Government and Not-for-

Profit Accounting
Ninth Edition
Michael H. Granof, Saleha B. Khumawala, Thad D. Calabrese

Chapter 2

Fund Accounting
Learning Objectives (1 of 2)
• The nature of funds, including why they are used and the interrelationship
among them
• The key elements of financial statements
• What characterizes funds
• Differences between major and nonmajor funds
• How funds can be combined and consolidated
• The basic fund types used by governments— governmental funds,
proprietary funds, and fiduciary funds
Learning Objectives (2 of 2)
• What’s notable about each type of governmental fund
• What’s notable about each type of proprietary fund
• What’s notable about each type of fiduciary fund
• The main components of a government’s Annual Comprehensive Financial
Report
• How the fund structures and financial reports of not-for-profits differ from
those of governments
What Is a Fund?
• Government and not-for-profit organizations establish their accounting
systems on a fund basis
• In governmental and not-for-profit accounting, the term fund has a
different meaning than it does in business accounting
o In business accounting, funds typically refer either to working capital or to selected
elements of working capital
o The crux of nonbusiness accounting is fund accounting, and it forms the basic
building block of governmental accounting and financial reporting
• Governmental and not-for-profit entities customarily use several funds to
account for their resources and activities
What Are the Key Elements of Government Financial Statements?

Element Definition
Assets Resources with present service capacity that the government presently
controls
Liabilities Present obligations to sacrifice resources that the government has
little or no discretion to avoid
A deferred outflow of resources The consumption of net assets by the government that is applicable to
a future reporting period
A deferred inflow of resources The acquisition of net assets by the government that is applicable to a
future reporting period
Net position The residual of all other elements presented in a statement of financial
position; that is the assets and deferred outflows less the liabilities and
deferred inflows
Deferred Inflows and Outflows of Resources (1 of 2)
• Deferred inflows and outflows of resources are not unique to governmental
accounting
• Businesses also report items such as deferred revenues and deferred costs
• However, they report the deferred inflows among the liabilities and the
deferred outflows among the assets
• (Shown on next slide)
A Statement of Net Position

Assets $100
+ Deferred outflow of resources 50
− Liabilities 75
− Deferred inflows of resources 60
= Net position $ 15
Deferred Inflows and Outflows of Resources (2 of 2)
• Reporting deferrals in separate categories makes more sense than including
them among the liabilities and assets
• A deferred revenue is a decidedly different economic element than a
traditional liability
GASB Definition of the Elements of Financial Reporting Relating
to Resources Flows
Element Definition
Outflow of resources A consumption of net assets by the government that is applicable to
the reporting period
Inflow of resources An acquisition of net assets by the government that is applicable to the
reporting period
What Characterizes Funds? (1 of 2)
• For a business…
o Assets = liabilities + owners’ equity
• Fund accounting uses…
o Assets + deferred outflows = liabilities + deferred inflows + fund balance
• Or, alternatively…
o Assets + deferred outflows ‒ liabilities ‒ deferred inflows = fund balance
• Funds for a not-for-profit would use…
o Assets ‒ liabilities = fund balance
An Important Distinction
• Governments and not-for-profits do not have owners, so the term owners’
equity is replaced…
• Full accrual basis → the residual amount is referred to as net position
• Modified accrual basis → the residual amount is referred to as fund balance
• Both fund balance and net position are residuals, like owners’ equity, the
difference between assets (and deferred outflows) and the claims against
those assets (liabilities and deferred inflows)
What Characterizes Funds? (2 of 2)
• According to GASB Statement No. 54, the fund balance is reported in a
hierarchy of classifications based primarily on the extent to which the
government is bound to observe restrictions on how the amounts in those
funds can be spent
• Because funds can be represented by the (slightly modified) basic
accounting equation that is used by businesses, they can also be accounted
for by the same double-entry system of bookkeeping
• Under GASB Statement No. 54, governmental fund balance information is
reported in five different classifications
Governmental Fund Information Classifications
Fund Balance Classification Meaning
Nonspendable Includes amounts that are not in spendable form or are legally or
contractually required to be maintained intact
Restricted Includes amounts constrained for specific purposes by external parties,
through constitutional provisions, or by enabling legislation
Committed Includes amounts constrained for specific purposes determined and
adopted by a formal action by the highest decision-making authority of
the government itself
Assigned Includes amounts a government explicitly intends to use
for specific purposes
Unassigned The residual classification for the general fund and comprises all amounts
not included in the other classifications
Restricted Fund Balance
• Amounts constrained to specific purposes by their providers:
o Creditors, bondholders
o Grant providers, contributors
o Imposed by law through constitution or enabling legislation
• Enabling legislation authorizes the government to assess or mandate
payments of resources
o Legally enforceable requirement that resources be used for the specific purpose
Committed Fund Balance
• The constraints are imposed by a formal action of the government’s highest
level of decision-making authority
• These funds cannot be used for any other purpose unless the government
removes or changes the specified use by taking the same formal action that
originally imposed the constraint
• Committed funds include contractual obligations for which existing
resources in the fund have been specifically committed for use
• The funds may also include “rainy day” or “stabilization funds”
Assigned Fund Balance
• Government intends to use the funds for a specific purpose as expressed by
the governing body or another body that has the delegated authority
• General Fund  assignment conveys that the intended use is narrower than
the general purposes
• In non-General Governmental Funds  assignment is to that fund when not
otherwise restricted or committed. In other words, it is the residual balance
of these funds
• Constraints imposed on assigned amounts can be more easily removed or
modified than those that are classified as committed
Unassigned Fund Balance
• Only the General Fund can report this positive Unassigned Fund Balance
• Includes amounts that are available for any purpose
• The residual classification of the General Fund
• For other governmental funds, this category is used to report only a
negative fund balance (that is, when expenditures have exceeded the
revenues)
Use of Multiple Funds to Account or an Entity
• Governments and not-for-profits separate resources into funds for reasons
that differ considerably from those for which businesses establish
subsidiaries
• Governments and not-for-profits most commonly separate resources into
funds to ensure that they adhere to restrictions placed on them by
legislators, grantors, donors, or other outside parties
• To a lesser extent, governments and not-for-profits establish funds to
account for certain activities—often those of a business type
o City running a golf course
• Each fund is a separate accounting entity
Electric Utility Example
• City maintains two funds: a United fund
general fund accounts and a Accounts receivable (from general fund) $10,000
utility fund Revenue from sale of electricity $10,000
To record the sale of electricity to general fund
• Utility bills other city General fund
departments for $10,000 Electricity expenditure $10,000
Accounts payable (to utility fund) $10,000
To record the use of electricity
Basis of Accounting and Measurement Focus
• The basis of accounting determines when transactions and events are
recognized
o With the full accrual basis, a transaction is recognized when it has its substantive
economic impact
o With the cash basis, the transaction is recognized only when cash related to the
transaction is received or paid
• The measurement focus of an entity determines what is being reported on
• The two concepts are closely related
• The selection of one implies the selection of the other
Full Accrual Basis
• Required of businesses
• Its measurement focus will
automatically be on all
economic resources
Vehicles $25,000
• Its balance sheet will report
Notes payable $25,000
on all assets and liabilities
To record the acquisition of a vehicle
• Revenues recognized when
earned
• Expenses recognized when
incurred
Modified Accrual Basis
• When a government is mainly
concerned with the assets needed
to satisfy current year obligations,
Cash $25,000
GASB mandates a modified accrual
Proceeds from borrowing'
basis of accounting
To record the issuance of a long-term note $25,000
• Revenues are recognized when Expenditure for vehicles $25,000
measurable and available Cash $25,000
• Expenditures when incurred To record the purchase of the vehicle

• Capital assets and long-term

liabilities are excluded from the
balance sheet
Example: Fund Accounting in a School District
• A newly formed public school district accounts for its operations on a
modified accrual basis
• It maintains four funds:
1. A general fund. This fund accounts for taxes and other unassigned resources.
2. A capital projects fund. This fund accounts for financial resources that are restricted,
committed, or assigned to expenditures for capital outlays.
3. A debt service fund. This fund accounts for financial resources that are restricted,
committed, or assigned to expenditures for principal and interest on its long-term
debt. It may be viewed as a savings account (or sinking fund) for resources restricted
either by the debt covenants (agreements) or by policies of the district itself.
4. A special revenue fund. This fund accounts for state grants that are restricted for
specific purposes.
Example: General Fund (1 of 2)
• The district levied $90 million of
general property taxes, of which General fund

it actually collected $88 million Cash $88

Property taxes receivable 2
• It expects to collect the balance Property tax revenue $90
shortly after year-end To record property taxes
• These taxes are unassigned
Example: Special Revenue Fund (1 of 2)
• The district received a state
grant of $2 million to purchase Special revenue fund

computers Cash $2
Grant revenue $2
• This grant is restricted for a To record a state grant restricted for the
specific purpose acquisition of computers

• It must be recorded in a
restricted fund, the special
revenue fund
Example: Capital Projects Fund
• The district issued $120 million
in long-term bonds to construct
Capital projects fund
a school building Cash $120
• The proceeds must be used for Other financing source: Proceeds from borrowing $120
the intended purpose so must To record the issuance of bonds
be recorded in the capital
projects fund
• The proceeds are recognized in a
revenue-type account—one that
will cause fund balance, rather
than a liability, to increase
Example: Capital Projects Fund 2
• The district constructed the
school building for $110 million
• The construction of the building Capital projects fund

must be accounted for as an Construction of building (expenditure) $110

expenditure rather than a capital Cash $110

asset To record the costs of constructing the school building

• The asset must be recorded in a

supplementary ledger or list as
well as on the district’s
government-wide statements
Example: General Fund (2 of 2)
• The district incurred $60 million General fund
in general operating General operating expenditures $60
expenditures Cash $55
• It actually paid $55 million Accounting payable 5
To record general operating expenditures
Example: Special Revenue Fund (2 of 2)
• Using its state grant, the district
purchased computers for $1
million Special revenue fund

• The district would recognize the Acquisition of computers (expenditures) $1

Cash $1
acquisition as an expenditure
To record the acquisition of computers
• It would record the asset in a
supplementary ledger or list as
well as the government-wide
statements
Example: General Fund
General fund
• The district transferred $11
Other financing use: Nonreciprocal transfer-out to debt $11
million from the general fund to service fund
the debt service fund Cash $11
To record transfer to the debt service fund
• This is to make the first Debt service fund
payments of both principal and Cash $11
interest that are due in the Other financing source: Nonreciprocal transfer-in $11
following year from general fund
To record transfer from the general fund
Example: School District’s Balance Sheet (in millions)
TABLE 2-1
School District's Balance Sheet (in millions)
General Special Capital Debt
Revenue Projects Service
Assets
Cash $22 $1 $1 $11
Property taxes receivable 2 . . .

Totals $24 $1 $1 $11

Liabilities and fund balances
Accounts payable $5
Fund balances (net assets) 19 $1 $1 $11
Totals $24 $1 $1 $11
Example: School District’s Statement of Revenues, Expenditures,
and Other Changes in Fund Balances (in millions)
TABLE 2-2
School District's Statement of Revenues, Expenditures, and Other Changes in Fund Balances (in millions)
General Special Capital Debt Service
Revenue Projects
Property tax revenue $90
Revenue from state grant $2
Total revenues 90 2 - -
Operating expenditures 60
Construction of building $11
Acquisition of computers 1
Total expenditures 60 1 11 -
Excess of revenues over expenditures 30 1 (11) -
Other financing sources (uses)
Transfers in/(out) (11) $11
Proceeds from borrowing . . 12 .

Increase in fund balance $19 $1 $1 $11

Major versus Nonmajor Funds
• The GASB distinguishes between major and nonmajor funds
• It requires that major funds are displayed more prominently than nonmajor
funds
• Major funds are those in which…
o The total of assets and deferred outflows of resources or the total of liabilities and
deferred inflows of resources or the total of revenues or expenditures are at least
10 percent of the total those elements of all funds of that category and
o Those same elements that meet the 10 percent criterion above are at least 5 percent of
the corresponding element total for all governmental and enterprise funds combined
• A government can classify as major any fund that it believes will be of special
interest to financial statement users
How Can Funds Be Combined and Consolidated?
• GASB Statement No. 34 model mandates that governments prepare two
separate, albeit related, sets of financial statements
• The first is the government-wide statements
o It concentrates on the government as a whole
• The second is the fund financial statements
o It views the governmental entity as a collection of separate funds
Table 2-3
Table 2-4 (1 of 2)
Table 2-4 (2 of 2)
Table 2-5
Table 2-6
City of Charlotte, North Carolina

Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position June 30, 2020 (in thousands)

Total fund balances for governmental funds $ 1,013,854

Total net position reported for governmental activities in the statement of net position is different because:
Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. 6,530,803
Contributions to pension plans in the current fiscal year are deferred outflows of resources. 44,894
Other long-term assets are not available to pay for current-period expenditures and, therefore, are deferred in the funds. 38,990
Internal service funds are used to charge the costs of insured and uninsured risks of loss as well as employee health and life claims to 60,001
individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the statement of net
position.
Noncurrent liabilities are not due and payable in the current period and, therefore, are not reported in the funds. (1,651,832)
Net pension liability (566,131)
Pension related deferrals 212,223
Net OPEB liability (501,033)
OPEB related deferrals 27,691
Total net position of governmental activities $5,209,460
Table 2-7 (1 of 2)
City of Charlotte, North Carolina

Statement of Revenues, Expenditures, and Changes in Fund Balance Governmental Funds for the Year Ended June 30, 2020 (in thousands)

General Debt Service Capital Projects Other Governmental Funds Total Governmental Funds
Revenues
Property taxes $ 391,475 $ 96,817 $ 10,431 $ 6,798 $ 505,521
Other taxes 122,203 22,967 9,971 74,848 229,989
Intergovernmental 100,798 1,764 36,629 83,279 222,470
Licenses, fees, and fines 36,681 53 16,431 — 53,165
Investment earnings 4,159 4,557 6,819 4,944 20,479
Administrative charges 46,858 — — — 46,858
Charges for current services 11,859 — 193 — 12,052
Miscellaneous 2,067 160 571 5,396 8,194
Private contributions — — 3,475 — 3,475
Total revenues 716,100 126,318 84,520 175,265 1,102,203
Table 2-7 (2 of 2)
Table 2-8
City of Charlotte, North Carolina
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities for the Year Ended June 30, 2020
Net change in fund balances—total governmental funds $ (83,403)
The change in net position reported for governmental activities in the statement of activities is different because:
Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful
lives and reported as depreciation expense. This is the amount by which depreciation exceeded capital outlays in the current period. 137,746
Contributions to the pension plan in the current fiscal year are not included on the statement of activities. 44,894
The net effect of various miscellaneous transactions involving capital assets (i.e., sales and donations) is to decrease net position. 75,211
Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. (2,119)
The issuance of long-term debt (e.g., bonds and installment purchases) provides current financial resources to governmental funds, while the repayment of the
principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction has any effect on net position in the government-
wide statements. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is issued, whereas these amounts
are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long-term debt and related items. (18,756)
Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in
governmental funds. (126,104)
Internal service funds are used to charge the costs of insured and uninsured risks of loss as well as employee health and life claims to individual funds. The net
revenue of certain activities of the internal service funds is reported with governmental activities. 5,936
Change in net position of governmental activities $ 33,405
What Are the Main Types of a Government’s Funds?
Broad Categories of Activities Description
Governmental activities Those financed predominantly through taxes and
intergovernmental grants
Business-type activities Those financed predominantly through user charges
Fiduciary activities Those for which the government acts as a trustee or
custodian for individuals, external organizations, or
other governments
Governmental Funds
Governmental Funds Description
General fund This fund accounts for all resources that are not required to
be accounted for in other funds
Special revenue funds These funds account for revenues that are restricted or committed to
expenditure for specific purposes other than debt service or capital projects
Debt service funds These funds are used to account for resources that are restricted, committed,
or assigned for the payment of interest and principal on long-term debt
Capital projects funds These funds are used to account for resources that are restricted, committed,
or assigned for capital outlays
Permanent funds These funds are used to report resources that are legally restricted so that only
earnings, not principal, may be used to support the government’s programs
Proprietary Funds (1 of 2)
• Proprietary-type funds are used to account for the ongoing business-type
activities of a government
• Governmental-type funds may be characterized as expendable funds
o Their resources are received from taxes, fees, or other sources, and then spent
• Proprietary-type funds are said to be nonexpendable (or revolving) funds
o Expected to “pay its own way” through customer charges
Proprietary Funds (2 of 2)
Proprietary Funds Description
Enterprise funds These funds are used to account for business-type activities in which the
government sells goods or services to the general public at large
Internal service funds These funds are used to account for business-type activities in which the
customers are other funds, departments, or agencies within the same
governmental unit
Fiduciary Funds (1 of 2)
• Fiduciary-type funds are used to account for resources held by the
government in a capacity that are intended to benefit parties other than
the government itself
• Fiduciary funds are neither consolidated with nor even incorporated into
government-wide statements
• A government may have any number of the other types of funds
Fiduciary Funds (2 of 2)
Fiduciary Funds Description
Pension and other employee The fund reports assets accumulated to fund liabilities owed to current
benefit trust funds employees and retirees
Investment trust funds Local governments are able to invest available cash into these pools and
earn a return on their assets, and then they can withdraw the funds when
needed
Private purpose trust funds These funds represent activities not covered by pension, other employee
benefit, or investment trust funds
Custodial funds These funds are used to account for resources held temporarily by one
government for another
What’s Notable about Each Type of Governmental Fund?
• The General Fund
• Special Revenue Funds
• Debt Service Funds
• Capital Projects Funds
• Permanent Funds
The General Fund (1 of 2)
• The general fund is the most significant single fund maintained by all state and
local governmental entities
• It is used to account for all resources that are not legally or contractually
restricted or arbitrarily set aside for specific activities
• All governments with general governmental activities will have one general
fund
• Ultimately, the general fund accounts for financial resources not reported in
any other funds
• To keep their accounting systems as simple as possible, governments should
establish the minimum number of funds to ensure legal compliance or
efficient administration
The General Fund (2 of 2)
• Although the resources of the general fund are not subject to the types of
restrictions that characterize other funds, they are not necessarily available
for spending
• Portions of fund balance may be considered nonspendable and restricted,
committed, or assigned for specific purposes
• By noting the assets and liabilities reported in a fund, users can draw
meaningful inferences as to the fund’s measurement focus and basis of
accounting
Special Revenue Funds
• Accounts for financial resources that are restricted or committed for
specific purposes other than debt service or capital projects.
• A governmental entity can have several special revenue funds
• Each of these funds is treated as a separate accounting entity for record-
keeping purposes
• Inasmuch as special revenue funds are, by nature, used to account for
restricted resources, no portion of fund balance would be classified as
“unassigned”
• Accounting and budgeting usually identical to general fund
Debt Service Funds
• Debt service funds are a particular type of special revenue fund in that they
are maintained to account for resources restricted for the payment of
principal and interest on all general long-term obligation debt
• Debt service funds have much in common with sinking funds maintained by
business
• Debt service funds derive their resources from other funds or taxes or fees
• Missing from the balance sheet of a debt service fund is the obligation for
the debt being serviced
• The one exception to this general rule applies to interest and principal that
have matured and are therefore current obligations
Capital Projects Funds
• Capital projects funds are categorized as governmental funds and are a
form of special revenue funds
• They are maintained to account for, and report, financial resources that are
restricted for capital outlays, including the acquisition or construction of
major capital facilities and other capital assets
• Capital projects funds used to account for the resources set aside to
purchase or construct capital assets, but not the assets themselves
• Governments must invest any excess cash awaiting expenditure for capital
projects
Permanent Funds
• Permanent funds are a relatively new type of governmental fund
• Permanent funds are a type of trust fund
• They are not classified and accounted as fiduciary-type funds because they
are public, rather than private purpose, funds
• They benefit the citizens at large or the government itself
• Per GASB Statement No. 54, the principal of the permanent fund is
reported in the nonspendable category of fund balance
What’s Notable about Each Type of Proprietary Fund?
• Enterprise Funds
• Internal Service Funds
Enterprise Funds
• Enterprise funds are used to account for business-type activities in which
the government provides goods or services on a user-charge basis to the
general public
o Utilities
o Golf courses
o Hospitals
o And so on…
• Many government enterprises are financed similarly to businesses
• Normally a separate fund is established for each type of activity
Internal Service Funds
• Internal service funds are used to account for business-type activities, but
they provide goods or services to other funds, departments, or agencies
within the same governmental unit
• They are typically established with contributions of resources from the
general or other fund
• Thereafter, they are expected to be self-sustaining
• Most of their transactions are with other funds
• Because one of a government’s objectives in providing enterprise-type
services may be to at least break even, the government officials responsible
for the activity require the same types of financial information as their
counterparts in industry
Table 2-9 (1 of 2)
Table 2-9 (2 of 2)
Table 2-10
What’s Notable about Each Type of Fiduciary Fund?
• Fiduciary funds benefit parties other than the government itself
• These funds are used to account for assets held by a government in a trust
or custodial capacity for others
• They are not included in the government-wide financial statements
Trust Funds
Trust Funds Description
Pension and other employee Benefit the government’s employees by providing income, disability
benefit trust funds income, health care insurance, and related forms of remuneration to
retirees and their beneficiaries
Investment trust funds Benefit the parties, usually other governments, which have entrusted their
resources to the fund
Private purpose trust funds These encompass all trust funds other than pension and investment trust
funds, and unlike the other trust funds, these funds may be expendable or
nonexpendable
Custodial Funds
• Custodial funds are used to account for assets held, usually for a short
period, on behalf of other governments, funds, not-for-profit entities
• Most commonly they are established to maintain control over:
o Taxes collected by one government for the benefit of another
o Special assessments collected to repay debt
o Refundable deposits
o Pass-through grants
o Amounts held for other governments in investment pools that do not meet certain
GASB specified criteria
What Is Included in a Government’s Annual Comprehensive
Financial Report (ACFR)?
• The complete annual report is known as the Annual Comprehensive
Financial Report (ACFR)
• It consists of more than just the basic statements
• The annual reports of states, cities, counties, and other general-purpose
governments are notable for their bulk
• Annual reports are directed to different groups of users
• Each group of users needs different types of information
ACFR Sections
• Introductory section
o This includes a letter of transmittal and general information on how the government
is organized and who are its key elected and administrative officials
• Financial section
o This is the main body of the ACFR
• Statistical section
o This contains current and historical data as to the jurisdiction’s demographics,
economy, tax rates, outstanding debt, and other information that supplements the
basic financial statements
Main Body of ACFR Contains…
• Management’s discussion and analysis (MD&A)
o Similar in nature to the MD&A that is part of the financial statements of businesses,
this narrative presents a brief, nontechnical overview of the government’s financial
performance during the year and its financial position at year-end
• The basic financial statements (to be discussed in the following paragraphs)
• Notes to the statements
• Required supplementary information
• Combining and individual fund financial statements (if required)
Minimum Requirements for General-Purpose Financial
Statements
The Financial Section: An Overview
• Basic financial statements present information from both a government-
wide and a fund perspective
• They include up to ten primary statements and a dozen supplementary
statements and schedules
• The government-wide statements are on a full accrual basis
• The fund statements are on the basis of accounting required for the specific
category of fund
Government-Wide Statements
• The objective of the government-wide financial statements is to present a
fairly broad and consolidated view of the financial position of the
governmental entity
• According to GAAP, there are just two required financial statements:
1. Statement of net position (balance sheet)
2. Statement of activities (statement of revenues and expenses)
• These statements provide a longer-term perspective and demonstrate
operational accountability
• The government-wide statements are prepared on a full accrual basis
• Program and function expenses include charges for depreciation, even though
they are not broken out separately
Example: Government-Wide Statement of Activities (1
of 2)
• The government of Charier City performs only two functions: public safety
and recreation
• Expenses of the public safety function total $100 million
• It offsets these expenses, in part, through miscellaneous revenues of $4
million and receives a state grant of $6 million
• it must cover the remaining balance of $90 million with taxes and other
unassigned revenues
• The recreation function incurs $30 million in expenses but collects user fees
of $8 million and receives a state grant of $9 million. It must cover
$13 million with unassigned revenues
Example: Government-Wide Statement of Activities (2
of 2)
• The city as a whole must cover a total of $103 million with unassigned
revenues
• The city’s general (unassigned) revenues total $105 million
• Thus the city’s net position increases during the period by $2 million
Example: Charier City Government-Wide Statement of Activities
(in millions)
Fund Statements
Fund Statements Description
Governmental funds Balance sheet; statement of revenues, expenditures, and changes in fund
balances and reconciliation schedules
Tables 2-5 through 2-8
Proprietary funds Balance sheet; statement of revenues, expenses, and changes; statement of
cash flows
Tables 2-9 and 2-10
Fiduciary funds Statement of fiduciary net position; statement of changes in fiduciary net
position
Chapter 10
Fund Accounting as a Convenience, Not a Mandate
• Although the GASB mandates fund-based reporting for governments, the
FASB imposes no similar requirement on not-for-profits
• Unless mandated by law, not-for-profit organizations need not employ fund
accounting for purposes of internal accounting and administration
• They must, however, comply with FASB requirements for external reporting
• For purposes of internal accounting and control, many not-for-profits do
employ fund accounting, and they maintain funds that are comparable to
those of governments
What Is Included in the Financial Report of a Not-for-Profit
Entity? (1 of 2)
• The financial reports of not-for-profit entities more closely resemble those
of businesses than of governments
• The reports need consist of only three primary statements:
1. A statement of position (balance sheet)
2. A statement of activities (statement of revenues and expenses)
3. A statement of cash flows
• Not-for-profits need not present separate data on each of their major funds
or even fund types
What Is Included in the Financial Report of a Not-for-Profit
Entity? (2 of 2)
• The FASB requires that not-for-profits classify their net assets into two
categories based on the restrictions of donors:
1. Not restricted
2. Restricted
• Restricted resources include those that must be used for a specific purpose
or cannot be spent until sometime in the future
o Also includes endowments
• The FASB permits not-for-profits considerable flexibility as to the form of
the primary statements
Table 2-12
Table 2-13 (1 of 2)
Hamilton College
Statements of Financial Position June 30, 2020 and 2019 (Dollars in thousands)
Assets 2020 2019
Cash and cash equivalents $ 21,559 28,910
Short-term investments 13,213 17,469
Student and other accounts receivable including loans, net 3,547 3,601
Contributions receivable, net 19,643 15,708
Beneficial interest trusts 5,138 2,719
Deposits with trustees of debt obligations 4,808 4,760
Collateral received for securities lending 1,993 2,005
Medium-term investments 5,317 17,884
Receivables for investments sold 33,339 —
Investments 1,034,831 1,017,291
Other assets 5,612 3,876
Property, plant and equipment, net 245,894 251,807
Total assets $1,394,894 1,366,030
Table 2-13 (2 of 2)
Hamilton College
Statements of Financial Position June 30, 2020 and 2019 (Dollars in thousands)
Liabilities and Net Assets 2020 2019
Accounts payable and accrued liabilities $ 9,040 9,903
Deposits and advances 4,388 1,664
Liability under securities lending transactions 1,993 2,005
Annuity and life income obligations 14,698 15,512
Accumulated postretirement benefit obligation 2,562 2,509
Other long-term obligations 3,689 3,185
Long-term debt 130,994 144,326
Total liabilities 167,364 179,104
Net assets:
Without donor restrictions 299,427 290,625
With donor restrictions 928,103 896,301
Total net assets 1,227,530 1,186,926
Total liabilities and net assets $1,394,894 1,366,030
Key Terms (1 of 2)
• Assigned fund balance • Debt service funds • Fund balance
• Basis of accounting • Deferred outflows of • General fund
• Business-type activities resources • Governmental activities
• Capital projects fund • Donors • Governmental-type
• Committed fund • Enterprise fund funds
balance • Expendable funds • Internal service funds
• Annual Comprehensive • Fiduciary activities • Investment trust funds
Financial Report (ACFR) • Fiduciary-type funds
• Custodial funds • Full accrual basis
Key Terms (2 of 2)
• Management’s • Nonspendable fund • Proprietary-type funds
discussion and analysis balance • Restricted fund balance
(MD&A) • Pension and other • Special revenue fund
• Measurement focus employee benefit trust
funds • Trust funds
• Modified accrual basis
• Permanent funds • Unassigned fund
• Net assets balance
• Net position • Plant funds
• Nonexpendable (or • Private purpose trust
revolving) funds funds