Government Fund Accounting: Fund Types & GASB 87 Leases

To clarify the difference between these concepts, the basis of accounting governs when transactions will be recorded, while the measurement focus governs what transactions will be recorded. Therefore, it can be seen that the governmental accounting system should be organized in a manner that ensures that all transactions are duly recorded in the system. In this regard, a fund is realized to be defined as a fiscal and accounting entity. The main premise here is to make sure that all cash or non-cash-related transactions are mentioned on the financial statement in order to reduce the chance of any embezzlement or fraudulent activities within the company.

They should be recognized as revenue in the special revenue fund from which they will be expended. Other resources (investment earnings and transfers from other funds, etc.) also may be reported in the fund if these resources are restricted, committed, or assigned (intended) to the specific purpose of the fund. The following principles are basic rules of accounting and financial reporting for cash based cities, counties and special purpose districts. In some cases, governments can find themselves in a position with an amount of unrestricted fund balance in the general fund over their formal policy reserve requirement even after taking into account potential financial risks in the foreseeable future.

Most expenditures should be reported when a related liability is incurred. This means that a governmental fund liability and expenditure is accrued in the period in which the fund incurs the liability. 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.

1. An exception to this is taxes collected for other governments; those will be shown as liabilities just as they have been in the past.
2. Major fund reporting is applied only to governmental funds (i.e., general, special revenue, debt service, capital project, and permanent funds) and enterprise funds.
3. Therefore, they can use the following journal entries to record these amounts.
4. Hence, a debt service fund is created with the aim and the objective to pay back the long-term debt that has been issued by the government in order to finance specific government-related projects.
5. 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.

The statements and reports listed above follow national standards of financial reporting. They should not be confused with legal reporting requirements, which are prescribed by the State Auditor’s Office for all local governments in Washington State. The legal requirements are consistent with these national standards, but they are not identical. Specific legal reporting requirements are contained in reporting part of this Manual. Budgetary comparison schedules should be presented as required supplementary information for the general fund and for each major special revenue fund that has a legally adopted annual/biennial budget. The budgetary comparison schedule should present both (a) the original and (b) the final appropriated budgets for the reporting period ad well as (c) actual inflows, outflows, and balances, stated on the government’s budgetary basis.

Revenues

This particular fund is kept separate because it deals with a couple of different tasks that are specifically designated for a stated cause. For more information on determining if a transaction is fiduciary please see the Determining Fiduciary Custodial Activities page. X plans to hire 100 workers for a new content moderation center focused on combatting child sexual exploitation, its head of business operations told Bloomberg.

Significant Changes to Fund Types and Accounting Principles

For more information on accounting for these funds see 3.9.6 and for reporting see 4.3.6. As a practical consequence, if an activity reported as a separate fund meets any of the three criteria, it should be an enterprise fund. Also, if a “multiple activity” fund (e.g., general fund) includes a significant activity whose principal revenue source meets any of these governmental accounting fund types three criteria, the activity should be reclassified as an enterprise fund. Although a local government has to report only one general fund in its external financial reports, the government can have multiple general subfunds for its internal managerial purposes. These managerial subfunds have to be combined into one general fund for external financial reporting.

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Financial resources that are being accumulated for principal and interest maturing in future years also should be reported in debt service funds. The debt service transactions for a special assessment for which the government is not obligated in any matter should be reported in a custodial fund. Also, if the government is authorized, or required to establish and maintain a special assessment bond reserve, guaranty, or sinking fund, it is required to use a debt service fund for this purpose. Code Debt Service Funds – should be used to account for and report financial resources that are restricted, committed, or assigned to expenditure for principal and interest. Also, if the government is authorized, or required to establish and maintain a special assessment bond reserve, guaranty, or sinking fund, GASB Statement 6 requires using a debt service fund for this purpose. 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.

Therefore, a government fund is defined as a group of funds that the government has received over the course of a fiscal year. Governments need to be accountable in terms of the funds they receive since these funds are technically generated from public collections, and therefore, they are accountable for it. Therefore, governmental accounting and fund management is considered to be a highly integral part of organizations. The determination of an activity’s principal revenue source is a matter of professional judgement.

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Therefore, these accounts should be properly maintained in proper compliance with the stated rules and regulations, in order to ensure that all the respective tasks and objectives are properly accounted for. The treatment of these funds on the balance sheet is similar to that of any reserve that is undertaken by commercial companies. However, what needs to be inculcated is the fact that it is supposed to be maintained on a perpetual basis because at the end of the day, government accounts also undergo an auditing treatment.

Government Funds: Definition, Types, Accounting

The Custodial funds are the area where the most significant changes will take place. In January 2017, the Governmental Accounting Standards Board (GASB) issued Statement No. 84 Fiduciary Activities (GASB 84). The Statement is effective for fiscal years beginning after December 15, 2018, which in practice means for fiscal years ending December 31, 2019, and later. Fiduciary activities are those activities that state and local governments carry out for the benefit of individuals and other agencies outside the government such as employee groups, members of the public, and other governments. This article is the second of a two-part series of articles on GASB 84, which will focus on the financial statement changes that will need to be made going forward. Special Revenue Funds are used in order to track the revenue from specific resources that are restricted to specific purposes.

Therefore, these journal entries are maintained following which financial statements are subsequently drawn for all the respective years. Government Funds are supposed to be accounted for bearing in mind the blueprint provided by major accounting bodies. All government funds need to be accounted for using this particular premise, and there needs to be a clear understanding regarding these government funds, and how these funds are treated when it comes to accounting-related treatment. Governmental fund revenues should be classified by fund and source.

Revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange-like transactions should be recognized when the exchange takes place. Revenues, expenses, assets, and liabilities resulting from nonexchange transactions should be recognized in accordance with the GASB Statements 24 and 33. To ensure the proper segregation of resources and to maintain proper accountability, a governmental entity’s accounting system should be organized and operated on https://accounting-services.net/ a fund basis. Each fund is a separate fiscal entity and is established to conduct specific activities and attain objectives in accordance with statutes, laws, regulations, and restrictions or for specific purposes. Given the unique needs of governments, a different set of accounting standards have been developed for these organizations. The primary organization that is responsible for creating and updating these standards is the Governmental Accounting Standards Board (GASB).

Public-entity risk pools also are accounted for as enterprise funds when they are included within a sponsoring government’s report, provided the sponsor is not the predominant participant in the arrangement. Finding an appropriate fund type requires a careful analysis since there is not always a clear choice. For example, building permit fees may be accounted for in the general fund or a special revenue fund in certain circumstances, such as when they are partially supported by taxes. However, if there is a pricing policy to recover the cost of issuing those individual building permits, they should be reported in an enterprise fund. The accounting for government funds differs from the process for other entities.