3 Accounting
3.9 Interfund Activities
3.9.7 Equipment Rental and Revolving (ER&R) Fund
3.9.7.10 Equipment Rental and Revolving funds, also known as ER&R funds, are established to provide equipment rental services within a local government. They increase government efficiency by giving the government a way to allow expensive equipment and supplies to, in essence, be rented to the government's various departments. Their rental equipment can include items such as computers, police and fire vehicles, heavy road equipment and specialized high voltage trucks.
All counties (RCW 36.33A.010) and cities with populations over 8,000 (RCW 35.21.088) are legally required to have an ER&R fund for operating county road and city street departments. ER&R funds may be expanded to provide services to other departments including public works, utilities, fire and police.
ER&R funds can be set up as a managerial fund (see BARS 3.1.12, Managerial Funds) or as a separately reported fund. If the government chooses to use a separately reported fund, it is an internal service fund. ER&R funds should operate on a cost reimbursement basis (without generating a profit).
ER&R funds are created by county commissions or city councils. Counties pass a resolution and cities pass an ordinance defining the origin of the resources, purpose, and specific duties of the fund. Start-up resources usually come from an interfund transfer of cash and/or equipment. The transfer may be as a loan or a permanent transfer. Further discussion of internal service funds and overhead cost allocations can be found in BARS 3.9.5, Overhead Cost Allocation and BARS 3.9.6, Internal Service Funds.
3.9.7.20 Operation of the fund
Management of the ER&R fund is responsible for ensuring that the fund’s operation complies with what is set out in the resolution or ordinance.
Goals of the ER&R program may include: setting rates that sufficiently cover the costs of operation and provide for equipment replacement; charges to departments that are equitable, fair, and reasonable; proper tracking of assets and equipment; and proper investment of reasonable and necessary reserves.
The assets of ER&R funds should be tracked and inventoried as with other assets, but also for purposes of assisting management with having sufficient information to establish rates and plan for asset replacement. As such, information about historical cost, purchase date, primary user verses pooled asset, expected life, and anticipated replacement cost of the asset is important. Further discussion on records that should be maintained for revenue assets can be found in BARS 3.9.6, Internal Service Funds, paragraphs .120 and .130.
ER&R funds should charge fees for all services, staff, facilities or equipment in a manner that is consistent and equitable to all participating funds or departments.
ER&R funds, as with other internal service funds, are collected for a specific purpose. The ER&R funds should be segregated, tracked and used for their intended purpose or returned to the originating funds in an equitable manner if they are no longer needed.
The fund balance of the ER&R fund should reflect a level that is anticipated to assure continued operation of the fund. Management policies should support the amount of cash reserves necessary for continued operation of the fund and timely replacement of vehicles or equipment; as determined during the rate setting process.
Guidance on accounting, management and controls over capital assets is available in BARS 3.3.8, Capital Assets Management.
3.9.7.30 Rate setting
ER&R rate structures should cover all costs associated with the operation of the fund. In counties, the rate structures are determined by the county engineer and must be reviewed annually by the legislative body (RCW 36.33A.040). See BARS 3.9.6, Internal Service Funds for more information on rate setting.