Fund Accounting -- Fund Accounting -- Government EntitiesGovernment Entities

Hartwell C. Herring III

University of Tennessee

The Four Governmental The Four Governmental FundsFunds

General Fund Special Revenue

Funds Capital Projects Funds Debt Service Funds

Accounting for Governmental Accounting for Governmental FundsFunds

The Measurement Focus is Flow of Current Financial Resources

The Basis of Accounting for Governmental Funds is Modified Accrual accounting - accruals are made for operating items but debt service and capital expenditures are charged to operations -- there are no long-term assets and liabilities

General FundGeneral Fund

Primary operating fund for general government operations

Resources -- tax revenues, intergovernmental transfers, grants, debt

Outflows --– Expenditures for operations, debt service,

capital– Transfers to other funds

Special revenue Special revenue

Established for legally restricted resources such as road use and fuel taxes, wildlife resources management, and Federal entitlement programs

Accounting procedures are identical to the GF

Capital ProjectsCapital Projects

Expendable fund used to account for construction of general capital projects (not fund projects)

Uses modified accrual accounting When the project is completed, the asset

and related debt are recorded in Account Groups and the fund is closed

Debt ServiceDebt Service

A fund established to make principal and interest payments on General Long Term Debt

Note that only General Long Term Debt is paid from the DS fund. The long term debt of proprietary funds is in the proprietary fund

DS funds use “when due” accounting

There are Two Account There are Two Account GroupsGroups

General Fixed Asset Account Group

General Long Term Debt Account Group

Accounting in Account GroupsAccounting in Account Groups

Account groups are just listings of assets or liabilities in a double entry format

Account groups are not funds because they have no resources available for expenditure

There are Two Types of There are Two Types of Proprietary FundsProprietary Funds

Enterprise Funds Internal Service Funds

Enterprise FundsEnterprise Funds

Enterprise Funds are established to account for business type activities that are run by a government.

Examples include Utilities, Airports, Golf Courses, and Transit Companies

These funds use full accrual -- flow of economic resources measurement focus

Internal ServiceInternal Service

These are established to account for activities that sell goods and services to other areas of government.

Examples include Motor Pools, Data Processing, and Self Insurance Pools

These funds also use full accrual -- flow of economic resources measurement focus

There are Four Types of There are Four Types of Fiduciary FundsFiduciary Funds

Expendable Trust Funds

Non-Expendable Trust Funds

Pension Trusts Agency Funds

Expendable TrustsExpendable Trusts

Account for gifts that can be spent -- either principle and interest or interest from a non-expendable trust

These funds use modified accrual accounting

Non-expendable trustsNon-expendable trusts

A full accrual fund for gifts that are permanently restricted by external donors

Only the income can be spent Income is transferred to an expendable trust

for disbursement

Pension trustsPension trusts

Pension assets of governmental organizations are a significant factor in our economy

State and Local Government pension plans are generally fairly fully funded defined benefit plans

Some government and most nonprofit workers have defined contribution plans

Agency FundsAgency Funds

These funds are established for funds that the government holds in trust

The principles examples are pass-through situations and tax agency funds

Government C&U FundsGovernment C&U Funds

An overview

Two current fundsTwo current funds

Current unrestricted -- accounts for operations financed by unrestricted sources– Tuition– Most appropriations– Unrestricted current gift income– Sales of services

Current restricted -- accounts for externally restricted income for research and other items

Four Plant FundsFour Plant Funds

Unexpended -- money for new plant Renewals and replacements -- money to

replace plant Retirement of indebtedness -- money to

retire long term debt Investment in plant -- the plant assets and

the long-term debt related to those assets

Numerous trustsNumerous trusts

Permanent endowment Temporary endowment Life income Annuity Agency

Government College and Government College and University AccountingUniversity Accounting

Generally modified accrual is used Reporting is fragmented into funds The financial statements are difficult to use

and understand No attempt is made to measure many

critical performance variables