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Financial Accounting for Local and State School Systems: 2014 Edition
NCES 2015347
April 2015

Chapter 6: Account Classification Descriptions — Fund Classifications

A fund is a separate fiscal and accounting entity with a self-balancing set of accounts recording cash and other financial resources, together with all related liabilities and residual equities or balances or changes therein. Current fund classifications are presented below. Each classification is presented by a code number followed by a description.

Governmental Fund Types

1General 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 those accounted for and reported in another fund. A district may have only one general fund.
2

Special Revenue Funds. These funds account for the proceeds of specific revenue sources (other than trusts or major capital projects) that are legally restricted or committed to expenditure for specified purposes other than debt service or capital projects. Unless specifically required by Generally Accepted Accounting Principles (GAAP) or other requirements, restricted revenues may also be accounted for in the general fund. One or more ongoing and specific restricted or committed revenues should be the foundation for a special revenue fund.

Some examples of special revenue funds are

  • restricted state or federal grants-in-aid;
  • expendable trusts that benefit or support the governmental entity; 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.These funds account for financial resources that are restricted, committed, or assigned to expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets  (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.
4Debt Service Funds.These funds account for financial resources that are restricted, committed, or assigned to expenditure for principal and interest.  Debt service funds should be used if legally mandated, as well as for the accumulation of resources for, and the payment of, general long-term debt principal and interest maturing in future years.
5 Permanent Funds.These funds 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.These funds 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; or
  • policy decision of the governing board of management to recover the costs of providing services through fees or charges.
Some examples of the use of enterprise funds are for activities such as certain food service programs, the bookstore operation, the athletic stadium, or the community swimming pool.
7

Internal Service Funds.These funds account for any activity within the school district that provides goods or services to other funds, school district 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 the use of internal service funds are for activities such as central warehousing and purchasing, central data processing, and central printing and duplicating.

Do not use internal service fund revenues or expenditures in federal surveys—unless the revenues are generated from outside the school district or education entity.

Fiduciary Fund Types

8 Trust Funds. These funds account for assets held by a school district in a trustee capacity for others—e.g., members and beneficiaries of pension plans and other postemployment benefit (OPEB) plans, external investment pools, or private-purpose trust arrangements—and that therefore cannot be used to support the school district's own programs. Trust funds are generally accounted for using 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 postemployment health care plans; refer to GASB Statements 26, 27, 43, 45, 67, and 68 for guidance on the recognition of these liabilities). Trust funds include pension trust funds (including OPEB plans), investment trust funds, and private-purpose trust funds (as described below).
  • Pension Trust Funds.These funds account for resources that are required to be held in trust for members and beneficiaries of defined benefit pension plans, defined contribution plans, OPEB plans, or other benefit plans. Typically, these funds 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. These funds 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. These funds account for other trust arrangements under which the principal and income benefit individuals, private organizations, or other governments.
9 Agency Funds. These funds account 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 taxes collected for another government or, in some states, for student activities.

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