Government Agencies and Government Essay

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Fund Types

Governments have multiple options when it comes to handling money. The diversity of funds and having a policy on how to manage funds is essential for governments because of the many different ways in which the government must allocate its budget and the many different ways that a government is expected to generate returns on its investments. Critical oversight of this process is crucial to governmental monetary and fiduciary success.

The Eleven Fund Types

The eleven fund types that government agencies can use for allocating revenues can be categorized into the three broader groupings: governmental funds, proprietary funds (business type funds), and fiduciary funds. The eleven fund types as grouped by the three categories are as follows:

Governmental funds consists of: 1) general funds, such as accounts for general operations -- Sheriff, Parks, etc.; 2) special revenue funds, such as a Tourist Tax Fund; 3) debt service funds, such as the 2008 Series Debt Service Fund; 4) capital projects funds; 5) permanent funds, such as a cemetery care fund.

Proprietary funds consist of 6) enterprise funds, such as water/sewer funds; 7) internal service funds, such as a technology fund.

Fiduciary funds consist of 8) investment trust funds, such as a Countrywide Cash Investment fund; 9) private-purpose trust funds, such as a credit union for government employees; 10) pension trust funds, such as retirement funds for workers; and 11) agency funds, such as a local option sales tax fund (Lee, n.d.).

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The Funds and Why They are Used

The funds listed above can be described in the following terms. Having a diversity of funds is important because it limits the risk of the government failing to have a positive return on investment; or, it limits the risk of money being misappropriated -- funds are allocated and limited by these different types. If all money was allocated to one big Fund, the risk would be high of funds being unavailable when needed: multiple funds allow the government to hedge and limit or have negative risk and better control over how money is moved, saved, and invested.

For example, a general fund is typically the largest and most essential to the aims of the government's budget, as it "contains all transactions not provided for in any other fund" (Lee, n.d., p. 171). It ensures that there are sufficient resources for budgeted programs. The Special Revenue Fund is for funds are restricted for specific purposes such as grants. Revenue and expenditures are separated so as to make audits easier. A….....

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