Which of the following statements best describes how enterprise funds should be reported in government-wide financial statements?

Enterprise funds are used by government entities to account for activities that are similar to businesses, providing goods or services to the public for a fee. The key characteristic of enterprise funds is that they operate more like commercial businesses, recovering their costs through user fees rather than relying primarily on tax revenues.

In government-wide financial statements, enterprise funds are classified under business-type activities. This classification aligns with the nature of the operations of enterprise funds, which are intended to be self-sustaining. By categorizing them as business-type activities, financial statements can more accurately reflect the operational and financial performance of these funds, much like a private-sector business would be evaluated.

This classification also allows for a clear distinction between services provided on a fee basis and services funded through taxpayer dollars, which are reported under governmental activities. Thus, including enterprise funds within business-type activities highlights the endowed fiscal responsibility of these funds and their role in generating revenues through operating activities.