The Town Board is discussing reclassifying for budgeting and accounting purposes the Orangetown, NY Town operated golf courses from Enterprise Funds to Governmental Funds (i.e.. General Fund). They should be encouraged to follow the recommendation of the Finance Director and Generally Accepted Government Accounting Practices and leave it as it is.
Why should you be concerned?
Doing so could weaken management, Town Board and resident controls and that could increase government inefficiency, increase golf course losses and put pressure on increasing property taxes. There is better management control, and public accountability with an Enterprise fund as all transactions occur in the same accounting fund on an accrual basis, like most businesses. That is why you should share your opinion with Town Board Members to keep it as it is.
The proposal will have golf related transactions separated among several Governmental Funds; the General Fund, Debt Service Fund and possibly a Capital Project Fund. Governmental Funds main purpose is to control the Town budget. There are expenditures, not expenses, it is on the modified accrual method, not the accrual method. They estimate a number for the budget and plan not to exceed it, and it is not a good measurement of financial results. Why?
Lets compare. As an example year one of golf course operations we have an expenditure purchasing $100,000 of golf equipment with useful economic lives of five years, and the following four years not purchase any equipment because it is not needed. It appears, everything else equal, there is a bigger loss that first year, $100,000.
However as an Enterprise Fund years one though five will have the same $20,000 as annual depreciation expense over the useful lives of the equipment. The losses are the same, assuming all revenues and expenses are the same.
Two different results.
You can have big fluctuations for the bottom lines year to year with Governmental Funds, similar to a cash budget, or your income tax return. That makes it hard to compare financial performance year to year, and with other government operated golf courses. It will always be an apples to oranges comparison unless each is in an Enterprise Fund. In addition the size of the annual loss will not be obvious in the budget and the Comprehensive Audited Financial Reports (CAFR) will lose necessary details by being commingled with other activities.
There is a risk we lose control, suffer even higher losses and put pressure on increasing property taxes.
The golf operations do not need to make a profit or even break even to be an Enterprise fund and in any case that should not be the main reason to use several Governmental funds. This and future Town Boards can decide the amount of annual subsidies from Property Taxes. Thus I support the Finance Director's recommendation to keep the golf courses as Enterprise Funds for these reasons and many more.
By the way I support Town Board Member Valentine's efforts to take a good look at the Town's Sewer Operations. One topic to consider is to reclassify the Sewer Fund from a Governmental Fund to its own Enterprise Fund. The Town Board and public would be able to hold management to higher standard of controls and accountability. Although it is financed mostly with property taxes and not user fees there are advantages having it an Enterprise Fund and that is acceptable within Governmental Accounting Standards.
This post was contributed by a community member. The views expressed here are the author's own.
The views expressed in this post are the author's own. Want to post on Patch?
