Purpose and Legal Separation of Dedicated Streams
Governments often protect specific public programs by creating dedicated revenue streams. These streams are legally ring-fenced, meaning the cash collected cannot be diverted into the General Fund to pay for standard administrative expenses.
Accounting for Earmarked Revenues (GASB Special Revenue Funds)
Under the US GASB framework, when a government passes a law creating a dedicated tax (e.g., a 1% sales tax increase spent exclusively on public parks), it must establish a Special Revenue Fund.
- Segregation: The revenues, accounts receivable, and corresponding expenditures are tracked completely outside the primary operating ledger. This structure allows independent auditors to verify that every dollar collected from that specific source was spent on the legally authorized program.
Trust and Fiduciary Inflows
- Fiduciary Inflows: When a government receives money that belongs to someone else (e.g., a municipality holding performance bonds submitted by private construction contractors, or a state managing a public employee pension fund), it cannot record these inflows as revenue.
- Reporting Treatment: These transactions are recorded within Fiduciary Funds. They appear on a separate Statement of Fiduciary Net Position, completely excluded from the government-wide financial statements, ensuring that personal or external assets are never mixed with public operating capital.
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