Page 8 - JanFeb2026 Vol 43 No 6

MTAS By John Chlarson, P.E., C.P.M.
Solid Waste Collection Fund Notes

Regarding Setting Fees and Charges

Municipal solid waste programs that Special Revenue Funds direct and indirect expenses.
are operated as enterprise or special Fund Types Capital costs: This includes the
revenue funds are expected to cover their Some special revenue funds currently recovery of capital costs, which can be
program costs through user fees and established by governments may not handled through depreciation or by
charges and to restrict the funds to the meet the definition of a special revenue making payments on debt service.
solid waste program. fund under GASB 54. Tennessee law Direct and indirect costs: The
Suppose the solid waste program is was changed to require solid waste fund fund must account for all direct costs
an enterprise or special revenue fund to be accounted for in accordance with (personal services, supplies, etc.) and also
rather than part of the general fund. In generally accepted accounting principles any indirect costs that are allocated from
that case, Tennessee law requires the (GAAP). other governmental funds (like general
solid waste fund to be accounted for This requires solid waste funds to be government or the General Fund).
in accordance with generally accepted accounted for in a special revenue fund Depreciation: Depreciation on
accounting principles (GAAP). or an enterprise fund, unless required capital assets should be expensed in
This requires solid waste funds to to be accounted for in the general fund the appropriate function or allocated to
be accounted for in a special revenue as noted above. Fees charged for solid shared assets. It should be reported on
fund or an enterprise fund. The primary waste services are considered restricted the statement of activities.
requirement is that fees and charges must and are not to be used for other purposes Cost recovery through fees: Activities
be set to recover all costs, including both *TCA Section 68-211-835 (g)(1). The must be financed by fees and charges
direct and indirect expenses. Comptroller of The Treasury, Division to recover costs, whether because of
Proprietary Funds of Local Government Audit issued the legal requirements or the fund’s own
Proprietary funds are those that are following guidance: established pricing policy.
most like funds in the private sector. “Municipalities that provide only How to Manage Expenses
According to GAAFR (the Blue Book), collection service to their residents are Budgeting: Develop a budget that
proprietary funds are “used to account required to account for this service in a includes all direct costs and an allocation
for activities that receive significant separate fund. In many instances these for indirect costs from other funds.
support from fees and charges.” There activities will be accounted for in a Cost allocation: Ensure that indirect
are two types of proprietary funds: special revenue fund.” costs incurred by other funds on behalf
enterprise funds and internal service The complete directive from the of the enterprise fund are allocated to it
funds. Division of Local Government for recovery.
As defined by GAAFR, enterprise Audit can be found in the Audit Payroll: Accurately account for all
funds are used to “report activities for Manual, https://comptroller.tn.gov/ payroll expenses, including withholdings
which a fee is charged to external users content/dam/cot/la/documents/ and employer contributions.
for goods or services.” Examples include manuals/2025FinalAuditManual-Rev1. TCA (§§ 68-1-101 — 68-221-1319)
the Water Fund, Sewer Fund, Natural pdf Section 68-211-874 - Accounting for
Gas Fund, Airport Fund, and possibly Reference Number: MTAS-579 financial activities - Funds - Uniform
the Solid Waste Fund. GAAP Enterprise Fund Requirements solid waste financial accounting system -
Internal service funds are used to track GAAP requires enterprise funds to Development - Approval - Requirement
the activity provided by one department account for all costs, including direct for state funds
for another department within the operating costs, capital costs (like (a)Each county, solid waste authority and
government itself. A common example depreciation or debt service), and any municipality shall account for financial
is the city garage charging various city indirect costs allocated from other funds. activities related to the management of
departments for its services. The fund must be structured to recover solid waste in accordance with generally
The benefit to tracking the these costs through fees and charges, accepted accounting principles (GAAP).
expenditures this way is to encourage as mandated by law or its own pricing The activities related to the management
efficiency. If a department is being policy. of solid waste must be accounted for in
charged for an otherwise “free” activity, either a special revenue or enterprise
the department using the service will be Enterprise Fund Key Expense fund, unless explicitly prohibited by
less likely to abuse it Requirements GAAP. Where GAAP prohibits the use
Reference Number: MTAS-1793 Recover all costs: The primary of a special revenue or enterprise fund,
Reviewed Date: 09/29/2025 requirement is that fees and charges must the solid waste financial activities may be
be set to recover all costs, including both
8 TPW January/February 2026