Special revenue fund

Definition

A special revenue fund is a type of governmental fund that is used to account for the revenues that are legally restricted to specific purposes. This means that money coming into this fund can only be spent on designated activities or projects, often funded by taxes, grants, or fees. Special revenue funds help governments manage resources for particular needs, ensuring transparency and accountability in how those funds are used.

5 Must Know Facts For Your Next Test

1. Special revenue funds are essential for tracking resources that must be used for specific activities, making them crucial for compliance with legal restrictions.
2. They often receive funding from specific taxes, grants, or fees designated for particular services or programs.
3. Common examples of special revenue funds include funds for parks and recreation, education, or public safety programs.
4. These funds help ensure that taxpayers' money is allocated properly and that there is a clear accounting of how it is spent.
5. Governments must maintain separate accounting for special revenue funds to provide transparency and adhere to legal requirements.

Review Questions

• How do special revenue funds differ from other types of governmental funds in terms of purpose and use?
  • Special revenue funds specifically track revenues that are legally restricted for certain purposes, unlike general funds which can be used for any governmental function. This specialized tracking ensures that the funds are spent according to legal stipulations, allowing for targeted spending on designated programs such as education or public safety. This distinct separation helps maintain fiscal accountability and transparency in government financial management.
• What role do special revenue funds play in maintaining compliance with legal and regulatory requirements in government accounting?
  • Special revenue funds serve a critical role in ensuring compliance with legal and regulatory requirements by providing a mechanism to track and report on revenues that are restricted for specific uses. By segregating these funds from general revenues, governments can demonstrate accountability to stakeholders and adhere to laws governing the use of public resources. This ensures that funds allocated for projects like public health initiatives or environmental programs are used exclusively for those intended purposes.
• Evaluate the impact of special revenue funds on fiscal management practices within local governments.
  • Special revenue funds significantly enhance fiscal management practices by promoting better resource allocation aligned with community needs and legal obligations. They allow local governments to earmark resources for essential services like parks, education, or public safety, thereby improving service delivery. Additionally, the existence of these dedicated funds fosters transparency and builds public trust as citizens can see how their taxes are utilized towards specific projects, ultimately leading to more effective governance.

Related terms

Governmental Fund: A category of funds used by governmental entities to account for activities primarily funded through taxes and grants.

Capital Projects Fund: A fund that accounts for financial resources used for the acquisition or construction of major capital facilities.

Trust Fund: A fund used to account for assets held by a government in a trustee capacity for others, often for specific purposes such as pensions or scholarships.