Issue:
Which business-type activities should be reported as separate lines in the statement of activities?

Reference:

GASB Statement 34, ¶ 38: "The operations of the reporting government should be presented in a format that reports the net (expense) revenue of its individual functions. An objective of using the net (expense) revenue format is to report the relative financial burden of each of the reporting functions on its taxpayers."

GASB Statement 37, ¶ 10 (supersedes GASB 34, ¶ 39): "At a minimum, the statement of activities should present:

1. Activities accounted for in governmental funds by function,27 as discussed in NCGA Statement 1, paragraph 112, to coincide with the level of detail required in the governmental fund statement of revenues, expenditures, and changes in fund balance.
2. Activities accounted for in enterprise funds by different identifiable activities.c"

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27The term function is used in this Statement to refer to the minimum level of detail for both governmental and business-type activities required to be presented in the statement of activities.

c An activity within an enterprise fund is identifiable if it has a specific revenue stream and related expenses and gains and losses that are accounted for separately. Determining whether an activity is different may require the use of professional judgment, but is generally based on the goods, services, or programs provided by the activity…

GASB Statement 34, ¶ 40: "Governments are encouraged to provide data in the statement of activities at a more detailed level if the additional detail provides useful information without significantly reducing readers' ability to understand the statement. No specific level of detail is appropriate for all governments; some have hundreds of programs and others have only a few. Therefore, reporting in greater detail than the minimum requirements in paragraph 39 may be practical for some governments but not for others."

GASB Statement 37, ¶ 17, Definition of a Segment. "… a segment is an identifiable activity (or grouping of activities)…reported as or within an enterprise fund or an other stand-alone entity that has one or more bonds or other debt instruments (such as certificates of participation) outstanding,48 with a revenue stream pledged in support of that debt." Separate accounting for the activity must be imposed by an external party.

GASB Statement 37, Basis for Conclusions, ¶ 40-46. Initially in GASB 34 segments were established as the minimum level of detail required for activities accounted for in enterprise funds. "The Board's intention in establishing "segments" as the minimum requirement in the statement of activities was to identify different activities accounted for in a multipurpose fund (or included in the nonmajor funds aggregation) that should be reported separately in the statement of activities-for example, water and electric operations accounted for in a single fund, or parking facilities and golf course operations included in the nonmajor funds column." However, "it became apparent that the use of segments as the minimum requirement could result in either too much or too little detail being provided for business-type activities (BTA)." Thus, in Statement 37 it changed the minimum requirement to be different identifiable activities. If a government has several significant different enterprise operations, each one would be reported separately, regardless of whether those activities meet the segment definition.

The level of detail required for activities accounted for in enterprise funds is more detailed than the functional categories required by Statement 34 for governmental activities. For example, police, fire and code enforcement are allowed to be combined into the "public safety" function, but water, gas, and electric utilities accounted for in a single enterprise fund should be reported separately. "The objective is to present a level of detail that will provide useful information to meet the needs of the users of the financial statements. It is that objective that should guide the application of professional judgment."

Evaluation:

The County's enterprise funds include:

• Transit Agency
• Solid Waste Management
• Seaport
• Aviation Department
• Water and Sewer Department
• Public Health Trust
• Rickenbacker Causeway
• Viscaya Art Museum
• Housing Agency Public Housing Division

Different identifiable activities may be found within the Water and Sewer Department and Solid Waste Management. Whether to report those activities separately in the statement of activities is a matter of professional judgment. The example given in Statement 37 where water, gas and electric utilities were required to be reported separately instead of combined is straightforward because all utilities are markedly different from each other. However, the case for reporting separately water and sewer and solid waste collection and disposal is not so clear.

Position:

The different activities within the Water and Sewer Department and the Solid Waste Department should be reported separately in the statement of activities. The reason for this position is that separately reporting these activities will provide useful information to certain users of the financial statements. For example, water or sewer only customers may be interested in knowing the extent, if any, to which one activity subsidizes the other or to which each activity contributes to or depends on the general government. For the similar reasons, the solid waste collection and disposal activities should be shown separately.