State and local government
The Fund Structure
Place the transaction in the right fund, classify fund balance by how binding the constraint is, and test a major fund on 10 and 5 percent.
How the exam words it
- -The stem describes an endowment, a debt payment, or a dedicated revenue and asks which fund type reports it.
- -It lists inventory, a grant, or a residual and asks for the GASB 54 fund-balance classification.
- -It gives a purchase order and asks for the encumbrance entry, or describes an interfund flow.
- -It gives a fund's share of category and combined totals and asks whether it is a major fund.
The playbook
- 1Match the transaction to its fund: a permanent fund for principal-intact endowments, a debt service fund for principal and interest, and a special revenue fund for dedicated sources.
- 2Rank fund balance from most to least constrained: nonspendable, restricted, committed, assigned, then unassigned, which is positive only in the General Fund.
- 3Encumber at the estimate when a purchase order is issued, then reverse it and record the actual expenditure on receipt.
- 4Call a fund major only when an element is at least 10 percent of its category total and at least 5 percent of the governmental and enterprise total combined.
The trap
Reporting positive unassigned fund balance outside the General Fund, or calling a fund major on the 10 percent test alone without checking the 5 percent combined test.
How the exam varies it
The same pattern, re-skinned along these axes:
Which fund type reports the transactionThe five GASB 54 fund-balance classificationsEncumbrances versus interfund activity versus the major-fund test
Drill this pattern
8 questions of The Fund Structure from across the AUD topics. Clear it by getting 5 right with a streak of 3.