Definition
The General Fund is the main operating account used by nonprofit entities, particularly governments and government agencies, to finance day-to-day activities and essential public services. It encompasses the bulk of a government’s revenue and expenditures that are not legally restricted to specific purposes. As such, the General Fund is integral to the financial health and operational capability of public institutions.
Examples
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City Government General Fund: A city’s General Fund might include revenue from property taxes, sales taxes, and fees for services. This fund would be utilized to cover the costs of public safety (policing and firefighting services), public works, parks and recreation, and other community services.
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State Government General Fund: A state government’s General Fund typically includes income from statewide sales taxes, income taxes, and corporate taxes. It would fund a wide array of programs such as education, transportation infrastructure, social services, and health services.
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School District General Fund: A local school district’s General Fund may receive funding from local property taxes, state aid, and federal grants. The fund is then used to cover teacher salaries, school maintenance, instructional materials, and extracurricular activities.
Frequently Asked Questions
What is the primary purpose of the General Fund?
The General Fund is used to finance the ongoing operations and essential services of a government or nonprofit entity. It covers expenditures that are not restricted by law or other provisions to specific purposes.
How does the General Fund differ from other government funds?
Unlike special revenue funds, capital projects funds, debt service funds, or enterprise funds, the General Fund is not restricted to specific uses. It provides the financial resources needed for the general day-to-day operations of the entity.
What are typical sources of revenue for the General Fund?
Typical revenue sources include taxes (property, income, sales), fees for services, fines, and intergovernmental transfers.
How is the General Fund managed?
The General Fund is managed through the budgetary process, which involves planning and allocating financial resources based on projected revenues and expenditures. Governments and nonprofit entities regularly monitor and update their budget to ensure fiscal responsibility.
Can the General Fund run a deficit?
Yes, the General Fund can run a deficit if expenditures exceed revenues. However, consistent deficits can lead to budget cuts, tax increases, or borrowing, which can affect the financial stability of the entity.
Related Terms
- Special Revenue Fund: A government fund used for specific purposes and financed through specific revenue sources (e.g., a highway fund financed by gasoline taxes).
- Capital Projects Fund: A fund used to account for financial resources used for the acquisition or construction of major capital facilities.
- Debt Service Fund: A fund used to account for the payment of interest and principal on long-term debt.
- Enterprise Fund: A government fund that operates similarly to a private business, covering its expenses through charges for services provided (e.g., utilities).
Online References
- Government Finance Officers Association (GFOA)
- National Association of State Budget Officers (NASBO)
- Federal Accounting Standards Advisory Board (FASAB)
Suggested Books for Further Studies
- “Governmental and Nonprofit Accounting: Theory and Practice” by Robert J. Freeman and Craig D. Shoulders
- “Accounting for Governmental and Nonprofit Entities” by Earl Ray Wilson, Jacqueline L. Reck, and Susan Convery
- “Fiscal Administration: Analysis and Applications for the Public Sector” by John L. Mikesell
Fundamentals of General Fund: Public Administration Basics Quiz
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