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Fund Accounting -- Government Entities

Fund Accounting -- Government Entities. Hartwell C. Herring III University of Tennessee. The Four Governmental Funds. General Fund Special Revenue Funds Capital Projects Funds Debt Service Funds. Accounting for Governmental Funds.

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Fund Accounting -- Government Entities

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  1. Fund Accounting -- Government Entities Hartwell C. Herring III University of Tennessee

  2. The Four Governmental Funds • General Fund • Special Revenue Funds • Capital Projects Funds • Debt Service Funds

  3. Accounting for Governmental Funds • 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

  4. General 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

  5. 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

  6. Capital 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

  7. Debt 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

  8. There are Two Account Groups • General Fixed Asset Account Group • General Long Term Debt Account Group

  9. Accounting 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

  10. There are Two Types of Proprietary Funds • Enterprise Funds • Internal Service Funds

  11. Enterprise 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

  12. Internal 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

  13. There are Four Types of Fiduciary Funds • Expendable Trust Funds • Non-Expendable Trust Funds • Pension Trusts • Agency Funds

  14. Expendable 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

  15. Non-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

  16. Pension 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

  17. Agency Funds • These funds are established for funds that the government holds in trust • The principles examples are pass-through situations and tax agency funds

  18. Government C&U Funds An overview

  19. Two 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

  20. Four 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

  21. Numerous trusts • Permanent endowment • Temporary endowment • Life income • Annuity • Agency

  22. Government College and University 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

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