Governmental Funds (Expendable Fund)

PENDAHULUAN

            Fund accounting is an accounting system emphasizing accountability rather than profitability, used by non-profit organizations and governments. In this system, a fund is a self-balancing set of accounts, segregated for specific purposes in accordance with laws and regulations or special restrictions and limitations.

            The label, fund accounting, has also been applied to investment accounting, portfolio accounting or securities accounting – all synonyms describing the process of accounting for a portfolio of investments such as securities, commodities and/or real estate held in an investment fund such as a mutual fund or hedge fund. Investment accounting, however, is a different system, unrelated to government and nonprofit fund accounting.

            Nonprofit organizations and government agencies have special requirements to show, in financial statements and reports, how money is spent, rather than how much profit was earned. Unlike profit oriented businesses, which use a single set of self-balancing accounts (or general ledger), nonprofits can have more than one general ledger (or fund), depending on their financial reporting requirements. An accountant for such an entity must be able to produce reports detailing the expenditures and revenues for each of the organization's individual funds, and reports that summarize the organization's financial activities across all of its funds.

            A school system, for example, receives a grant from the state to support a new special education initiative, another grant from the federal government for a school lunch program, and an annuity to award teachers working on research projects. At periodic intervals, the school system issues a report to the state about the special education program, a report to a federal agency about the school lunch program, and a report to another authority about the research program. Each of these programs has its own unique reporting requirements, so the school system needs a method to separately identify the related revenues and expenditures. This is done by establishing separate funds, each with its own chart of accounts.

Governmental funds (Expendable Fund)

            Governmental funds should be reported using the current financial resources measurement focus and the modified accrual basis of accounting.

            The governments are required to provide a summary reconciliation of total governmental fund balances to net position of governmental activities in the statement of net position. The reconciliation may be presented at the bottom of the balance sheet or in an accompanying schedule.

            The governments have the option to report the budgetary information in the governmental funds financial statements instead as a part of the required supplementary information.

Balance Sheet

            The financial information is required to be reported separately for general fund, each major governmental fund and nonmajor governmental funds in aggregate.

            Current assets, liabilities, and fund balances of governmental funds should be displayed in a balance sheet using the following formula:

Current Assets = Current Liabilities + Fund Balance

            General capital assets and general long-term liabilities are not reported in the governmental fund balance sheet.

When preparing the governmental balance sheet, remember:

• Interfund liabilities should be reported as fund liabilities regardless of their date of scheduled repayment. Interfund loans may be reported as short-term or long-term liabilities depending on their conditions. The governments should also show the reservation of the fund balance for the noncurrent interfund receivables.

• Equity interest in joint ventures should not be reported as an asset in the governmental fund balance sheet except for amounts that meet the definition of financial resources (e.g., receivable from/payable to joint venture, etc.). All equity interest should be reported in the government-wide financial statements.

• A reconciliation that shows adjustments made between the balance sheet and the government-wide statement of net position is required on the bottom of the report.

• If any categories of the fund balances are displayed on the face of financial statements in aggregate, the specific components and purposes must be disclosed in the notes to financial statement. 

Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds.	20,000
Other long-term assets are not available to pay for current-period expenditures and therefore are deferred in the funds.	4,850
Internal service funds are used by management to charge the costs of certain activities, such as insurance and telecommunications, to individual funds. The assets and liabilities of certain internal service funds are included in governmental activities in the statement of net position.	5,500
Some liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds.	(14,575)
Net position of governmental activities:	30,675

The notes to financial statements are an integral part of this statement.

Statement of Revenues, Expenditures, and Changes in Fund Balances

            The governmental fund statement of revenues, expenditures, and changes in fund balances reports information about the inflows, outflows, and balances of current financial resources of each major governmental fund and for the nonmajor governmental funds in the aggregate. There is one permitted format for the statement.

Revenues (detailed)								$
Expenditures (detailed)
		Excess (deficiency) of revenues over expenditures
Other financing sources and uses, including transfers
(detailed)
Special and extraordinary items (detailed)
		Net change in fund balances
Fund balances – beginning of period
Fund balances – end of period								$

When preparing the governmental statement of revenues, expenditures and changes in fund balances, remember:

• Governmental fund revenues should be classified by major revenue source (taxes, licenses and permits, etc.); expenditures – by function (e.g., general government, public safety, etc.). However, the governments can report additional details on the statement.

• Debt issue costs paid out of either debt proceeds or from existing resources should be reported as expenditures. The face amount of the debt should be reported as other financing sources and debt premiums or discounts should be shown as a separate component of Other Financing Sources (Uses).

• Payments to escrow agents for bond refunding from the proceeds of the refunding (new) debt should be reported separate category in Other Financing Sources (Uses).

• Sales of assets (unless they are considered a special item) and transfers should be also shown as separate categories in Other Financing Sources (Uses).

• Statement of Net Position. Extraordinary and special items should be separated on the bottom of the statement. For more details see

• A reconciliation that shows adjustments made between the statement of revenues, expenditures, and changes in fund balances and the government-wide statement of net position, is required on the bottom of the report.

            The governments are required to provide a summary reconciliation between total change in governmental fund balances and the change in net position in governmental activities in the statement of net position. The reconciliation may be presented at the bottom of the statement of revenues, expenditures, and changes in fund balances or in an accompanying schedule

PENUTUP

            Governmental funds include the following.

• General fund. This fund is used to account for general operations and activities not requiring the use of other funds.
• Special revenue (or special) funds are required to account for the use of revenue earmarked by law for a particular purpose. State and federal fuel tax revenues require special revenue funds, because federal and state laws restrict these taxes to transportation uses.
• Capital projects funds are used to account for the construction or acquisition of fixed assets, such as buildings, equipment and roads. Depending on its use, a fixed asset may instead be financed by a special revenue fund or a proprietary fund. A capital project fund exists only until completion of the project. Fixed assets acquired and long-term debts incurred by a capital project are assigned to the government's General Fixed Assets and Long-Term Debts.
• Debt service funds are used to account for money that will be used to pay the interest and principal of long-term debts. Bonds used by a government to finance major construction projects, to be paid by tax levies over a period of years, require a debt service fund to account for their repayment. The debts of special assessment and proprietary funds are serviced within those funds, rather than by a separate debt service fund.
• Special assessment funds account for public infrastructure improvements financed by special levies against property holders. Sidewalk and alley repairs often rely on special assessments.