Transferring Dollars from Enterprise Funds…It’s like Ghostbusters

One question I often receive from community members, “Why can’t we transfer money from the Electric Fund Ending Fund Balance to support the shortfall in the General Fund?”

This is an excellent question and logical too. Before we dive in, there are a few important definitions to consider.

As many are aware, our city uses a practice called Fund Accounting. Fund Accounting ideally suits non-profit, and government entities, as the focus remains on accountability rather than profitability. Revenues collected are held in a variety of buckets, called funds. Each of those fund buckets holds money to address specific expense requirements1.

Ashland has about 20 funds for which the city budgets and reports2. We will look at two types of funds to address our question.

First, the General Fund. Our General Fund supports expenditures for public safety (Police and Fire,) Parks & Recreation, and Community Development.  The revenues used to support these expenditures come primarily from property taxes, Transient Occupancy Tax, franchise fees and charges for service, such as building permits2.

Second, our Enterprise Funds. Enterprise Funds are comprised of funding received from a fee for service model, like electric services, water, and waste water treatment. Customers are charged a fee for the service. The payments made by the customer are then used for general operations, and infrastructure projects, required to properly deliver the service2.

So back to our question. Why can’t we use money from the Electric Fund to cover the needs of the General Fund?

The answer is similar to the 1984 movie, Ghostbusters. As Egon said, “There is something very important I forgot to tell you… Don’t cross the streams.3

The same is true for Fund Accounting, specifically Enterprise Funds and Special Revenue Funds, like our Street Fund. Enterprise Funds are legally required to be used only for the services they were collected to support. Therefore, the fee for service revenue stream that provides funding to our Electric Fund cannot be used to pay expenses from our General Fund4.  Legally, Ashland cannot cross the streams. Unlike in Ghostbusters where crossing streams results in “life as we know it stopping instantaneously” Fund Accounting and finance rarely, if ever, reach that level of excitement.  

Thus, the answer to our question, Enterprise Fund dollars received as payment for a specific service, cannot be used for purposes other than those for which the revenues were collected. To use the Electric Fund (or any Enterprise Fund/ Special Revenue Fund) for General Fund expenses would be “crossing revenue streams” and therefore legally unallowable. 

(Now, there are instances where allocation and budget resources can be transferred but that is a topic for another post.)

Sources:

  1. https://en.wikipedia.org/wiki/Fund_accounting#:~:text=Fund%20accounting%20is%20an%20accounting,Nonprofit%20organizations%20and%20by%20governments.
  2. https://stories.opengov.com/ashlandor/published/Y-nqmTEnP
  3. https://www.quotes.net/mquote/114195
  4. http://www.ashland.or.us/Files/September_2019.pdf
  5. https://www.oregonlaws.org/ors/294.463

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