In accounting for state and local governments the modified accrual basis is required for

GASB Codification Section 1300 – Fund Accounting

Process and Document Preparation:

New York State has three broad fund categories that are further divided into fund types. A fund type is the grouping of all funds of similar characteristics and purposes. Only the minimum number of funds consistent with legal and operating requirements will be established since unnecessary funds result in inflexibility and inefficient financial administration.

The fund categories and related fund types are listed below and are discussed in greater detail later in this section.

• Governmental Funds
  • General Fund
  • Federal Special Revenue Funds
  • Other Special Revenue Funds
  • General Debt Service
  • Other Debt Service Funds
  • Capital Projects Funds
  
  
• • Private Purpose Trust Funds

  • Pension Trust Funds

  • Custodial Funds

A list of the State's funds, classified by fund type, is set forth in Section 3.C - State Funds Included in the ACFR of this Chapter. A detailed description of the activities and characteristics of the different fund types is necessary for a complete understanding of governmental accounting. A discussion of the fund types used by the State, as well as the criteria used to make determinations regarding classification of a fund to a fund group, follow below.

These are the funds through which most governmental functions are financed. The acquisition and use of the State's expendable financial resources (current assets) and the related current liabilities, as well as any deferred inflows and outflows of resources, are accounted for through these funds.

All Governmental Funds use the modified accrual basis of accounting and their measurement focus is a flow of spendable financial resources.

This fund category is comprised of the following fund types:

• General Fund

  The General Fund is usually created at the inception of a governmental unit and exists throughout the life of that unit. It is the State's principal operating fund and also serves as a "catch-all" fund for all revenues and expenditures not required to be accounted for in other funds. All assets, deferred outflows of resources, liabilities and deferred inflows of resources are current. The most significant General Fund revenue source is taxes.

• Federal Special Revenue Funds

  Federal Special Revenue Funds are used to account for federal grants received that are earmarked for specific programs.

• Other Special Revenue Funds

  Other Special Revenue Funds are used to account for resources legally restricted to expenditures for specified current operating purposes.

• General Debt Service Fund

  General Debt Service Fund is used to account for the payment of principal and interest on the State’s general debt and the payments on certain lease/purchase or other contractual obligations.

• Debt Service Funds

  Debt Service Funds record the accumulation of resources and payment of principal and interest on general long-term obligations and payments on certain lease/purchase or other contractual obligations.

  Debt service payments are generally tax-supported via operating transfers from the General Fund. Other revenues are generally derived from patient fees and other miscellaneous revenues that are restricted for payment of debt service. Interest is recorded in the fund financial statements only when it is legally payable. Principal payments are also recorded as expenditures when legally payable. Total outstanding debt at year end is reported in the Government-wide Financial Statements – Statement of Net Position.

• Capital Projects Fund

  Capital Projects Funds account for expenditures related to the construction of major State-owned capital facilities and for local assistance grants for local government capital projects. Revenues and other financial sources are generated from bond proceeds, federal grants and General Fund contributions (transfers). Capital assets and the liability for capital debt are reported in the Government-wide Financial Statements – Statement of Net Position.

The required financial statements for the Governmental Funds are the:

• Balance Sheet; and
• Statement of Revenues, Expenditures and Changes in Fund Balances.

These funds are used to account for business-type activities supported, at least in part, by fees or charges. There are two types of proprietary funds: enterprise funds and internal service funds. The State has no internal service funds on a GAAP basis.

• Enterprise Funds

  Enterprise Funds report net position, revenues and expenses associated with business-type activities in which the State is engaged. These activities include Lottery, Unemployment Insurance Benefits, State University of New York and senior colleges of the City University of New York.

  Enterprise Funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with an Enterprise fund’s principal ongoing operations. Operating expenses include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses.

The required financial statements for the Enterprise Funds are the:

• Statement of Net Position;
• Statement of Revenues, Expenses and Changes in Fund Net Position; and
• Statement of Cash Flows.

These funds are used to account for assets held by a governmental unit in a trustee capacity or as an agent for individuals, private organizations, other governmental units, and/or other funds. Trust Fund spending is controlled primarily through legal trust agreements and applicable State Laws. Equitable title to fund assets does not pass to the State by virtue of the custodial role. This fund category is comprised of the following three fund types:

• Pension Trust Funds

  Pension Trust Funds report resources required to be held in trust for the members and beneficiaries of certain pension, contribution or benefit plans. The State reports the New York State and Local Retirement Systems (System), which is a defined benefit pension plan, as a Pension Trust Fund. Financial statements are prepared by the System using the accrual basis of accounting.

• Private-Purpose Trust Funds

  Private-Purpose Trust Funds account for resources legally held in trust. All resources of the fund, including any earnings on invested resources, may be used to support various activities. The resources held under these arrangements are not available to support the government’s own programs. These funds are accounted for using the accrual basis of accounting and use the economic resources measurement focus.

• Custodial Funds

  Custodial Funds are fiduciary activities that are not required to be reported in another fiduciary fund type. This includes funds that are held for the benefit of individuals, organizations, or other governments that are not part of the State’s reporting entity. They hold the resources until disbursement is made to authorized recipients or entities. These funds are accounted for using the accrual basis of accounting and use the economic resources measurement focus.

The required financial statements for the Fiduciary Funds are the:

• Statement of Fiduciary Net Position; and
• Statement of Changes in Fiduciary Net Position.

Guide to Financial Operations

REV. 09/12/2022

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