Governmental and nonprofit accounting organizations both use fund accounting. In fund accounting, the resources are segregated into categories or “funds” to identify the source and the use of these funds. These funds have certain requirements. These accounts have their own general ledger, individual income statements, and their own balance sheet. It is important to note that the assets of the Governmental funds are expected to be used or liquidated within a year. The governmental fund liabilities are expected to be repaid or satisfied with current resources (Wilson, Reck & Kattelus, 2010).
There are five types of government funds:
- · General Fund
- · Special Revenue Fund
- · Capital Projects Fund
- · Debt Service Fund
- · Permanent Fund
Government funds are expendable funds and most of the activities of the government are financed through these funds. I will discuss three of the government funds. These funds are:
- Capital projects fund
- Debt service fund
- Special revenue fund
(Wilson, Reck & Kattelus, 2010).
The Capital Projects Fund is a government fund that State and Local governments use for funds accounting. The funds in this account are used for major projects. The Capital Projects Fund of Illinois was created to help fund the “Illinois Jobs Program.” The fund is only to be used for capital projects as well as payment of debt service on bonds that were issued for capital projects (Baar Topinka, 2011).
The major projects in Illinois would be:
Coal Development Fund. This fund is used to track the financial support to research, demonstrate, and commercialize coal, activities (Baar Topinka 2011).
Build Illinois Bond Fund. Any money generated through the sale of bonds in the Build Illinois Bond Program is in this fund. Various projects related to scientific research, industrial development, manufacturing or expansion are paid for through this fund (Baar Topinka 2011).
Transportation Bond Series A Fund. Any money received from bonds issued to improve or expand the Illinois highway system is in this fund (Baar Topinka 2011).
Transportation Bond Series B Fund. The money in this fund comes from the sale of bonds used to finance mass transportation and the aviation infrastructure. The Regional Transportation Authority can use this fund to purchase equipment for rail, bus or other mass transit (Baar Topinka 2011).
Transportation Bond Series D Fund. This fund is used by counties, municipalities, townships or road districts for maintaining highways, freeways, roads, railroads, bridges and structures that separate highways (Baar Topinka 2011).
Capital Development Fund. This fund is used to track the earnings from bonds that are issued to fund capital development projects in the state of Illinois (Baar Topinka 2011).
School Construction Fund. The bonds that are issued to finance the construction of building projects for schools is tracked by the earnings from this fund (Baar Topinka 2011).
CDB Contributory Fund. The remodeling of building and the purchase of land and equipment in connection with the educational institutions, state departments, and other agencies that are authorized by law is tracked by this fund (Baar Topinka 2011).
The Debt Service Fund is a fund that is set up to finance and account for the payment of principal and interest on long term debt. The long terms debt cannot be capital leases, installment purchases, workers’ compensation, and unfunded retirement benefit costs (Wilson, Reck & Kattelus, 2010).
Some examples of Debt Service Funds in Illinois are:
The General Obligation Bond Retirement and Interest Fund. This fund tracks the construction of facilities that is leased back to the State of Illinois as well as the development of mass transportation and aviation systems in the state. This Fund also tracks the payments of principal and interest in relation to general obligation bonds. These bonds provide funding for the environmental protection in the state as well as acquiring, constructing, reconstructing, extension, and improvement of highways and capital projects (Baar Topinka 2011).
Illinois Civic Center Bond Retirement and Interest Fund. This fund tracks the payment of principal and interest on bonds that have been issued to finance the building of local civic centers. The funding is made up from transfers from the Metropolitan Exposition Auditorium and Office Building Fund as well as investment income (Baar Topinka 2011).
Build Illinois Bond Retirement and Interest Fund. The funding comes from transfers from the Build Illinois Fund as well as investment income. This fund tracks the payment of principal and interest on bonds that have been issued to finance improvements to existing or scientific research that is planned, manufacturing, or the industrial development or expansion in Illinois (Baar Topinka 2011).
The Special Revenue Fund is one where the revenue is dedicated for a specific purpose. These funds need to be tracked separately and the money in this account is only allowed to be used for specific purposes that are defined by law (Wilson, Reck & Kattelus, 2010).
The Special Revenue Funds in Illinois are:
State Pension Fund. This fund tracks the receipts from abandoned property sales. The disbursements are mainly to various State of Illinois retirement systems to reduce the accrued actuarial unfunded liability (Baar Topinka 2011).
Unclaimed Property Trust Fund. This fund tracks the money that is received from abandoned property or from the sale of abandoned property in accordance with the Uniform Disposition of Unclaimed Property Act (Baar Topinka 2011).
Tobacco Settlement Recovery Fund. This fund tracks the money that is annually received in connection with the Master Settlement Agreement in the State of Illinois vs. Phillip Morris (Baar Topinka 2011).
Local Government Tax Fund. This fund accounts for 15% of the share of various sales taxes that will be distributed to the cities and counties in Illinois (Baar Topinka 2011).
Illinois Affordable Housing Trust Fund. This fund accounts for a section of the state real estate transfer tax that is used for grants and low or no interest mortgages or other loans that are used to provide low income households to acquire, construct, rehabilitate, develop, operate, insure, and retain affordable single and multi-family housing (Baar Topinka 2011).
Local Government Distributive Fund. This fund receives 1/10 of the collection of the State’s income tax that are distributed to various municipalities and counties in Illinois (Baar Topinka 2011).
Personal Property Tax Replacement Fund. This fund allocates and disburses the net revenue that is received from the personal property replacement income tax from each of the taxing districts within the state (Baar Topinka 2011).
Build Illinois Fund. This fund receives a portion of the sales from hotel and privilege taxes that is used for monthly allocation to the various State of Illinois agencies to promote activities related to tourism (Baar Topinka 2011).
Motor Fuel Tax Fund. This fund tracks the activities of the various transportation related program expenditures as well as the administrative cost of supervising the handling of the funds that is assigned to the State of Illinois municipalities, counties, and road districts (Baar Topinka 2011).
Public Transportation Fund. This fund receives transfers on a monthly basis from the General Revenue Account from the General Fund that represents statutory shares under the various sales tax acts and distributes them to the Regional Transportation Authority in accordance with a statutory formula (Baar Topinka 2011).
Downstate Public Transportation Fund. This fund provides financial assistance for local governments that have public transportation systems (Baar Topinka 2011).
DCFS Childrens’ Services Fund. This fund accounts for the revenues and expenditures that are related to the federal Title IV-E foster care and adoption service program (Baar Topinka 2011).
Supplemental Low Income Energy Assistance Fund. This account provides assistance to low income households to help them pay for heating and cooling costs (Baar Topinka 2011).
Open Space Lands Acquisition and Development Fund. This fund receives deposits from money collected under the Real Estate Transfer Tax Act that is to be transferred, appropriated and used only for the acquisition or development of land for public parks and open spaces that is authorized by the Open Space Lands Acquisition and Development Act (Baar Topinka 2011).
Food Stamp and Commodity Fund. This fund accounts for food stamps and commodities that are received from the federal government (Baar Topinka 2011).
In conclusion, government funds are used for the operations of the services within the state such as education, the police, and fire department. The statements of the general fund provide specific details of the operations of the government as well as services that are provided.
Baar Topinka, J. (2011, June 30). Comprehensive Annual Financial Report. In www.ioc.state.il.us. Retrieved April 1, 2012, from http://www.ioc.state.il.us/?LinkServID=083E57BA-1CC1-DE6E-2F48783E3F984EF7&showmeta=0
Wilson, E. R., Reck, J. L., & Kattelus, S. C. (2012). Accounting for Government & Nonprofit Entities (15th ed.). New York, NY: McGraw-Hill/Irwin.