Modern Fund Accounting Software And How It Makes Life Easier for Government Accountants
In this blog post we’ll be taking a look at the basics of government fund accounting, including the unique considerations and needs of a modern fund accounting system, and how a modern reporting platform is necessary to set users and their organizations up for success.
What is Fund Accounting?
Fund accounting is the process government accountants use to track, record, and report on all financial activities of the organization. To break this down a bit, a fund is defined as a set of self-balancing accounts, consisting of its own self-contained “company,” General Ledger, and reporting structure. The purpose of fund accounting, as defined by the New York State Society of Certified Accountants, is for “a method of and presentation whereby assets and liabilities are grouped according to the purpose for which they are to be used.” In other words, fund accounting is used for recording, tracking, and reporting on how designated monies from specific funds are allocated and spent. There are five unique types of governmental funds:
- General Funds
- Special Revenue Funds
- Debt Service Funds
- Capital Projects Funds
- Permanent Funds
Each of these funds has a specific purpose and intended use for how governments manage them. For example, capital projects funds are designated for projects and community initiatives like public park improvements or the building of a new library. Accounting staff are required to chronicle the use of these funds through data entry for the purpose of reporting on how they are being administered and spent.
While fund accounting may not be the most interesting topic in the world of government finance, it plays a critical role in how decisions are made and taxpayer dollars are spent. In this context, we often speak to local government finance leaders who talk about the disparity between the tools and technology their teams use versus those that are available to the private sector.
Many government accounting professionals are still working in spreadsheets with hundreds of tabs and links. Experienced accountants rely on Excel but are fully aware of the burdens of subtle, hard-to-isolate errors lurking in totals and other formulas, broken links, and just keeping the data fresh. These dangers slow the accountant’s work and make it difficult to prepare clear and easy-to-understand presentations for internal and external consumers that finance can be proud to share and stand behind with confidence in the numbers.
- Aggregates revenues from multiple funds such as Federal Grants, State Gas Tax, and CIP
- Reports expenditures in all areas of the project in total and by fund
- Displays current variances to the project budget in total and by funding source
- Provides easily accessible search features, down to the individual transaction when needed
Because all transactions are fully identified, reporting is automatically refreshed every day so the project manager has the latest data at her fingertips. Data selections can be stored as “saved views” for specific reporting needs, like reimbursement requests to funding sources, interim and closeout detail reports, and audit support.
With all of these features in mind, we’ve identified three ways in which a modern fund accounting platform enables finance professionals to manage their daily duties with efficiency, effectiveness, and accountability, alleviating some of their burdens and challenges along the way.
1. Self-Service and Easy-to-Use Reporting
Reporting can sometimes be viewed as an afterthought, especially with the pressure of closing the books at end-of-month and end-of-year, but modern solutions are enabling users to take control of the entire process and produce dynamic, robust reports with just a few clicks of a button.
For example, OpenGov Financials, which is a comprehensive, cloud-based financial management suite designed for local government, sits atop a powerful Reporting and Transparency platform, which allows users to conduct ad-hoc reporting with drill-down capabilities to gain greater visibility into cost drivers for informed decision-making. Government accounting software like this is especially critical for finance staff who are tracking funds for Capital Improvement Plans and need a way to easily report on where these monies are being allocated (see screenshot below for an example).
One of the most powerful features of modern fund accounting reporting is the ability for accounting staff to quickly share easy-to-understand reports with stakeholders and executive management. OpenGov Financials supports a plethora of functions that would otherwise be extremely difficult to achieve, such as:
- Complex funding arrangements spread over multi-years with contributions from multiple state, federal, and private sources can be budgeted for and journalized in the Financials suite. Allocations of funding to authorized uses can be recorded, reconciled, and reported.
- Local match funding, which may be currently budgeted or has been previously set aside in dedicated reserves for application to specific projects, can be included in the project.
- Progress, expenditures, variance, and performance reporting for all stakeholders can be issued on any desired schedule as a standard part of project management.
2. Long-Term Decision-Making
The finance director’s ultimate audience is the government’s elected representatives, and through them, the community’s residents. Legislators understand that everything placed on a Council or Board Agenda is a public record and assume that the public has ready access to the information in their “agenda packets,” budget documents, and other materials.
With this in mind, government accounting staff can use OpenGov Financials to share with stakeholders at-a-glance insights into funding resources to enable more strategic and accurate decision-making down the line. Finance departments can also use OpenGov Financials to:
- Prepare standardized interim financial reports for the Agenda in good form, including budget variances, cash, reserve and fund balances, and selected expense or revenue detail.
- Prepare financial content with specific accounting information relevant to a proposed purchase, process, or budget amendment for Agenda items.
- Make the above, and any other desired reporting, publicly accessible on the OpenGov portal.
- Provide fully detailed revenue, expense, and balance sheet reports on the portal for self-service FOIA request handling.
As Council members and legislators gain more insights through the use of these modern solutions, they can make more meaningful and data-driven decisions on the budget.
3. External Reporting
Finance teams are very familiar with the rules and regulations around fund accounting reporting, especially when it comes to grant funds, capital project funds, and state-specific reporting requirements. All external reporting should balance to the government’s accounting records and is subject to review or audit, often by multiple parties.
Finance Departments can use the OpenGov platform to generate and support reporting for capital projects, grants, special programs, and areas of legislative interest:
- The chart of accounts typically provides the structure to allow reports to isolate specific grants, projects, revenue streams, and expenses for reporting.
- Reports can be used directly or exported to Excel as data extracts for formatting to required specifications including both actual and budget amounts.
- Where the chart does not provide specific summary structures to pull from, individual accounts or transactions can be isolated to provide the basis for specialized reporting.
- State-mandated reporting is often required for tax payments, mandated activities, and specific operating results. Airport fuel purchases, solid waste facility closures, and state controller’s office submissions all require detailed data from the government’s accounting system.
These are just a few ways in which modern government accounting software is alleviating day-to-day challenges of finance teams. For more information on how modern solutions like OpenGov Financials are transforming local government operations, download our eBook on the 3 R’s of Government Accounting (written by a 30-year veteran of Government Finance), or visit the OpenGov Financials page.
Category: Government Finance