enterprise funds related to capital contributions, restricted

 

Desert Palms County has operated a municipal golf course for more than 30 years. Local patrons, as well as tourists, enjoy reasonable rates in a picturesque setting. Ten years ago, the golf course was quite profitable, so the county created an Enterprise Fund and moved accounting for the golf operations from the General Fund to the new Enterprise Fund. Over the years, however, interest in golf everywhere has declined and the course usage has decreased while costs have increased. During the current year, the course suffered a $700,000 loss that had to be covered by the county’s General Fund. In the upcoming fiscal year, the county projects to shortfall to be more than $1 million. Some local taxpayers have criticized the county for injecting money into a business that should be primarily funded through user charges. Supporters of the golf course, though, note that the municipal course is part of the county’s Parks & Recreation Department which benefits the entire community, so support for the course is warranted.

Required:

  • Evaluate whether Desert Palms County should include the golf course in their Parks and Recreation department or if it should be funded by fees charged to the users.
  • Is there justification for accounting for the recreational facility as an Enterprise Fund? If so, how does this affect reporting as an Enterprise Fund activity instead of a General Fund activity?
  • How would you handle the recreational facility dilemma?
  • What questions, if any, should you address for the following situations: Desert Palms County continues accounting for the recreational facility as in the past. An outside management company operates a portion or the entire golf course. Several options are presented under this option including the county maintains control of the golf operations but outsources the golf carts, concession stands, golf pro shop, and maintenance of the golf course. The county leases the golf course to a private operator in exchange for lease income to the municipality. Under this option, capital investments in facility improvements, minimum standards of maintenance, and golf fee restrictions exist; the county sales the golf course and removes from their books.

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