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Financial Accounting for Local and State School Systems, 2003 Edition



Account Classification Description
Quick Code Finder by Number/Category
Code Descriptions in Alphabetical Order

Table of Contents
Introduction
Uses of Information
Budgeting
Governmental  Accounting
Financial Accounting
Cost Accounting and Reporting for Educational Programs
Activity Fund Guidelines
Summary of Account Code Changes and other Appendices
PDF File (1044 KB)

Contact:
Frank Johnson
(202) 502-7362



Chapter 6, Account Classification Descriptions

This chapter establishes the hierarchy of the account code structure. This structure gives an entity the ability to accurately and effectively report on its financial activities. The hierarchy for both revenues and expenditures gives districts the necessary code structure to segregate and group accounts with the greatest amount of flexibility and, therefore, the ability to produce the most useful financial statements.

This chapter provides the basic account structure necessary for uniform financial reporting by state education agencies and public schools, including charter schools. Additionally, private schools may use this chart of accounts to report financial information that is comparable to that of the public education sector. Local and state needs and requirements may call for additional levels of account details and reporting requirements to be added to this basic structure. The basic structure and codes discussed herein are sufficient to comply with federal reporting requirements and those established by GASB Statement 34 for fund reporting.

The account code structure associated with revenues is relatively straightforward because each revenue is identified by source, ranging from general to specific. Expenditures, however, use a series of levels in a hierarchy to identify the following:

  • The fund from which funds are being expended
  • The program that is spending the funds
  • The function for which the funds are being spent
  • The object on which the funds are spent
  • The project for which funds are being spent (used mainly for reporting, e.g., grants)
  • The level of instruction associated with the expenditure
  • The operational unit on which the funds are being spent
  • The subject matter on which the funds are being spent
  • The job class associated with the expenditure
Although the code structure for the accounting of expenditures may initially appear complex, it has been established to develop sound guidelines for school district account codes and, therefore, to provide for more comparable financial statements among districts.


Fund Classifications

A "Permanent Fund" (code 5) was added in the draft 2003 handbook to account for resources that are legally restricted to the extent that only earnings, and not principal, may be used by the school district. Codes for Enterprise Funds and Internal Service Funds were moved up to make room for the new Permanent Fund code. The Trust and Agency Fund in the 1990 handbook was broken out into two funds in the 2003 handbook; Trust Funds (code 8) and Agency Funds (code 9). The General Fixed Assests (in the 1990 handbook) was deleted. The new fund classifications are presented below.

Code Description

Governmental Fund Types

1. General Fund. This fund is the chief operating fund of the school district. It is used to account for all financial resources of the school district except for those required to be accounted for in another fund. A district may have only one general fund.
2. Special Revenue Funds. This fund is used to account for the proceeds of specific revenue sources (other than trusts or major capital projects) that are legally restricted to expenditure for specified purposes. Some examples of special revenue funds are
 
  • restricted state or federal grants-in-aid and
  • restricted tax levies.
  A separate fund may be used for each identified restricted source, or one fund may be used, supplemented by the classification Project/Reporting code.
3. Capital Projects Funds. This fund is used to account for financial resources to be used to acquire or construct major capital facilities (other than those of Proprietary funds and trust funds). The most common source of capital projects funding is the sale of bonds or other capital financing instruments. A separate fund may be used for each capital project or one fund may be used, supplemented by the classification Project/Reporting code.
4. Debt Service Funds. This fund is used to account for the accumulation of resources for, and the payment of, general long-term debt principal and interest.
5. Permanent Funds. This fund is used to account for resources that are legally restricted to the extent that only earnings, and not principal, may be used for purposes that support the school district's programs.
Proprietary Fund Types
6.  Enterprise Funds. This fund may be used to account for any activity for which a fee is charged to external users for goods or services. Enterprise funds are required to be used to account for any activity whose principal revenue sources meet any of the following criteria:
 
  • Debt backed solely by revenues from fees and charges (thus, not debt that is backed by the full faith and credit of the school district)
  • Legal requirement to recover costs through fees and charges
  • Policy decision of the governing board of management to recover the costs of providing services through fees or charges
  • Some examples of enterprise funds are activities such as the food service program, the bookstore operation, the athletic stadium, or the community swimming pool.
7. Internal Service Funds. This fund may be used to account for any activity within the school district that provides goods or services to other funds, departments, component units, or other governments on a cost-reimbursement basis. The use of an internal service fund is appropriate only for activities in which the school district is the predominant participant in the activity. Otherwise, the activity should be reported as an enterprise fund. Examples of internal service funds are such activities as central warehousing and purchasing, central data processing, and central printing and duplicating.
Fiduciary Fund Types
8. Trust Funds. These funds are used to account for assets held by a school district in a trustee capacity for others (e.g., members and beneficiaries of pension plans, external investment pools, or private purpose trust arrangements) and therefore cannot be used to support the school district's own programs. Trust funds are generally accounted for on the economic resources measurement focus and the accrual basis of accounting (except for the recognition of certain liabilities of defined benefit pension plans and certain post-employment healthcare plans; refer to GASB 26 and 27 for guidance on the recognition of these liabilities). Trust funds include pension trust funds, investment trust funds, and private-purpose trust funds (as described below).
  Pension Trust Funds. This fund is used to account for resources that are required to be held in trust for members and beneficiaries of defined benefit pension plans, defined contribution plans, other post-employment benefit plans, or other benefit plans. Typically, these funds are used to account for local pension and other employee benefit funds that are provided by a school district in lieu of or in addition to any state retirement system.
  Investment Trust Funds. This fund is used to account for the external portion (i.e., the portion that does not belong to the school district) of investment pools operated by the school district.
  Private-Purpose Trust Funds. This fund is used to account for other trust arrangements under which the principal and income benefit individuals, private organizations, or other governments.
9. Agency Funds. This account is used for funds that are held in a custodial capacity by a school district for individuals, private organizations, or other governments. Agency funds may include those used to account for student activities or taxes collected for another government.

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