Statewide Expansion of Enterprise Funds
Melinda Ordway - Technical Assistance Bureau Senior Project Manager

from the Divison of Local Services website - under cities & Towns

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A growing number of communities in Massachusetts have been establishing enterprise funds as the means to account for the finances of particular types of operations. Within the statutory provisions that define the services that may be operated as enterprise funds (M.G.L. c. 44, § 53F½), it is a local management decision whether to implement this option, but it has certain benefits that may account for its general popularity. A city or town that operates a utility or other business-type service must account for its revenues within the general fund unless there is an applicable statute or special act that permits special revenue fund treatment (i.e., receipts reserved for appropriation or revolving fund). As an alternative for certain services, the community may accept M.G.L. c. 44, § 53F½ to create an enterprise fund, which establishes a mechanism for the separate accounting and financial reporting of a service for which a fee is charged in exchange for providing goods or services. An enterprise fund segregates all the service’s revenues and expenditures from the general fund, which has the advantage of allowing the community to identify the service’s true costs— direct, indirect, and capital. The city or town can thereby determine the sufficiency of the rates or fees being charged. Although many communities operate wholly selfsupporting enterprise funds, this is not a requirement. An enterprise fund may be subsidized by the general fund through shared services, debt exclusions, or appropriations of other available funds. The number of communities managing enterprise funds for various operations (e.g., water, sewer, solid waste, recreation, airport, ambulance services, etc.) has been increasing over the past decade, as illustrated by the two charts below. In FY2006, 199 communities had such funds, and by FY2016 (year-end results for June 30, 2015), the number had expanded to 244, an increase of almost 23 percent. Thus, by June 30, 2016, 70 percent of the 351 municipalities statewide had at least one enterprise fund. This trend continues, with six more communities—Billerica, Cheshire, East Longmeadow, Holliston, Milton and Newbury—having adopted and budgeted their first 53F½ enterprise funds in FY2016.


posted by Jeff Bennett