Interfund Activities Overview

Interfund Activities Overview

3 Accounting

3.9 Interfund Activities

3.9.8 Interfund Activities Overview

3.9.8.10 BARS requires that each fund be supported by its own separate set of self-balancing accounts. As such, funds will often interact with one another.

Interfund activity is defined as financial interactions between the funds of a government (including legally separate blended component units).

3.9.8.15 Interfund activity should be reported within each fund as described below. Governments that roll up or consolidate a fund (or funds) with another fund of the government (for example, the consolidation of managerial funds or activity between departments within a single fund) should redefine the interfund activity between these funds as intrafund activity and eliminate it for reporting.

3.9.8.20 Interfund activity is split into two broad categories and four smaller subcategories. The categories and subcategories are as follows:

1. Reciprocal interfund activity – A situation or transaction involving the exchange of equal or almost equal value between funds. There are two types of reciprocal interfund activity:

a. Interfund loans – Borrowings or advances from one fund to another fund with the expectation of repayment through collection of principal payments and interest as stipulated in a loan document, resolution, and/or ordinance. Please note that if there is no reasonable expectation for repayment, the loan should instead be reported as an interfund transfer. For more information about loans and what constitutes as reasonable expectation of repayment see BARS Manual 3.9.1, Loans.

b. Interfund services provided and used – As part of regular fund activity, one fund could sell goods or services to another fund in return for assets (such as cash or goods) of equal or almost equal value. Interfund services provided and used are accounted for and recognized as normal revenues and expenditures/expenses. Examples of interfund services include:

• Purchase of goods or service: water fund selling water to the parks department of the general fund, parks facility rental to the water department for public meeting, permitting department selling a permit to the sewer department (sewer fund).
• Property transfers: Property transferred between funds of the same local government. For details see BARS Manual 3.9.2, Property Transfers.
• Cities only: Utility tax levied by the general fund on its own utility. For details see BARS Manual 3.6.13, Utility Tax.

2. Nonreciprocal interfund activity – A situation that does not involve the equal or near equal exchange of value between funds. One fund gives (or receives) value without receiving (or giving) value in return.

a. Interfund transfers – A flow of assets (such as cash or goods) from one fund to another without the return of equivalent assets, goods or services, or requirement for repayment. An example of an interfund transfers include:

• Regular operations subsidies such as the general fund provides an annual operating subsidy to a transit enterprise fund.
• Cities only: Utility surplus transfers as allowed by RCW. For details see BARS Manual 3.9.3, Utility Surplus Transfers.

b. Interfund reimbursements – A repayment from the fund responsible for a particular expenditure or expense to a fund that initially paid for them. Interfund reimbursements are reported as an expenditure/expense in the fund ultimately responsible and as a reduction of the expenditure/expense in the fund being reimbursed.

Reimbursement situations generally result out of convenience, because of errors, or due to from routine administrative transactions; however, these can also occur when a government is not able to determine proper fund allocation of an expenditure at the time it is incurred. Interfund reimbursements examples include:

• Reimbursements to correct errors or allocate payments for pooled activities (payments for a convenience) such as distribution of telephone bills among the departments and funds after one department has paid the bill. For details see BARS Manual 3.9.4, Reimbursements.
• Overhead cost allocation – Costs of central services or support functions shared across departments and provided on a cost reimbursement basis. For details see BARS Manual 3.9.5, Overhead Cost Allocation (and GAAP only: BARS GAAP Manual 3.9.6, Internal Service Funds).

3.9.8.30 Reporting of transactions in funds for interfund activity [note: for GAAP entities this activity should be recognized according to the fund's basis of accounting]: