CLASSIFYING FUNDS-GAAP BASIS

A good indicator of the activity’s significance may be comparing pledged revenues or fees and charges to total revenue. For example, consider a county auditor’s office that charges fees to provide a payroll service to various taxing districts. Even if the fee is meant to cover the cost of the service, the county auditor function as a whole is primarily supported with tax dollars from the general fund.

Fixed budgets must be adopted by ordinance or resolution, either for the government’s fiscal period or at the outset of a service project, debt issue, grant award, or capital project. 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 https://accounting-services.net/what-are-net-credit-sales/ 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. Permanent funds do not include private-purpose trust funds which account for resources held in trust for individuals, private organizations, or other governments.

Types of Governmental Funds

In all cases, use of those funds should be prohibited as a funding source for ongoing recurring expenditures. Revenue sources that would typically be looked to for replenishment of a fund balance include nonrecurring revenues, budget surpluses, and excess resources in other funds (if legally permissible and there is a defensible rationale). Year-end surpluses are an appropriate source for replenishing fund balance. In addition, GAAP mandate the use of enterprise funds for the separately issued financial statement of public-entity risk pools. 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. Governments should discontinue reporting a special revenue fund, and instead report the fund’s remaining resources in the general fund, if the government no longer expects that a substantial portion of the inflows will derive from restricted or committed revenue sources.

Some governments, including those that present their financial statements in an annual financial report (AFR), will prepare supporting schedules that present the detail behind columns in the fund financial statements that aggregate multiple funds. For the governmental funds statements, these combining statements show the non-major funds individually, often grouped by type of fund (in other words, capital projects, debt service, and so on). The concept of major fund reporting was introduced and defined by GASB Statement 34 to simplify the presentation of fund information and to focus attention on the major activities of the reporting entity. Rather than requiring each type of fund to be individually presented, Statement 34 requires the individual presentation of only major funds, with all other funds combined into a single column. This reduces the number of funds presented on the face of the financial statement and directs the focus to the significant funds of the reporting entity. Major fund reporting is applied only to governmental funds (i.e., general, special revenue, debt service, capital project, and permanent funds) and enterprise funds.

BARS Alerts

In the context of financial reporting, the term fund balance is used to describe the net position of governmental funds calculated in accordance with generally accepted accounting principles (GAAP). Unreserved fund balance represents resources that are available to be used for the purposes of the fund they are reported in. For the general fund, unreserved fund balance is legally available for any purpose. In a transportation-related special Governmental Funds: Types & Uses revenue fund, unreserved fund balance is available for transportation. GASB research suggests that roughly half of governments take advantage of the option to “designate” a portion of their unreserved fund balance. Designations indicate a government’s intention to use resources for a particular purpose, though there is no force of law behind the designation and a government could change its mind and use the resources for another purpose.