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Reporting Requirements for Annual Financial Reports of State Agencies and Universities

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Reporting Requirements for Annual Financial Reports of State Agencies and Universities

Interfund Activity

Reporting Interfund Activity

GAAP establishes two broad classes of interfund activity:

  • Reciprocal interfund activity
  • Nonreciprocal interfund activity

Interfund activity within and among the governmental, proprietary and fiduciary fund categories is classified and reported as described below. According to GASB 103, all transfers are considered subsidies.

Reciprocal Interfund Activity

Reciprocal interfund activity is the interfund counterpart to exchange and exchange-like transactions and includes:

  1. Interfund loans — One fund loans money to another fund and the amounts provided are required to be repaid.
    • Report interfund loans as interfund receivables in lender funds and interfund payables in borrower funds.
    • Do not report interfund loans as other financing sources or uses in the governmental fund financial statements because interfund loans are intra-agency activities.
    • Reduce the interfund balances if repayment is not expected within a reasonable time. Report the amount not expected to be repaid as a transfer from the fund making the loan to the fund receiving the loan.

      In substance, such a transaction is not actually a loan (such as a reciprocal transaction), but rather a transfer of resources from one fund to another (such as a nonreciprocal transaction).

  2. Interfund services provided and used — Report sales and purchases of goods and services between funds for a price approximating their external exchange value as revenues in seller funds and expenditures or expenses in purchaser funds. Treat the activity as though the transaction had involved a party outside the state.

Nonreciprocal Interfund Activity

Non-exchange activities do not involve the exchange of equal or approximately equal value. Nonreciprocal interfund activity is the interfund equivalent to non-exchange transactions and includes:

  1. Interfund transfers — Flows of assets (such as cash, goods or services) without a repayment requirement and without equivalent flows of assets in return.
    • Interfund transfers include “payments in lieu of taxes” that are not payments for (but are reasonably equivalent in value to) services provided.
    • In the governmental fund statement of revenues, expenditures, and changes in fund balances, transfers must be classified separately from revenues and expenditures. Unusual or infrequent items must be reported separately after other financing sources and uses.
    • In proprietary funds, transfers must be reported as noncapital subsidies or as other nonoperating revenues and expenses. Unusual or infrequent items must be reported individually as the last presented flow of resources prior to the net change in resource flows.
    • Transfers between governmental and business-type activities must each be reported separately from (but in the same manner as) general revenues in the government-wide statement of activities.
  2. Interfund reimbursements — Repayments from the funds responsible for particular expenditures or expenses to the funds that initially paid for them are not displayed in the financial statements, but are reported as:
    • Expenditures or expenses (as appropriate) in the reimbursing fund
    • Reductions of expenditures or expenses in the reimbursed fund