There are four categories of interfund activities classified into two groups - Interfund Transactions and Interfund Transfers.

Transactions and transfers constitute revenues, expenditures or expenses of the funds involved. In a strict fund accounting sense, however, they do not constitute such to the governmental unit as a whole. Clarification of their treatments is therefore necessary to avoid confusion to the financial statement users and assure proper representations of the financial position and operating results.The four classifications of activities are:

1. Interfund Transactions
   • Quasi-External Transactions
   • Reimbursements
2. Interfund Transfers
   • Residual Equity Transfers
   • Operating Transfers From/To Other Funds

Interfund transfers are separately recorded as interfund items in external financial statements and distinguished from revenues, expenditures or expenses in financial statements, while interfund transactions are not. Special care will be taken to ensure consistent treatment between the paying and receiving funds.

INTERFUND TRANSACTIONS

QUASI-EXTERNAL TRANSACTIONS

These are transactions that would be treated as revenues, expenditures or expenses if they involved organizations external to the State. They are accounted for as ordinary revenues, expenditures or expenses of the fund involved. Examples are payments by a State agency to the Office of General Services and Centralized Services Fund for billings.

REIMBURSEMENTS

These are transactions that constitute reimbursements of a fund for expenditures or expenses initially made from the fund which are properly applicable to another fund. They are recorded as expenditures or expenses of the reimbursing fund and as reductions of the expenditure or expense originally charged in the fund that is reimbursed. However, interfund reimbursements do not include situations whereby interfund receivables or payables have been set up.

INTERFUND TRANSFERS

RESIDUAL EQUITY TRANSFERS

These are nonrecurring or non-routine transfers of equity between funds. They should be reported as additions to or deductions from the beginning fund balance for Governmental Funds and as additions to or deductions from contributed capital or as deductions from retained earnings for Proprietary Funds. Examples are transfers of residual balances of discontinued funds to the General Fund or a Debt Service Fund.

OPERATING TRANSFERS FROM/TO OTHER FUNDS

All other interfund transfers are included here. An example would be legally authorized transfers from a fund receiving revenues to the fund through which the resources are to be expended. These transfers should be reported in the "Other Financing Sources (Uses)" section in the Statement of Revenues, Expenditures and Changes in Fund Balance for the Governmental Funds.

It should be noted that interfund transfers do not include loans or advances.

Guide to Financial Operations

REV. 10/13/2021