Question

Why does a governmental entity need an enterprise fund? Find an example of this type of fund for your city and share the details of that fund.?

Answer 1

A government's general fund is a pool of cash raised from taxes and can be spent wherever the government needs it. An enterprise fund is more specific. Enterprise fund money can only be spent on a specific purpose, such as parks and recreation. Most of the funding comes from fees related to the fund's mission. An enterprise fund is a self-supporting government fund that sells goods and services to the public for a fee. For example, a government-owned power generating facility provides electricity to local homeowners in exchange for a fee.

Advantage of Funds:-

Tying fees and services together through an enterprise fund has advantages. Users and the general public can see how much it costs to provide particular services, and why the fees are set at a certain level. It's not always possible to balance fees and the cost of services perfectly, though. A fund may run in the red one year, which is a sign the government needs to raise fees. If the fund turns a profit, the money carries over to operations in the next fiscal year, and fees might drop.

Wisconsin's Liquor Fund is an example of an enterprise fund. It administers state liquor stores and warehouses, and finances its operations through money from alcohol sales. The state's Worker's Compensation coverage is an enterprise fund paid for by employers' workers comp insurance payments. Governments don't have to rely on fees to cover all the fund's spending. If necessary, a government can pay for some of the services with tax dollars. Most of the financing, however, is based on the fees or bonds backed by future fee payments.