Accounting Implications of Operating Municipal Golf Courses

Many cities in Florida operate municipal golf courses.In recent years, tourism and the popularity of golf have fallen off, leading the golf courses to operate at a loss, often up to $1 million per year.Supporters of the golf courses note that the municipal courses are part of the cities' Parks and Recreation departments which benefit the entire community, while others have criticized the local governments for injecting money into a business that should be funded primarily through user charges. What are the accounting implications of operating the golf courses as part of the General Fund rather than an enterprise fund? What are some other options you would suggest for the cities and what questions would be associated with those alternatives? The first consideration regarding the implications of operating the golf courses as part of the General Fund is whether that is even allowed by accounting standards.Reck et al. (2022) indicate that GASB standards provide three specific criteria which outline the types of activities required to be reported within an enterprise fund.If an activity does not meet any of the criteria, then the government is allowed to report it in an enterprise fund or in the General Fund.The criteria are: User charges from the activity are the only source of revenue pledged to pay for any associated debt. Regulations require that revenues from the activity cover all applicable costs, including capital costs. Prices are designed to cover all applicable costs, including capital costs. If the golf courses in the Florida cities satisfy any of the conditions, then accounting for the courses in the General Fund is prohibited.Since the operations are being subsidized by the local governments, it seems doubtful that the courses would meet the requirements for enterprise fund accounting. Assuming the golf courses are allowed to be included within the General Fund, another consideration for the cities is the difference in information provided to financial statement users. The accounting for enterprise funds utilizes the accrual method and mirrors accounting standards for similar private-sector businesses.This means that all long-term assets and liabilities related to the enterprise are included in the fund accounting.Activities within the General Fund follow modified accrual accounting.Major variations between the two methods include that governmental funds do not report long-term assets or liabilities and they report expenditures and not expenses (Reck et al., 2022).