Government Fund Accounting: Fund Types & GASB 87 Leases

If the resources are initially received in another fund, such as the general fund, and subsequently remitted to a special revenue fund, they should not be recognized as revenue in the fund initially receiving them. They should be recognized as revenue in the special revenue fund from which they will be expended. So, the local governments can either receive resources directly into the special revenue fund, or account for the resources as agency deposits in the receiving fund and, after remitting them, recognize them as revenue to the special revenue fund. Continuing appropriation – A fixed budget which authorizes expenditures for a fiscal period that differs from the government’s fiscal year, such as capital projects, debt issues, grant awards, and other service projects. These expenditures require an ordinance or resolution to authorize the project, establish the assessment roll, adopt the debt amortization schedule, or accept the grant award. Such ordinances or resolutions set an absolute maximum or ceiling on the expenditures, but the time period for incurring expenditures does not coincide with the government’s fiscal year; it may even cover several years.

Proprietary fund statements of net position and revenues, expenses, and changes in fund net position should be presented using the economic resources measurement focus and the accrual basis of accounting. Code Internal Service Funds – may be used to report any activity that provides goods or services to other funds, departments or agencies of the government, or to other governments, on a cost-reimbursement basis. Internal service funds should be used only if the reporting government is the predominant participant in the activity. For more information on accounting for these funds see 3.9.6 and for reporting see 4.3.6. The state statutes contain many requirements for special funds to account for different activities. The legally required funds do not always meet GAAP standards for external reporting.

General Accounting

Elected officials should be educated to the fact that accountability may be achieved effectively and efficiently by judicious use of department, program and other available account coding or cautious use of managerial funds. These criteria should be applied in the context of the activity’s principal revenue source. Receipts Reserved for Appropriation – these are restricted to a specific use but also require appropriation by Town Meeting such as Parking Meter Receipts and the Sale of Town-owned real estate. If the reconciliations aggregate the reconciling items into categories that obscure the individual adjustments, then a government should provide a more detailed reconciliation in the notes. The Clearing/Suspense Fund accounts for receipts where final disposition is pending. Judges Supplemental Retirement Defined Contribution Fund membership includes judges elected or appointed to the Supreme Court, Court of Appeals, and Superior Courts who are members of the Public Employees’ Retirement System for their service as judges. Law Enforcement Officers’ and Fire Fighters’ Retirement System Plan 2 Fund membership includes all full-time, fully compensated, local law enforcement officers and fire fighters, who became members on or after October 1, 1977.

Activities reported in governmental funds are heavily financed by taxes and involuntary contributions from persons who do not receive services in direct proportion to the contribution they make. Thus, governmental funds are said to have a flow of current financial resources measurement focus, as distinguished from the government-wide, proprietary fund, and fiduciary fund statements, which have an economic resources measurement focus. Page 14 Activities of governmental funds are said to be expendable; that is, the focus is on the receipt and expenditure of resources. These resources are generally restricted to current assets, investments, and liabilities.

Objectives of Financial Reporting by the Federal Government

Encumbrances – Commitments related to unperformed contracts for goods or services should be utilized to the extent necessary to assure effective budgetary control and to facilitate cash planning. Encumbrances outstanding at year end represent the estimated amount of expenditures ultimately to result if unperformed contracts in process are completed; they do not constitute expenditures https://accounting-services.net/ or liabilities. This government type selection will limit the accounts to those applicable to the selected government type. Although the listing provided intends to be all inclusive, it is possible that needed account codes will not be included. If this occurs, please use the All option to view the entire chart of accounts and contact so the listing can be updated.

• The nucleus of a financial reporting entity usually is a primary government.
• The total assets plus deferred outflows, liabilities plus deferred inflows, revenues, or expenditures/expenses of the individual governmental or enterprise fund are at least 5 percent of the corresponding total for all governmental and enterprise funds combined.
• For example, one of the most popular permanent fund disbursements is the one given to Alaskan residents from oil revenues by the state.
• Governments should establish and maintain those funds required by law and sound financial administration.

Current Financial Resources Measurement Focus and the Modified Accrual Basis of Accounting. The fund statements for governmental funds are presented using the current financial resources measurement focus and modified accrual basis of accounting. Many of the transactions in governmental funds are nonexchange in nature; that is, they are activities undertaken in response to the needs of the public.

Groups of Government Funds

Generally, income earned on the non-expendable trust principal may be expended in accordance with the conditions of the trust. Examples include the Cemetery Perpetual Trust, the Ben Alper Tree Trust, and the Abbie Deanne School Trust. Governmental Funds Governmental funds are those through which most governmental functions typically are financed. With the use of funds, a governing body is able to establish and monitor how resources are allocated and spent, set and manage spending limits and achieve other fiscal accountability objectives. Blended component units are entities that, although legally separate from the state, are part of the state’s operations in substance. They are reported as part of the state when they exist for the exclusive benefit of the state. The Local Government Pooled Investments Fund is used to report the external portion of the LGIP, which is reported by the state as the sponsoring government.

Although accounting standards specify that the period of availability for property taxes is 60 days, they are silent on other revenues. Governments should disclose in the summary of significant accounting policies the length of time it used to define availability for its other revenues. The general fund is a government’s basic operating fund and accounts for everything not accounted for in another fund. The Tobacco Settlement Authority was created to issue bonds to securitize a portion of the state’s future tobacco settlement revenue to generate revenue to help fund increased costs of health care, long-term care, and other programs of the state. The Pooled Investments Fund is used to administer the pooling and investing of surplus state funds, and the accumulation and allocation of interest earned among the various accounts and funds from which such investments and investment deposits were made. The Higher Education Revolving Fund accounts for stores, data processing, educational, operational printing and duplication, motor pool, and other support service activities at colleges and universities. The Health Insurance Fund accounts for premiums collected and payments for public and school employees’ insurance benefits.

BARS Reporting Requirements

Only cities and special purpose districts with revenue usually less than $300,000 are required to prepare this schedule. However, conservation districts, fire districts, transportation benefit districts, local/regional trauma care councils and industrial development corporations are required to prepare the Schedule regardless of the amount of revenue. However, no financial activity reports do not require a formal Schedule 22 to be submitted. Governments who file a no activity report will be required to submit supporting documents to confirm no activity, such as meeting minutes, county reports and/or bank statements. As a practical consequence, if an activity reported as a separate fund meets any of the three criteria, it should be an enterprise fund.

Code Special Revenue Funds – should be used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specific purposes other than debt service or capital projects. Committed revenues are resources with limitations imposed by the highest level of the government, and where the limitations can be removed only by a similar action of the same governing body. Revenues do not include other financing sources (long-term debt, transfers, etc.). Special revenue fundsaccount for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for a specified purpose other than debt service or capital projects.

Capital project funds exclude those types of capital-related outflows financed by proprietary funds or for assets that will be held in trust for individuals, private organizations, or other governments (private-purpose trust funds). This article continues a series begun in the last issue reviewing the basic financial statements and other required components of a state or local government’s annual financial report. The first two articles covered the financial statements you would initially encounter upon opening a financial report-the government-wide statement of net assetsand statement of activities. This article looks at the two required financial statements for the governmental funds—the balance sheet and the statement of revenues, expenditures, and changes in fund balances.

• There are three groups of funds for which financial statements are prepared—governmental, proprietary, and fiduciary.
• Figure 3 illustrates a reconciliation presented on the following page after the statement .
• The reporting focus of these funds is on the sources, uses and balances of current financial resources and often has a budgetary orientation.
• Committed revenues are resources with limitations imposed by the highest level of the government, and where the limitations can be removed only by a similar action of the same governing body.

Local governments need to consider factors such as past resource history, future resource expectations and unusual current year inflows such as debt proceeds in their analysis. Enterprise Funds distinguish operating revenues Governmental Funds: Types & Uses and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with an Enterprise fund’s principal ongoing operations.

The expenditure or expense accounts are presented in the export without object codes. Governmental Funds Proprietary Funds Fiduciary Funds General Enterprise Pension Special Revenue Internal Service External Investment Trust Debt Service Private-Purpose Trust Capital Projects Custodial Permanent Suspense funds are reported in fund types 01 or 05. The trust fund tracks money designated for a specific program and the expenditures that relate to the program. Because the government owns these accounts, a change in the law is able to alter their designations. Paying for the costs accumulated by other funds is the internal service fund. For example, government vehicles, computers, or copiers are assets typically listed in an internal service fund.

Operating budget – Presents the estimated expenditures and available resources necessary to provide the services for which the government was created. An operating budget will contain flexible budgets and fixed budgets; the fixed budgets will include annual/biennial appropriations for services and the annual/biennial portion of continuing appropriations for debt service and for service projects. In the world of accounting, an account belonging in a fund often is due to the fact it doesn’t actually fit in other designations. Governmental funds are monetary resources of the government that are used in financing government projects and expenditures. Explore groups of government funds and their uses, and discover the types of governmental, proprietary, and fiduciary funds.

The format of the revenue and expenditure categories may follow either that used in the statement of revenues, expenditures, and changes in fund balances or the format the government uses in its budget. These numbers are presented in the government’s budgetary basis, which is likely to be on a cash- or near-cash-bases and therefore different from the modified accrual used in the governmental funds.

• Local governments should periodically undertake a comprehensive evaluation of their fund structure to ensure that individual funds that became superfluous are eliminated from accounting and reporting.
• Current operations are flexibly budgeted based on the estimated level of services to be provided and long-range sources and uses of assets are controlled by annual/biennial appropriations and continuing appropriations.
• One method assumes an economic resources measurement focus and the accrual basis of accounting, and the other method assumes a flow of current financial resources measurement focus and modified accrual accounting.
• All Governmental Funds use the modified accrual basis of accounting and their measurement focus is a flow of spendable financial resources.
• In fund financial statements, the modified accrual or accrual basis of accounting, as appropriate, should be used in measuring financial position and operating results.
• The Higher Education Retirement Plans provides benefits for state institutions of higher education faculty and other positions as designated by each employer who are members of this supplemental defined benefit plan.

Fund accounting is the mechanism by which governments and nonprofits demonstrate their responsible use of the cash and other financial resources they receive. All other 518 codes not listed above – Allowed in all governmental funds or internal service funds. Annual/biennial appropriated budget – A fixed budget adopted for the government’s fiscal period. The appropriated budget was traditionally used to determine a government’s property tax levy, and a ceiling on expenditures was made absolute so that the expenditures of a government unit would not exceed its revenues. This budget was also historically a balanced budget, estimated revenues equaling appropriations.