GASB re-examines Fund Balance Reporting and Definitions of Fund Types: the Governmental Accounting Standards Board is looking for feedback on possible modifications to fund balance reporting and governmental fund type definitions.

• Author: Gauthier, Stephen J.
• Position: The Accounting Angle - Governmental Accounting Standards Board

In late October, the Governmental Accounting Standards Board (GASB) released an invitation to comment (ITC) document on Fund Balance Reporting and Governmental Fund Type Definitions. The new ITC suggests possible changes to the definitions currently used for certain governmental fund types to enhance comparability among governments. It also explores potential new approaches to categorizing and reporting the various components of fund balance to better meet the needs and expectations of financial statement users.

FUND-TYPE DEFINITIONS

In current practice, there is considerable diversity in how governments use special revenue funds, capital projects funds, and debt service funds.

Special revenue funds. Currently, a special revenue fund may be used:

... to account for the proceeds of specific revenue sources (other than trusts for individuals, private organizations, or other governments or for major capital projects) that are legally restricted to expenditure for specified purposes. (NCGA Statement 1, Governmental Accounting and Financial Reporting Principles, paragraph 26). [emphasis added] Specific revenue sources. The current definition was intended to apply only to specific revenue streams. In practice, special revenue funds are not infrequently used for dedicated resources that do not necessarily share a common source. Furthermore, even if a special revenue fund has indeed been established to account for a specific revenue source, it is not clear whether the fund, once established, may also properly be used to account for other resources dedicated to that same purpose. The ITC suggests three approaches:

* Revenue source only. Limit the use of a special revenue fund to just those resources generated from the specific revenue source it was established to account for;

* Revenue source + matching funds. Also allow a special revenue fund to be used to account for matching resources that must be provided by the government itself under the terms of a grant contract;

* Revenue source + matching funds + other legally limited resources. Allow a special revenue fund to be used, not only for resources generated from the specific revenue source itself and from resources provided by the government to meet matching requirements, but also for resources otherwise legally limited to the same purpose.

The ITC uses the term legally limited to describe a limitation on the use of resources imposed by the government itself such that those resources" cannot be...