FUND ACCOUNTING

What is a fund?
A fund is a fiscal and accounting entity with self
balancing set of accounts recording cash and other
financial resources, together with all related liabilities
and residual balances, which are segregated for the
purposes of carrying on specific activities or objective
in accordance with certain regulations restrictions and
limitations.–
• The process of accounting for earmarked resources
in accordance with certain rules is termed fund
accounting
 TYPES OF FUNDS

There are three main categories of fund

• – Government /public funds)
• – Proprietary fund
• – Fiduciary funds

Government funds
These are funds that are established for public purpose.–
(In general, they report tax supported activities) They
include..
• General funds
• Special revenue fund
• Debt service funds
• Capital project fund
 TYPES OF FUNDS

• General Fund–
To account for all resources except those required to be
accounted for in another fund. Example: General Fund –
Government’s primary operating fund (such as recurrent)
• Special revenue funds–
-To account for proceeds of specific revenue sources that
are legally restricted for specific purposes.• Most are
associated with federal and state grants.
• Capital projects funds–
-To account for financial resources to be used to acquire or
construct major capital facilities
Debt service funds
– To account for resources that are used to pay principal
and interest on long-term debt
 TYPES OF FUNDS (CONT.)
Proprietary funds
these are funds established for furthering the development of
entrepreneurial skills and business oriented activities. –( Report business-type
activities)
They include:
 • Enterprise fund
 • Internal service fund

Fiduciary funds–
used to report assets held in a trustee capacity for others and cannot be
used to support the government’s own programs. –(Report resources held as
trustee or agent for others)
They include:
• Pension funds
• Investment trust funds
• Private purpose trust fund ( eg private scholarship fund administered by
government)
 TYPES OF ACCOUNTS IN FUNDS

There are two main types of accounts items found in

every fund:
– Above-the-line account items
– Below –the- accounts items
• Above-the-line items
– relate to recurrent revenues and expenditures for
the current period.
– Examples are: taxes, fees and charges, income from
investment, personal emolument, admin expenses,
investment activity expenses, service activity
expenses.
 TYPES OF ACCOUNTS

• Below-the-line accounts items

relate to financial assets, liabilities and residual balances
(or net asset).
– They are balance sheet items.
– Examples are:
• Loans
• Advances
• Receivables
• Sundry creditors (payables)
• Debts
• Accumulated fund
 FINANCIAL REPORTS OF FUNDS

• Each funds requires to be separated accounted for

as an entity
• Financial reports of funds include:
– Fund statement (receipt and payment statement)
– Revenue and Expenditure statement– Statement of
financial position
– Cash flow statement
– Notes to accounts
 FUNDS

• Why use Funds?

To meet legal requirements to support fiscal
accountability
 APPROPRIATIONS

• Appropriations
• An appropriation is a formal authorization to a
governmental unit or agency to commit not more
than a stated amount of fund resources for
specified entity purposes, usually within a given
period of time. The appropriation is the source of
available spending authority, or available funds,
 WARRANT

• What is a Warrant Release Data?

• Warrant Release is a formal authorization or
guarantee issued by Department of Treasury to
Provinces and Local-level Government that a
certain level of funding has been approved for
disbursement. Once the warrant release data is
published, a warrant authority is prepared and
advice is provided to the Provinces and Local-level
Governments advising of the availability of the cash
release.
 WARRANT

• In accordance with FMA, the Government prepares

annual budgets, called Main Estimates, for Legislative
Assembly approval by enactment.
• The Main Estimates are divided into major categories
called
• votes , which are subdivided into items and activities .
The Legislative Assembly approves or reviews the Main
Estimates at the vote , item and activity levels.
• Votes approving expenditures are reviewed and voted
on individually, and the Legislative Assembly may adjust
them, both before and after approving them. No vote or
item that has been approved within an appropriation
may be changed without Legislative Assembly approval
through a Supplementary Appropriation Bill or Special
Warrant.
 WARRANT
In case of any conflict between the following definitions and
the Financial Administration Act , the meaning intended in the Act
prevails.

"activity" a subdivision of an item , containing Divisions, Sections and Units for

business planning and budgeting

"appropriation" a Legislative Assembly enactment providing authority to incur

an expenditure. (Every expenditure requires the authority of
an enactment.)

"item" a subdivision of a vote, usually associated with a single department or

program

"vote" a major Government budget category e.g., “Vote 2, Capital Asset

Acquisition (Investment)”, or “Vote 8, Operations and Maintenance
Revenue”
 WARRANT
For example,
Vote 100- Current Expenditure
This category consist of payment for the services and consumable and non-
consumable goods to be utilized in the government operations.
Following the vote the item falls in such as,
 110 personal emoluments
 111 salaries and allowance
 112 Wages
 113 Overtime
 114 Leave fares and etc…
Vote 200- Capital Expenditure
 210 acquition of existing assets
 211 acquistion of lands, building and intangible assets and etc..
Vote 300- Other Payments
 Lending
 Loan to individual and non profit and etc…
 WARRANT

Typical Budgetary Accounts

1. Estimated Revenues –what you expect to receive
during FY as revenue
2. Appropriations –what you are authorized to spend
in Financial year.
3. Encumbrances –commitments to spend
 RECORDING REVENUE

When? License renewal fee is due

APPROPRIATION CONTROLS
 ENCUMBRANCE

What is encumbrance??
Set aside a portion of the budget for unperformed contracts and
orders for goods and services or other obligations
• “No obligation involving the expenditure of money shall be
incurred by any officer, employee, board or Commission of the
City and County unless the Controller first certifies that there
is a valid appropriation from which the expenditure may be
made, and that sufficient unencumbered funds are available
in the treasury to the credit of such appropriation to pay the
amount of such expenditure when it becomes due and
payable. "Each sum so recorded shall be an encumbrance for
the purpose certified until such obligation is fulfilled.
 ESTABLISHING ENCUMBRANCES

• Purchase order is issued or Contract signed

 RELIEVING ENCUMBRANCES

•When? Goods are received and accepted

• How? Reverse the encumbrance and record an
expenditure
 TUTORIAL ACTIVITY
Identify the fund type or types that could be used for the following resources.
In Which Fund Type Would You Deposit?
• General property tax levy
• Property tax levy devoted to paying debt service
• Property tax levy for parks and recreation
• Golf course fees
• Law enforcement block grant
• Parking fines
• Building permits
• Gas taxes shared by the state
• Investment earnings from pension funds
• Gift or bequest without restrictions
• Gift or bequest with restrictions benefiting the library
• Gift or bequest with restrictions benefiting parties outside the government
• Airport fees and charges