Consolidating unnecessary funds can make your life easier.

Governmental entities have a unique accounting system based on various self balancing funds. Unlike businesses where the bottom line is based on the entity as a whole, governmental accountants face a variety of funds each with a purpose and each treated as though it were its own entity. Fund accounting can be very useful, for example keeping moneys for grants separate from the general funds. However, too many funds can complicate accounting as well as the decision making process.

The Governmental Accounting Standards Board (GASB) requires only a minimum number of funds. Having additional funds can make your life more difficult by making the accounting less flexible, unnecessarily complex and creating inefficiency. Consolidating funds simplifies the accounting system.

Many funds are established by law. The funds are mandated for budget or other purposes by governing agencies. Other funds are required to assist in managing information or to aid in creating reports needed by the entity. A review of your funds may reveal funds which are actually a part of other funds, often the general fund.

To consolidate unnecessary funds the old fund is transferred as a function of the new fund. For example, if you determine Fund X can be transferred to the General fund, Fund X is closed by transferring the cash balance to the General Fund. The budget in fund X will show a line item expenditure “transfer to General Fund” and the General Fund will show a line item receipt “transfer from Fund X.” In the future Fund X expenditures would be budgeted as a separate function or department in the General Fund.

The easier your accounting system is, the less stress you will have to deal with, so take a look at the funds you are using and see if there are any unnecessary funds that could be consolidated.

For further information, contact Lewis, Hooper & Dick, LLC at (620)275-9267.

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