2020-03-25-AC-ATM-rpt - Laserfiche WebLink

Browse Search

APPROPRIATION COMMITTEE-2.020 ATM 25 March 2020 Appendix B: Enterprise Funds The Town of Lexington has maintained Water,Wastewater(Sewer),and Recreation Enterprise Funds since the state legislature enacted legislation authorizing such funds, G.L. c. 44, § 53F ''/2, in the late 1980's. 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. Revenues and expenses of the service are segregated into a fund with financial statements separate from all other governmental activities" and are accounted for on an accrual basis.DOR Enterprise Funds Manual(April 2008).An enterprise fund provides management and taxpayers with information to measure performance, analyze the impact of financial de- cisions, and determine the cost of providing a service. Enterprise funds may be operated on a stand-alone basis, i.e., supported by fees,or subsidized by the General Fund. The Water and Wastewater Enterprise Funds operate on a completely stand-alone basis. These funds do not rely on any tax-levy revenues but cover their complete operating and capital needs with user charges and fees. The Recreation Enterprise Fund is only partially stand-alone. It covers its operating costs with user charges and fees and contributes to the debt service on certain recreation capital projects (most recently, the Lincoln Field restoration project for which the debt has now been fully repaid). Most recreation capital costs are subsidized by the General Fund through a combination of within-levy borrowing, Community Preservation Act(CPA)funding, and debt exclusion funding. Establishing the Enterprise Fund Budgets At the Annual Town Meeting each year, Town Meeting appropriates an operating budget and authorizes capital expenditures for each of the three enterprise funds for the upcoming fiscal year.Later in the year(in the early fall in the case of the Water and Wastewater Enterprise Funds), user charges are set that are de- signed, based on projections of usage for the fiscal year,to be sufficient to cover the appropriations made by Town Meeting to run the enterprises. Depending on the accuracy of the usage projections, the actual revenue realized by the enterprise during the year may exceed or fall short of the appropriated amount. Any operating surplus must be retained in reserve in the enterprise fund. The funds accumulated in that reserve (referred to as "retained earnings") may be applied only to meet the capital needs of the enterprise or to reduce user charges. Any operating loss (after applying any accumulated reserves in the fund),must be made up in the succeeding fiscal year's appropriation. Since FY2007, the Annual Town Meeting Warrant has contained a separate Article for the appropriation of the enterprise fund operating budgets (previously, appropriations for the enterprise funds were commin- gled with those for the General Fund).This presentation makes it easier to understand the operating budgets of the enterprise funds. However, it should be noted that certain indirect costs that are charged by the Gen- eral Fund to the enterprise funds are still appropriated as part of the municipal operating budget,this year in Article 4.For the complete operating costs of the enterprise funds,including indirect costs,see the Brown Book sections on Water,Wastewater, Recreation. To present a more meaningful picture of the complete enterprise fund operating budgets,the tables included in the write-up of this article have been expanded from those presented in the Warrant to show the indirect as well as the direct costs of the funds. Debt service costs for previously approved capital expenditures are shown in the enterprise fund operating budgets. However,it should be noted that appropriations for capital needs of the enterprises, whether funded by cash or borrowing, are addressed in separate capital Warrant articles. 55