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Enterprise Fund Overview What is an Enterprise Fund? An enterprise fund establishes a separate accounting and financial reporting mechanism for municipal services for which a fee is charged in exchange for goods or services. Under enterprise accounting, the revenues and expenditures of the service are segregated into a separate fund with its own financial statements, rather than commingled with the revenues and expenses of all other governmental activities. Financial transactions are reported using standards similar to private sector accounting. Revenues are recognized when earned and expenses are recognized when incurred, under a full accrual basis of accounting. An enterprise fund provides management and taxpayers with information to measure performance, analyze the impact of financial decisions, determine the costs of providing a service and identify any subsidy from the general fund in providing a service. Enterprise accounting allows a community to demonstrate to the public the portion of total costs of a service that is recovered through user charges and the portion that is subsidized by the tax levy or other available funds, if any. A community may choose to recover total service costs through user charges, but it is not required. History The enterprise fund statute, MGL Ch 44 § 53F ½ (formerly Chapter 41 § 39K), was enacted in 1986. Before that time, communities used special revenue funds authorized under various general laws or special acts in order to separately account for their business type services. These special revenue funds were limited, however, with regard to the services and costs covered. The funds were most commonly authorized for water, gas and electric utility departments and used primarily to account for annual operating costs, not the indirect costs, capital expenditures or fixed assets of the service. The purpose of the enterprise fund statute was to give communities the flexibility to account separately for all financial activities associated with a broader range of municipal services. As part of the FY 2014 budget process the Mayor requested and the City Council approved the adoption of the Massachusetts Department of Revenue Division of Local Services Bulletin 2012-02B (page 3/7) which allows for the combining of water and sewer enterprise funds voted under MGL Ch 44 §53F ½ into a single water-sewer fund. The combined funds will be treated the same as the individual funds were and will have only one certified retained earnings. For operational and accounting purposes the water and sewer enterprise funds will remain separate and distinct funds but will be combined for the purpose of certifying retained earnings and for reporting on the annual Tax Recapitulation report which sets the annual tax rate. This will allow the City to use the Sewer Fund Balance to help offset Water revenue deficits and to help keep the water and sewer rate increases lower for rate payers. ---PAGE BREAK--- Basis of Accounting Proprietary fund revenues and expenses are recognized on the accrual basis. Revenues are recognized in the accounting period in which they are earned and become measurable; expenses are recognized in the period incurred, if measurable. The following major proprietary funds are classified as Proprietary funds and audited as such: • The Sewer Enterprise fund is used to account for the Sewer activities. • The Water Enterprise fund is used to account for the Water activities. • The Trash Enterprise fund is used to account for the Trash activities. The following major proprietary funds are classified by the City as Special Revenue Funds but are audited and reported as proprietary funds: • The Golf Course Enterprise fund is used to account for the Golf Course activities. The following major proprietary fund is budgeted and revenue collected as part of the General Fund but is audited and reported as proprietary funds: • The Parking Department Enterprise fund is used to account for the Parking activities. For the entire MGL on Enterprise Funds visit the Massachusetts Department of Revenue website: