The town swimming pool is described as being supported by user fees. Which statement is true?

• A. Yes
• B. Only if funded by general fund
• C. Only if used by governmental activities
• D. No

Answer: (D)

In GASB, how an activity is reported hinges on financing sources. An activity is treated as a business-type (enterprise) activity if user charges are the primary source of funding and are intended to recover most costs. If user fees are used but do not fund the majority of the cost (for example, the general fund or subsidies still cover most of it), the activity remains a governmental activity for reporting.

Saying the town pool is “supported by user fees” does not by itself prove it is a business-type activity. You’d need to know that the user fees are the predominant funding source. If that isn’t clear (or if subsidies still play a major role), the pool would not automatically be classified as a business-type activity. That’s why the statement as given is not enough to declare the pool as a business-type activity, leading to the correct choice being No.