Managerial Funds

3 Accounting

3.1 Accounting Principles and Internal Control

3.1.12 Managerial Funds

A managerial fund is a separate set of accounts that governments may elect to use to track an activity at a more detailed level than may be available in a reportable fund. Creating and using managerial funds is optional. 

For discussion on the minimum number of funds necessary to be established, see BARS 3.1.1, Fund Accounting and Fund Types.

Clearing funds are not considered managerial funds. For more information on clearing funds, see BARS 3.8.6, Use of Payroll and Claims Funds. 

3.1.12.10 Operating a managerial fund

A managerial fund functions as a sub-fund of a reportable fund of the government. The sub-fund is designed to track the financial transactions related to the activity in which the sub-fund was created. A managerial fund does not have any special or specific operating rules and should be operated like all other funds of the government (e.g. debits must equal credits within the managerial fund).

3.1.12.20 Intrafund activity

It is common for managerial funds to engage in financial transactions with their respective reportable fund. These types of transactions are called intrafund activity and include activities such as transferring or lending of cash. Transfer and lending are the most common type of intrafund activity in managerial fund use; however the government should evaluate other transactions between the funds to determine if eliminations of that activity should occur, see BARS 3.1.12.30 below.

To ensure accurate reporting, governments should have a process for tracking and identifying the intrafund activity.

3.1.12.30 Eliminating activity and financial reporting

For financial reporting purposes, governments should roll up all managerial funds into their respective reportable funds. Managerial funds should not be presented separately on the financial statements. While some accounting systems may support this roll up process, other systems may not have the necessary functionality. In these cases, governments can use an off-book consolidation spreadsheet to manually combine managerial fund activity with the reportable fund, ensuring accurate and complete financial reporting.

For example, in a government’s accounting system there is a ‘Grants 301’ fund tracked as a managerial fund of the ‘General 001’ reportable fund. In this case, an off-book consolidation spreadsheet is used to assist the government in rolling the Grants 301 fund into the General 001 fund, as seen below.

In this example, the government has consolidated (rolled up) all activity of the Grants 301 fund into the General 001 fund for financial reporting purposes. During this roll-up process in this example, the transfers in and transfers out were eliminated through the use of the eliminations column to prevent inflating the transfer activity in the financial statements.

Note: The roll-up of managerial funds does not constitute as a change in the reporting entity, as identified in BARS 3.1.10.90, Accounting Changes and Error Corrections, as long as the managerial fund has either consistently been consolidated into the reportable fund or the roll-up is occurring in a subsequent year following initial consolidation.

3.1.12.40 Moving a reported fund to a managerial fund

If a government determines that a previously reported fund on the financial statements will now operate as a managerial fund this would be reported as a change in reporting entity as identified in BARS 3.1.10.90, Accounting Changes and Error Corrections. This change must be disclosed and reported in the first year that the transition occurs.

A change in reporting entity should be reported as if the change occurred at the beginning of the fiscal year. To reflect a change in reporting entity, a government must adjust the beginning balance of the affected funds on the Schedule 01 using BARS codes 388.40.00 and 588.40.00. Additionally, all the reportable financial transactions in the managerial fund must be moved to the new reportable fund to ensure accurate and consistent financial reporting.

Note: Adjustments to consolidate managerial funds into the reportable funds are presented on the Schedule 01 only and should not be posted as transactions in the government’s accounting system to ensure both funds are still present in the government’s own systems.

This will require a government to perform a consolidation process. See an example of this process below.

In the initial year of transition, a fund reclassified as a managerial fund will still be reported on the financial statements. However, it will only display the beginning balance and the disclosure of the change in reporting entity, indicating where the beginning balances of the fund went. After the initial year, the fund is now considered a managerial fund and will follow the standard roll up process for reporting following the guidance in the section BARS 3.1.12.30 above.

3.1.12.50 Moving a managerial fund to a reported fund

If a government decides to begin reporting a fund – previously treated as a managerial fund and consolidated into another fund – as a standalone fund in the financial statements, this would constitute as a change in reporting entity as identified in BARS 3.1.10.90, Accounting Changes and Error Corrections, for the first year the decision is made. This change must be disclosed and reported in the first year that the transition occurs.

A change in reporting entity should be reported as if the change occurred at the beginning of the fiscal year. To reflect a change in reporting entity, a government must adjust the beginning balance of the affected funds on the Schedule 01 using BARS codes 388.40.00 and 588.40.00. Additionally, all the reportable financial activities that were reported in the initial managerial fund must now be moved to the new reported fund. This process is the reverse of the example shown in BARS 3.1.12.30, since the financial statements will now report both funds.

Note: Adjustments to separate a managerial fund from its reportable fund are presented on the Schedule 01 only. The government’s accounting system should continue to maintain the separate funds.

See an example of the separation of a managerial fund from its reportable fund below.

*Note: the transfer in and transfer out transactions between these funds would now be reported on financial statements since the funds no longer represent a managerial fund/reportable fund relationship.