Federal Accounting Standards Advisory Board

Identifying and Reporting Earmarked Funds 

Statement of Federal Financial Accounting Standards 27 

28 December 2004 
THE FEDERAL ACCOUNTING STANDARDS ADVISORY BOARD 

The Federal Accounting Standards Advisory Board (FASAB or "the Board") was established by 

the Secretary of the Treasury, the Director of the Office of Management and Budget (OMB), and 

the Comptroller General in October 1990. It is responsible for promulgating accounting standards 

for the United States Government. These standards are recognized as generally accepted 

accounting principles (GAAP) for the Federal Government. 

An accounting standard is typically formulated initially as a proposal after considering the 

financial and budgetary information needs of citizens (including the news media, state and local 

legislators, analysts from private firms, academe, and elsewhere), Congress, Federal executives, 

Federal program managers, and other users of Federal financial information. The proposed 

standard is published in an exposure draft for public comment. In some cases, a discussion 

memorandum, invitation for comment, or preliminary views document may be published before 

an exposure is published on a specific topic. A public hearing is sometimes held to receive oral 

comments in addition to written comments. The Board considers comments and decides 

whether to adopt the proposed standard with or without modification. After review by the three 

officials who sponsor FASAB, the Board publishes adopted standards in a Statement of Federal 

Financial Accounting Standards. The Board follows a similar process for Statements of Federal 

Financial Accounting Concepts, which guide the Board in developing accounting standards and 

formulating the framework for Federal accounting and reporting. 

Additional background information is available from the FASAB: 

 • "Memorandum of Understanding among the General Accounting Office, the Department of 

the Treasury, and the Office of Management and Budget, on Federal Government 

Accounting Standards and a Federal Accounting Standards Advisory Board" 

 • "Mission Statement: Federal Accounting Standards Advisory Board" 

Federal Accounting Standards Advisory Board 

441 G Street, NW, Suite 6814 

Mailstop 6K17V 

Washington, DC 20548 

Telephone (202) 512-7350 

Fax (202) 512-7366 

www.fasab.gov
Summary 

Federal Accounting Standards Advisory Board 

Identifying and Reporting Earmarked Funds 

December 28, 2004 

i

Summary 

This statement defines and addresses “earmarked funds.” Note that this statement uses 

the term “earmarked” only as it is defined below. This statement does not use the term 

“earmarked” as it is sometimes used to refer to set-asides of appropriations for specific 

purposes. 

Scope of this Statement 

The Board's proposed standard for "Fiduciary Activities" and this standard on 

"Earmarked Funds" together address all activities or funds considered "dedicated 

collections" by Statement of Federal Financial Accounting Standards (SFFAS) 7. When 

finalized, the fiduciary activities standard will rescind the "dedicated collections" 

provisions in SFFAS 7. This standard supersedes the “dedicated collections” provisions 

in SFFAS 7 (paragraphs 83-87) for earmarked funds. 

Earmarked funds are financed by specifically identified revenues, often supplemented by 

other financing sources, which remain available over time. These specifically identified 

revenues and other financing sources are required by statute to be used for designated 

activities, benefits or purposes, and must be accounted for separately from the 

Government’s general revenues. The three required criteria for an earmarked fund are: 

1. A statute committing the Federal Government to use specifically identified 

revenues and other financing sources only for designated activities, benefits 

or purposes; 

2. Explicit authority for the earmarked fund to retain revenues and other 

financing sources not used in the current period for future use to finance the 

designated activities, benefits, or purposes; and 

3. A requirement to account for and report on the receipt, use, and retention of 

the revenues and other financing sources that distinguishes the earmarked 

fund from the Government’s general revenues. 

An earmarked fund may be classified in the unified budget as a trust, special, or public 

enterprise fund. Application of this standard, however, should not be based on whether 

a statute or the unified budget labels an earmarked fund as a certain type of fund. 

Rather, the Board intends that the term earmarked fund be applied based on the 

substance of the statute and consistent with the three criteria set forth in the standard. 

Reporting Requirements 

The component entity will show earmarked nonexchange revenue and other financing 

sources, including appropriations, and net cost of operations separately on the 

Statement of Changes in Net Position. The component entity also will show the portion 

of cumulative results of operations attributable to earmarked funds on the Statement of 

Changes in Net Position and on the Balance Sheet. 

At the Government-wide level, earmarked revenue, other financing sources and net cost 

of operations will be shown separately on the U.S. Government Statement of Operations 
Summary 

Federal Accounting Standards Advisory Board 

Identifying and Reporting Earmarked Funds 

December 28, 2004 

ii

and Changes in Net Position. The U.S. Government Balance Sheet will show separately 

the portion of net position attributable to earmarked funds. 

This standard requires that every component entity disclose the earmarked fund(s) for 

which it has program management responsibility. It also requires condensed information 

on assets, liabilities and cost for all earmarked funds, although it permits information on 

funds not presented individually to be aggregated. In addition, it requires disclosure of 

any legislation that changed the purpose of or redirected a significant portion of an 

earmarked fund. 

Required note disclosures at the component entity level will clarify the fact that 

investments in Treasury securities held by the component entity are not assets for the 

Government as a whole. That is, the investments in Treasury securities are available for 

authorized expenditures and are thus assets of the managing component entity. 

However, financing will be needed by the Government as a whole when those 

investments in Treasury securities are redeemed to make expenditures. 

In addition, this standard addresses those situations where several component entities 

each have program management responsibility for separate, identifiable portions of the 

earmarked fund. By requiring each component entity to report on only its portion of the 

earmarked fund, the standard assists report users in evaluating the service efforts, costs 

and accomplishments of the component entity. 

Effective Date 

The provisions of this standard are effective for periods beginning after 

September 30, 2005. Early adoption is not permitted. In the year this standard 

becomes effective, entities should not restate the prior period columns of the basic 

financial statements and related disclosures.
Table of Contents 

Federal Accounting Standards Advisory Board 

Identifying and Reporting Earmarked Funds 

December 28, 2004 

iii

Table of Contents 

Summary........................................................................................................................................ i

Scope of this Statement ............................................................................................................. i

Reporting Requirements ............................................................................................................ i

Effective Date ............................................................................................................................ ii

Table of Contents......................................................................................................................... iii

Introduction ...................................................................................................................................1

Scope ........................................................................................................................................3

Effective Date ............................................................................................................................3

Accounting Standards...................................................................................................................4

Definition of Earmarked Funds..................................................................................................4

Reporting for Earmarked Funds ................................................................................................6

Basis of Accounting...................................................................................................................9

Effective Date and Implementation .........................................................................................10

Effect on Existing Standards ...................................................................................................10

Appendix A: Basis for Conclusions .............................................................................................12

Response to Comments Received..........................................................................................12

Existing Accounting Standard Needs Clarification ..................................................................13

Special Accountability .............................................................................................................14

Identifying Earmarked Funds ..................................................................................................14

Reporting Treatment ...............................................................................................................15

Board Approval........................................................................................................................18

Appendix B: Glossary .................................................................................................................19

Appendix C: Pro Forma Illustrations ..........................................................................................21

Appendix D: Example of Note Disclosure Summary Financial Information for Component Entity

....................................................................................................................................................26

Appendix E: List of Abbreviations ..............................................................................................27
Introduction 

Federal Accounting Standards Advisory Board 

Identifying and Reporting Earmarked Funds 

December 28, 2004 

1

Introduction 

1. This statement defines and addresses “earmarked funds1.” Note that this 

statement uses the term “earmarked” only as it is defined below. This 

statement does not use the term “earmarked” as it is sometimes used to refer 

to set-asides of appropriations for specific purposes. 

2. This statement amends Statement of Federal Financial Accounting Standards 

(SFFAS) 7, Accounting for Revenue and Other Financing Sources. This 

statement defines and addresses earmarked funds and differentiates 

between earmarked funds and fiduciary activity. This statement requires 

that earmarked funds be identified and shown separately on the Statement of 

Changes in Net Position (for U.S. Government-wide, the Statement of 

Operations and Changes in Net Position) and the Balance Sheet. It also 

requires the component entity to identify all earmarked funds for which it has 

management responsibility, by either a list by official title or a statement 

indicating where the information can be obtained and to provide specific 

information on earmarked funds including revenue sources, assets and 

liabilities, and changes in net position. 

3. Earmarked revenue and other financing sources are accounted for in 

earmarked funds with widely disparate characteristics. In a 2001 report, the 

Government Accountability Office (GAO) identified three hundred and ninetytwo possible earmarked funds.2

 Annual revenues and other financing 

sources for those earmarked funds range from negligible amounts to over 

half a trillion dollars. Accumulated balances range from zero to over a trillion 

dollars. 

4. Earmarked funds are financed by specifically identified revenues and other 

financing sources (such as appropriations) and serve a variety of purposes. 

Revenue sources may be exchange or nonexchange and include but are not 

limited to payroll taxes, excise taxes, customs duties, fees, user charges, 

sales of goods and services and interest earned. In addition, although 

earmarked funds are usually the responsibility of a single entity, management 

responsibility for some earmarked funds is shared by two or more entities.

5. The purpose of earmarked funds ranges from the long-term commitments 

financed by social insurance taxes, such as Social Security, to business-type 

activities financed mainly by exchange transactions, such as the Employees 

Life Insurance Fund. Every department and many independent agencies 

have at least one earmarked fund. Therefore, earmarked funds affect a wide 

array of programs, including commerce, income security, natural resources, 

administration of justice, agriculture, education, science and technology, the 

environment, healthcare, housing credit and insurance. 

6. Despite the differences among earmarked funds they do share certain 

characteristics. Earmarked funds are financed by specifically identified 

revenues, often supplemented by other financing sources, which remain 

 

1

 Words first appearing in boldface are defined in Appendix B: Glossary. 2

 GAO, Federal Trust and Other Earmarked Funds, January 2001, GAO-01-199SP, p. 12. The term “earmarked funds” used by 

GAO in its survey differs from that established by this standard and was not intended to reflect standards for financial reporting. The 

term “earmarked funds” as used in either the GAO report or other governmental issuances shall not govern the application of this 

standard. 
Introduction 

Federal Accounting Standards Advisory Board 

Identifying and Reporting Earmarked Funds 

December 28, 2004 

2

available over time, are required by statute to be used for designated 

activities, benefits or purposes, and must be accounted for separately from 

the government’s general revenues. 

7. The following chart shows fund types used in reporting to the Treasury 

Financial Management Service (FMS) and the Office of Management and 

Budget (OMB). It is intended only to show the general relationship between 

fund groups and earmarked funds as classified in this statement. Regardless 

of classification for reporting to the Treasury FMS or the OMB, funds meeting 

the definition of earmarked funds promulgated in this standard should be so 

classified and funds not meeting the definition should not be so classified. 

Table 1. Fund Groups Used in Federal Reporting to the Treasury FMS and the 

OMB 

Fund Groups and Major Classes 

Generally Are Subject to 

the Reporting 

Requirements of this 

Standard 

Generally Are Not 

Subject to the Reporting 

Requirements of this 

Standard 

 

General Funds ....................0000-3999 X 

Revolving Funds..................4000-4999 

Intra-governmental Revolving Funds X 

Public Enterprise Funds: 

Credit Reform Financing Funds X 

All Other Public Enterprise Funds X 

 

Special Funds .................... 5000-5999 X 

Deposit Funds ....................6000-6999 X 

Trust Funds .......................8000-8999 X 

8. Funds that receive earmarked revenue and other financing sources include 

special funds, trust funds -- both revolving and non-revolving -- and public 

enterprise funds. The general fund is used to carry out the general 

purposes of Government rather than being restricted by law to a specific 

program. It consists of all collections not earmarked by law to finance other 

funds, including virtually all income taxes and many excise taxes, and all 

expenditures financed by these collections and by general U.S. Treasury 

borrowing.3

 While intragovernmental funds, which are revolving funds that 

conduct business-type operations primarily within and between Government 

agencies, share the characteristics of an earmarked fund, they are excluded 

 

3

 Analytical Perspectives, Budget of the United States Government, Fiscal Year 2005, p. 339. 
Introduction 

Federal Accounting Standards Advisory Board 

Identifying and Reporting Earmarked Funds 

December 28, 2004 

3

from the reporting requirements of this standard. Credit financing accounts 

and fiduciary funds are also excluded. 

Scope 

9. This statement provides accounting and reporting standards for earmarked 

funds in the general purpose financial statements of reporting entities and the 

U.S. Government-wide Financial Report. This statement does not affect 

reporting in the Budget of the United States Government or any other special 

purpose type of report. 

Effective Date 

10. This statement is effective for periods beginning after September 30, 2005. 

Early adoption is not permitted. In the year this standard becomes effective, 

entities should not restate the prior period columns of the basic financial 

statements and related disclosures.
Accounting Standards 

Federal Accounting Standards Advisory Board 

Identifying and Reporting Earmarked Funds 

December 28, 2004 

4

Accounting Standards 

Definition of Earmarked Funds

11. Earmarked funds are financed by specifically identified revenues, often 

supplemented by other financing sources, which remain available over time. 

These specifically identified revenues and other financing sources are 

required by statute to be used for designated activities, benefits or purposes, 

and must be accounted for separately from the Government’s general 

revenues. The three required criteria for an earmarked fund are: 

1. A statute committing the Federal Government to use specifically 

identified revenues and other financing sources only for designated 

activities, benefits or purposes; 

2. Explicit authority for the earmarked fund to retain revenues and other 

financing sources not used in the current period for future use to 

finance the designated activities, benefits, or purposes; and 

3. A requirement to account for and report4

 on the receipt, use, and 

retention of the revenues and other financing sources that 

distinguishes the earmarked fund from the Government’s general 

revenues. 

12. The requirement to account for revenues and other financing sources that are 

statutorily available only for designated activities, benefits or purposes is 

usually created by statute. An earmarked fund may be classified in the 

statute, the unified budget, or both, as a trust, special, or public enterprise 

fund. Application of this standard, however, shall not be based on how a 

statute or the unified budget labels the fund. Rather, the Board intends that 

the term “earmarked fund” be applied based on the substance of the statute 

and consistent with the three criteria described above. 

13. Fund in this statement’s definition of earmarked funds refers to a “fiscal and 

accounting entity with a self-balancing set of accounts recording cash and 

other financial resources, together with all related liabilities and residual 

equities or balances, and changes therein, which are segregated for the 

purpose of carrying on specific activities or attaining certain objectives in 

accordance with special regulations, restrictions, or limitations.”5

 

Distinct from the General Fund

14. Whereas earmarked funds are financed by specifically identified revenues 

and other financing sources, the general fund is financed by receipts not 

earmarked by law for a specific purpose and the proceeds of general 

borrowing. Although there are exceptions, funding decisions regarding 

activity financed from general receipts usually govern one fiscal year and are 

made as part of the process of enacting one of the annual appropriations 

acts. In contrast, legislation establishing earmarked funds reflects a longer (if 

not indefinite) Government commitment to collect, hold and spend identified 

 

4

 A “report” may be something other than stand-alone financial statements for the earmarked fund. 

5

 National Council on Governmental Accounting Statement 1, par. 16. 
Accounting Standards 

Federal Accounting Standards Advisory Board 

Identifying and Reporting Earmarked Funds 

December 28, 2004 

5

revenues for a designated activity, benefit or purpose. Earmarked funds may 

have a permanent indefinite appropriation, often enacted by authorizing 

legislation. If not, an appropriation provided in annual appropriation acts is 

necessary to make expenditures. Whether the appropriation is provided by 

authorizing legislation or annual appropriations acts, the cumulative results of 

operations arising from earmarked funds is reserved or restricted to the 

designated activity, benefit or purpose. 

Distinct from Fiduciary Activities

15. The activity of earmarked funds differs from fiduciary activities primarily in 

that earmarked fund assets are Government-owned. A fiduciary activity is 

the collection or receipt, management, protection, accounting, investment and 

disposition by the Federal Government of cash or other assets in which nonFederal individuals or entities have an ownership interest that the Federal 

Government must uphold.6

 Therefore, even though an earmarked fund is 

designated exclusively for a specific activity, benefit or purpose, the Federal 

Government does not have a fiduciary relationship with the individuals or 

groups who potentially will benefit from the fund. 

Distinct from Private Sector Trust Funds

16. Although earmarked monies are predominantly in funds that are designated 

by law as trust funds, the meaning of the term “trust” in the Federal 

Government differs significantly from its meaning in the private sector. 

Whereas earmarked funds in the Federal Government are distinct from 

fiduciary activities, a trust in the private sector necessarily involves a fiduciary 

relationship. 

17. An earmarked fund should not be characterized as a “trust” in general 

purpose external financial reports of Federal entities. (The use of the term 

“trust fund” is acceptable only in the fund’s official title.) 

Exclusions from Reporting Requirements

18. Certain categories of funds are excluded from the reporting requirements of 

this standard. Intragovernmental funds are excluded because they are 

revolving funds that conduct business primarily within and between 

Government agencies. Credit financing accounts are also excluded. Credit 

financing accounts are nonbudgetary funds that do not accumulate results of 

operations; they primarily serve as clearing accounts for cash activity relating 

to Federal credit programs. Fiduciary funds, which are not Governmentowned, are also excluded. 

 

6

 See the FASAB exposure draft of March 2003, Accounting for Fiduciary Activities, for more on fiduciary activity in the Federal 

Government and the differences between private trust funds and Federal government trust funds. 
Accounting Standards 

Federal Accounting Standards Advisory Board 

Identifying and Reporting Earmarked Funds 

December 28, 2004 

6

Reporting for Earmarked Funds 

Financial Statement Presentation and Disclosures for Component Entities 

Financial Statement Presentation 

19. Earmarked non-exchange revenue and other financing sources, including 

appropriations, and net cost of operations should be shown separately on the 

Statement of Changes in Net Position. Also, the portion of cumulative results 

of operations attributable to earmarked funds should be shown separately on 

both the Statement of Changes in Net Position and the Balance Sheet. This 

standard does not require earmarked funds to be separately shown on the 

Statement of Net Cost. (See Appendix C: Pro Forma Illustrations for 

examples of accounting entries and financial reporting.) 

20. Most earmarked revenues and other financing sources are in the basic 

financial statements of the entity carrying out the program and responsible for 

administration of the fund. If more than one component entity is responsible 

for carrying out the program financed with earmarked revenues and other 

financing sources, and the separate portions of the program can be clearly 

identified with a responsible component entity, then each component entity 

should report its portion in accordance with the requirements of this standard. 

If separate portions cannot be identified, the component entity with program 

management responsibility should report the fund.7

 

Disclosure 

21. A component entity should disclose8

 all earmarked funds for which it has 

program management responsibility by either a list, by official title, or a 

statement indicating where the information can be obtained. An earmarked 

fund should not be characterized as a “trust” in general purpose external 

financial reports of Federal entities. (The use of the term “trust fund” is 

acceptable only in the fund’s official title.) 

22. The following information should be disclosed for individual earmarked funds. 

An exception is provided for component entities having numerous individual 

earmarked funds. Paragraph 24 discusses criteria to consider in selecting 

individual funds for disaggregated disclosure. The following information 

should be disclosed for selected individual earmarked funds and in aggregate 

for all remaining earmarked funds: 

1. Condensed information about assets and liabilities showing 

investments in Treasury securities, other assets, liabilities due and 

payable, other liabilities, cumulative results of operations and net 

position. 

2. Condensed information on gross cost, exchange revenue, net cost, 

nonexchange revenues and other financing sources, and change in 

net position. 

 

7

 To determine program management/accounting responsibility, agencies should consider the legislation authorizing the program; 

the Memorandum of Understanding that establishes responsibilities; and the provisions of SFFAC 2, Entity and Display, as 

amended by this standard. 

8

 Disclosure is reporting information in notes or narrative regarded as an integral part of the basic financial statements. 
Accounting Standards 

Federal Accounting Standards Advisory Board 

Identifying and Reporting Earmarked Funds 

December 28, 2004 

7

The information required by this paragraph for earmarked funds may be 

presented separately on the face of the entity's basic financial statements or 

disclosed in the accompanying notes. Information for funds not presented 

individually may be aggregated, but must be provided even if the aggregate 

total is immaterial. The total cumulative results of operations shown in the 

note disclosure should agree with the cumulative results of operations for 

earmarked funds shown on the face of the component entity’s basic financial 

statements.9

 (See Appendix D: Examples of Note Disclosure of Summary 

Financial Information for an illustration of the disclosure required by this 

paragraph.) 

23. The following information should be disclosed for each individually reported 

earmarked fund, or portion thereof, for which a component entity has program 

management responsibility (see paragraph 24). 

1. A description of each fund's purpose, how the entity accounts for and 

reports the fund, and its authority to use those revenues and other 

financing sources. 

2. The sources of revenue or other financing for the period and an 

explanation of the extent to which they are inflows of resources to the 

Government or the result of intragovernmental flows. 

3. Any change in legislation during or subsequent to the reporting period 

and before the issuance of the financial statements that significantly 

changes the purpose of the fund or that redirects a material portion of 

the accumulated balance. 

24. Selecting earmarked funds to be presented individually requires judgment. 

The preparer should consider both quantitative and qualitative criteria. 

Acceptable criteria include but are not limited to: quantitative factors such as 

the percentage of the reporting entity’s earmarked revenues or cumulative 

results of operations from earmarked funds; and qualitative factors such as 

whether an earmarked fund is of immediate concern to constituents of the 

fund, whether it is politically sensitive or controversial, whether it is 

accumulating large balances, or whether the information provided in the 

financial statements would be the primary source of financial information for 

the public. 

25. The total cumulative results of operations of all earmarked funds shown in the 

note disclosure should agree with the cumulative results of operations of 

earmarked funds shown on the face of the component entity’s Balance Sheet 

and the Statement of Changes in Net Position.

26. In accordance with the provisions of paragraph 20, if a component entity 

reports a different portion of an earmarked fund than it reported in prior years, 

it should not restate its prior year financial statements. It should disclose the 

change in a note. This applies if a component entity does not report an 

earmarked fund, or portion thereof, that it reported in the previous year. It 

also applies if a component entity does report an earmarked fund, or portion 

thereof, that it did not report in the previous year. 

 

9 For the U.S. Treasury and any other component entity where earmarked fund investments are eliminated within the component 

entity, the note disclosure should include eliminations, similar to the note disclosure provided by the U.S. Government-wide financial 

statements as described in paragraph 30.
Accounting Standards 

Federal Accounting Standards Advisory Board 

Identifying and Reporting Earmarked Funds 

December 28, 2004 

8

Note on Investments 

27. Investments in Treasury securities for earmarked funds should be 

accompanied by a note that explains the following issues: 

• The U.S. Treasury does not set aside assets to pay future expenditures 

associated with earmarked funds. Instead, the cash generated from 

earmarked funds is used by the U.S. Treasury for general Government 

purposes. 

• Treasury securities are issued to the earmarked fund as evidence of 

earmarked receipts and provide the fund with the authority to draw upon 

the U.S. Treasury for future authorized expenditures (although for some 

funds, this is subject to future appropriation). 

• Treasury securities held by an earmarked fund are an asset of the fund 

and a liability of the U.S. Treasury, so they are eliminated in consolidation 

for the U.S. Government-wide financial statements. 

• When the earmarked fund redeems its Treasury securities to make 

expenditures, the U.S. Treasury will finance those expenditures in the 

same manner that it finances all other expenditures. 

28. Below is one example of a note that addresses the points in paragraph 27 

above. 

Intra-governmental Investments in Treasury Securities 

The Federal Government does not set aside assets to pay future benefits or 

other expenditures associated with earmarked funds (or name/s of fund/s). 

The cash receipts collected from the public for an earmarked fund are 

deposited in the U.S. Treasury, which uses the cash for general Government 

purposes. Treasury securities are issued to the (component entity) as 

evidence of its receipts. Treasury securities are an asset to the (component 

entity) and a liability to the U.S. Treasury. Because the (component entity) 

and the U.S. Treasury are both parts of the Government, these assets and 

liabilities offset each other from the standpoint of the Government as a whole. 

For this reason, they do not represent an asset or a liability in the U.S. 

Government-wide financial statements. 

Treasury securities provide the (component entity) with authority to draw 

upon the U.S. Treasury to make future benefit payments or other 

expenditures. When the (component entity) requires redemption of these 

securities to make expenditures, the Government finances those 

expenditures out of accumulated cash balances, by raising taxes or other 

receipts, by borrowing from the public or repaying less debt, or by curtailing 

other expenditures. This is the same way that the Government finances all 

other expenditures. 
Accounting Standards 

Federal Accounting Standards Advisory Board 

Identifying and Reporting Earmarked Funds 

December 28, 2004 

9

Financial Statement Presentation and Disclosures for the U.S. Government-wide Financial 

Statements

Financial Statement Presentation 

29. Earmarked funds should be shown separately on the U.S. Government 

Statement of Operations and Changes in Net Position. The portion of Net 

Position attributable to earmarked funds should be shown separately on the 

U.S. Government Balance Sheet.10 (See Appendix C: Pro Forma 

Illustrations for examples of accounting entries and financial reporting.) 

Disclosure 

30. Specific information should be disclosed for selected earmarked funds. 

Paragraph 24 discusses criteria to consider in selecting individual funds for 

disaggregated disclosure. The following information should be provided for 

selected individual earmarked funds and in aggregate for all remaining 

earmarked funds with eliminations necessary to produce the Governmentwide total of earmarked funds: 

1. Condensed information about assets, liabilities and net position. 

2. Condensed information on gross cost, exchange revenue, net cost, 

nonexchange revenues and other financing sources, and change in 

net position. 

31. The information for earmarked funds should be disclosed in the notes 

accompanying the basic financial statements. Information for funds not 

shown individually may be aggregated (see paragraph 24). A total column 

should be presented that relates the disaggregated data to the data on the 

face of the principal financial statements. The net position shown in the note 

disclosure should agree with the portion of net position attributable to 

earmarked funds shown on the face of the balance sheet. 

32. A note disclosure should provide a reference to component reports for 

additional information about individual earmarked funds. 

33. A note disclosure should provide a general description of earmarked funds 

and an explanation of how the Federal Government as a whole could provide 

the resources represented by the earmarked funds’ balance in Treasury 

securities. 

34. An earmarked fund should not be characterized as a “trust” in general 

purpose external financial reports of Federal entities. (The use of the term 

“trust fund” is acceptable only in the fund’s official title.) 

Basis of Accounting 

35. All amounts reported and disclosed in the reporting entity’s basic financial 

statements or the notes thereto, as required in paragraphs 19 through 34, 

should be recognized and measured using the standards provided in 

 

10 Net Position is composed of unexpended appropriations and cumulative results of operations for component entities. Since 

unexpended appropriations are not applicable at the U. S. Government-wide level, net position equals cumulative results of 

operations. 
Accounting Standards 

Federal Accounting Standards Advisory Board 

Identifying and Reporting Earmarked Funds 

December 28, 2004 

10

generally accepted accounting principles applicable to the Federal 

Government. 

Effective Date and Implementation 

36. This standard is effective for periods beginning after September 30, 2005. 

Early adoption is not permitted. In the year this standard becomes effective, 

entities should not restate the prior period columns of the basic financial 

statements and related disclosures. 

Effect on Existing Standards 

37. This standard affects existing standards dealing with “dedicated collections” 

in Statement of Federal Financial Accounting Standards 7, Revenue and 

Other Financing Sources, as follows: for funds meeting the definition of 

earmarked funds promulgated in this standard, paragraphs 83 through 87 are 

replaced by this standard. 

38. This standard amends Statement of Federal Financial Accounting Concepts 

(SFFAC) 2, Entity and Display” footnote 3, as follows: 

For some trust funds, the collection of the revenues is performed by an 

organizational entity acting in a custodial capacity that differs from the 

organizational entity that administers the trust fund. In those instances, the 

organizational entity that collects the revenue would be responsible for 

reporting only the collection and subsequent disposition of the funds. The 

organizational entity responsible for carrying out the program(s) financed by a 

trust fund, or in the case of multiple responsible entities, the entity with the 

preponderance of fund activity, will report all assets, liabilities, revenues and 

expenses of the fund, notwithstanding the fact that another entity has 

custodial responsibility for the assets. In the case of multiple responsible 

entities, if the separate portions of the program can be clearly identified with a 

responsible component entity, then each component entity should report its 

portion in accordance with the requirements of SFFAS 27, Identifying and 

Reporting Earmarked Funds. If separate portions cannot be identified, the 

component entity with program management responsibility should report the 

fund. 

39. This standard amends SFFAC 3, Management’s Discussion and AnalysisConcepts, paragraph 26 as follows: 

Financial Results, Position and Condition-MD&A should help those who read 

it to understand the entity's financial results and financial position and the 

entity's effect on the financial position and condition of the Government. It 

should give readers the benefit of management's understanding of the 

significance and potential effect from both a short- and a long-term 

perspective of: 

• the variations discussed in paragraph 14 in terms of major changes in 

types or amounts of assets, liabilities, costs, revenues, obligations and 

outlays; 
Accounting Standards 

Federal Accounting Standards Advisory Board 

Identifying and Reporting Earmarked Funds 

December 28, 2004 

11

• particular balances and amounts shown in the basic financial statements, 

including the notes, such as those dealing with dedicated collections or 

trust funds earmarked funds, if relevant to important financial 

management issues and concerns; and 

• the entity's required supplementary stewardship information (because 

RSSI describes economic conditions that cannot be expressed in the 

basic financial statements). 

The provisions of this statement need not be applied to immaterial items. 
Appendix A: Basis for Conclusions 

Federal Accounting Standards Advisory Board 

Identifying and Reporting Earmarked Funds 

December 28, 2004 

12

Appendix A: Basis for Conclusions 

This appendix discusses factors considered significant by Board members in reaching the 

conclusions in this statement. It includes the reasons for accepting certain approaches and 

rejecting others. Individual members gave greater weight to some factors than to others. The 

standards enunciated in this statement – not the material in this or other appendices– should 

govern the accounting for specific transactions, events or conditions. 

40. FASAB published the exposure draft Identifying and Reporting Earmarked 

Funds on October 16, 2003. Upon release of the exposure draft, notices 

and/or press releases were provided to: the Federal Register; the FASAB 

News, the Journal of Accountancy, AGA Today, the CPA Journal, 

Government Executive, the CPA Letter, Government Accounting and Auditing 

Update, and JFMIP News; the CFO Council, the Presidents Council on 

Integrity and Efficiency, the Financial Statement Audit Network, the Federal 

Financial Managers Council; and committees of professional associations 

generally commenting on exposure drafts in the past. A public hearing was 

held on March 4, 2004. Sixteen letters were received from the following 

sources; three respondents supplemented their written responses with oral 

testimony at the public hearing. 

Comment letters and/or oral testimony 

provided by: 

Federal 

(Internal) 

Non-Federal 

(External) 

Users, academics, others 3 

Auditors 1 2 

Preparers and financial managers 10 

Response to Comments Received 

41. The majority of the respondents concurred with most of the provisions of the 

proposed standard. Several sources expressed the opinion that all of the 

disclosures should be placed in the notes to the financial statements. The 

Board’s reasons for requiring some reporting on the face of the financial 

statements is provided in the section, “Reporting Treatment,” which begins at 

paragraph 59 of this Appendix. 

42. Several respondents requested guidance regarding criteria to consider in 

selecting earmarked funds for disaggregated disclosure; additional guidance 

has been included in this standard. 

43. Several respondents questioned the term, “accounting mechanism,” and 

asked why this term was used instead of a more specific term, such as 

Treasury account fund symbol. This standard eliminates references to 

accounting mechanisms and states that the Board’s intent is to establish a 

principle-based standard that is not dependent upon funding terminology that 

is subject to change. 

44. Two respondents requested that the examples in Appendix C differentiate 

between the Treasury General Fund and the Treasury Bureau of Public Debt. 

The examples in Appendix C now include that distinction. 
Appendix A: Basis for Conclusions 

Federal Accounting Standards Advisory Board 

Identifying and Reporting Earmarked Funds 

December 28, 2004 

13

45. Two respondents asked for more detail regarding mixed-activity funds and 

the word “primarily.” However, the Board considers the definition criteria and 

the term “primarily” to be sufficiently clear regarding the classification of 

mixed-activity funds 

46. One respondent identified credit financing accounts as a category of funds 

that would be covered by the standard, based upon definition criteria, that 

should not be included. Credit financing accounts are nonbudgetary funds 

that do not accumulate results of operations; they primarily serve as clearing 

accounts for cash activity relating to Federal credit programs. The standard 

includes an “Exclusions” paragraph (paragraph 18) which excludes credit 

financing accounts from the reporting requirements of this standard 

47. Three respondents had questions about earmarked funds that have 

exchange revenue. Appendix C has been expanded to include both 

exchange and nonexchange revenue. 

48. Two respondents had questions about the reporting requirements for 

earmarked funds managed by multiple agencies. Footnote 7, which provides 

factors to consider in determining program management, has been added. 

Paragraph 38, which amends SFFAC 2, “Entity and Display,” has also been 

added. 

Existing Accounting Standard Needs Clarification 

49. The objective of this standard is to define earmarked funds and provide 

accounting and reporting guidance for them. In the existing standard, SFFAS 

7, Revenue and Other Financing Sources, paragraphs 83 through 87, the 

term “dedicated collections” includes revenue earmarked or dedicated to 

finance or help finance specific Federal programs as well as revenue being 

held for the exclusive benefit of specific, identifiable non-Federal parties.11 

50. SFFAS 7 did not differentiate between (a) Government-owned revenue and 

other financing sources earmarked to finance or help finance specific Federal 

programs (earmarked funds) and (b) cash and other assets being held for the 

exclusive benefit of specific, identifiable non-Federal parties who have 

ownership interest in the assets (fiduciary activities). The Board believes 

separate standards based on the unique characteristics of these two types of 

“dedicated collections” are needed. In April 2003 the Board issued an 

exposure draft of a proposed standard, Accounting for Fiduciary Activities, to 

address those activities relating to the collection or receipt, management, 

protection, accounting, investment and disposition by the Federal 

Government of cash or assets in which non-Federal individuals or entities 

have an ownership interest that the Federal Government must uphold. 

51. The Board's proposed standard for "Fiduciary Activities" and this standard on 

"Earmarked Funds" together address all activities or funds considered 

"dedicated collections" by SFFAS 7. When finalized, the fiduciary activities 

standard will rescind the "dedicated collections" provisions in SFFAS 7. This 

standard supersedes the “dedicated collections” provisions in SFFAS 7 

(paragraphs 83-87) for earmarked funds.

 

11 SFFAS 7, par. 83. 
Appendix A: Basis for Conclusions 

Federal Accounting Standards Advisory Board 

Identifying and Reporting Earmarked Funds 

December 28, 2004 

14

52. SFFAS 7 classifies funds as “dedicated collections” based on the term ‘’trust” 

as used in the U.S. Government Budget. It states that the standard covered 

“all funds within the budget classified as trust funds, “ and “those funds within 

the budget that are classified as "special funds" but that are similar in nature 

to trust funds.”12 The Board found this definition was insufficiently precise to 

ensure that all earmarked funds were reported as intended. The definition in 

this standard provides a substantive basis for classifying funds instead of 

relying on terms used in the budget.13 

Special Accountability 

53. Although the Federal Government does not have a fiduciary relationship (as 

defined by the proposed standard, Accounting for Fiduciary Activities14) with 

the potential beneficiaries of earmarked funds, the unique nature of 

earmarked funds necessitates additional explanation and disclosure in the 

basic financial statements. In SFFAS 7, Accounting for Revenue and Other 

Financing Sources, special accountability reporting provisions were applied to 

all “dedicated collections” regardless of whether or not they involved 

Government-owned funds or private funds. The concept of special 

accountability applies to earmarked funds. 

54. All earmarked funds have characteristics that justify special accountability. 

While many Government programs raise implied commitments for the future, 

there is a more explicit commitment associated with the statutory 

establishment of earmarked funds. The Government raises an expectation 

on the part of the public that the Government will use the amounts collected 

from specific sources and accumulated in earmarked funds for their stated 

purpose. There is often a direct link between the source of fund revenues 

and designated activities, benefits or purposes in an effort to charge 

beneficiaries or users for benefits received. Resource inflow is accounted for 

separately from general tax receipts, allowing the program’s status to be 

more easily examined. Many earmarked funds receive permanent 

appropriations in an amount equal to these inflows that become available 

without recurrent action by Congress through annual appropriations. 

55. Earmarked funds are of interest to a universe of contributors, taxpayers and 

recipients, who have an expectation that earmarked revenues will be used for 

the purposes specified in the law authorizing the collection of the revenues. 

For example, current contributors to Social Security programs may assume 

that their earmarked taxes in excess of payments to current recipients will be 

available to fund future social security benefits. The likelihood of the public 

making this assumption may reasonably be expected when the Federal 

Government issues projections of the availability of accumulated balances for 

future payments. 

Identifying Earmarked Funds 

56. The Board considered whether any substantive difference exists between 

earmarked funds that are designated as “trusts” and those that are not. It 

 

12 Ibid. 13 The exposure draft, Accounting for Fiduciary Activities, discusses the differences between private trust funds, Federal government 

trust funds designated as trusts by Congress, and fiduciary funds. 14 The exposure draft, Accounting for Fiduciary Activities, was issued in March 2003. 
Appendix A: Basis for Conclusions 

Federal Accounting Standards Advisory Board 

Identifying and Reporting Earmarked Funds 

December 28, 2004 

15

also considered whether any substantive difference exists between 

earmarked funds that conduct business-type operations and those that do 

not. The Board did not find a substantive difference in either case. 

Therefore, all earmarked funds that meet the special accountability criteria in 

paragraph 11 of the standard are subject to the provisions of the standard, 

regardless of whether they are labeled as “trusts” or not and regardless of 

whether they conduct business-type operations or not. 

57. The Board also considered whether intragovernmental funds should be 

included in the reporting requirements for earmarked funds. Although 

intragovernmental funds may meet the criteria of the definition of an 

earmarked fund, the Board does not believe Intragovernmental funds warrant 

special accountability to the public because these funds conduct businesstype operations primarily within and between Government agencies. 

Intragovernmental balances are eliminated in the consolidation process in the 

preparation of the U.S. Government-wide financial statements. 

58. The Board also decided to exclude credit financing accounts from the 

reporting requirements for earmarked funds. Although credit financing 

accounts may meet the criteria of the definition for earmarked funds, they 

primarily serve as clearing accounts for cash activity relating to Federal credit 

programs and do not accumulate results of operations. Fiduciary funds, 

which are not Government-owned, are also excluded. 

Reporting Treatment 

Effect on Net Position

59. Special accountability for earmarked funds is of increasing importance 

because the amount of revenue directed to earmarked funds has increased 

dramatically over the past two decades. It now constitutes a much greater 

proportion of the Federal budget. Just those earmarked funds designated as 

“Federal trust funds” by Congress alone accounted for over fifty percent of 

receipts from the public in 2003. 

60. In addition, the invested balances of earmarked funds have grown 

significantly over the past two decades. Debt held by Government accounts 

was approximately $2.85 trillion in 2003, a twelve-fold increase from 198315. 

61. Most of these balances are invested in Treasury securities. The Federal 

Government does not set aside assets to pay future benefits or other 

expenditures associated with earmarked funds. The cash receipts collected 

from the public for an earmarked fund are deposited in the U.S. Treasury, 

which uses the cash for general government purposes. Treasury securities 

are issued to the earmarked fund as evidence of its receipts. Treasury 

securities are an asset to the component entity and a liability to the U.S. 

Treasury. Because the component entity and the U.S. Treasury are both 

parts of the Government, these assets and liabilities offset each other from 

the standpoint of the Government as a whole. For this reason, they do not 

represent an asset or a liability in the U.S. Government-wide financial 

statements. 

 

15 Fiscal Year 2005 Historical Tables, Budget of the U.S. Government, pp. 118-119. 
Appendix A: Basis for Conclusions 

Federal Accounting Standards Advisory Board 

Identifying and Reporting Earmarked Funds 

December 28, 2004 

16

62. Treasury securities provide the component entity with authority to draw upon 

the U.S. Treasury to make future benefit payments or other expenditures. 

When the component entity requires redemption of these securities to make 

expenditures, the Government finances those expenditures out of 

accumulated cash balances, by raising taxes or other receipts, by borrowing 

from the public or repaying less debt, or by curtailing other expenditures. 

This is the same way that the Government finances all other expenditures. 

The investments in Treasury securities (an asset) held by the various 

earmarked funds and the liability of the U.S. Treasury to redeem the 

securities are treated as intragovernmental eliminations when the 

consolidated U.S. Government-wide financial statements are prepared. 

Therefore, the consolidated net position of the Federal Government reported 

on the U.S. Government-wide financial statements does not include the effect 

of the claim on the U.S. Treasury that the various funds hold, just as the 

consolidated net position does not include the effect of other 

intragovernmental claims. Instead, the U.S. Government-wide financial 

statements include the cumulative results of operations of earmarked funds – 

currently a large positive balance – as an offset against the cumulative results 

of operations of the general fund – currently a large negative balance. The 

result is that the financing provided by earmarked fund operations to general 

fund operations – which would otherwise be financed through the issuance of 

debt to the public, tax increases or other financing sources – is not shown on 

the face of the U.S. Government Balance Sheet. 

63. This standard requires component entities to show the total amount of 

cumulative results of operations attributable to earmarked funds on the 

Statement of Changes in Net Position and on the Balance Sheet. The U.S. 

Government-wide financial statements are subject to the same requirement, 

except that the U.S. Government-wide financial statements include the 

U.S. Government Statement of Operations and Changes in Net Position 

instead of the Statement of Changes in Net Position. Net position at the 

component level is composed of unexpended appropriations and cumulative 

results of operations. Since unexpended appropriations are not applicable at 

the Government-wide level, net position equals cumulative results of 

operations. Under this standard the financial statements would thus present 

– in a transparent manner – the cumulative financing provided by earmarked 

funds to the general fund that will need to be repaid in order to use 

earmarked funds for the designated activities, purposes or benefits. 

64. This standard also requires that component level financial statements include 

an explanation of earmarked fund investments in Treasury securities similar 

to the one given in paragraphs 27 and 28. The U.S. Government-wide 

financial statements are required to include an explanation of how the 

Government as a whole could provide the resources represented by the 

earmarked funds’ balance in Treasury securities. 

65. Several respondents to the exposure draft recommended that all reporting 

requirements relating to earmarked funds should be limited to the financial 

statement notes. Due to the impact of earmarked funds upon the financial 

position of the U.S. Government as a whole, as discussed in this section, the 

Board decided that certain basic disclosures, such as the impact upon net 

position, should appear on the face of the financial statements. 
Appendix A: Basis for Conclusions 

Federal Accounting Standards Advisory Board 

Identifying and Reporting Earmarked Funds 

December 28, 2004 

17

Effect on Flows

66. For component entities, earmarked nonexchange revenue and other 

financing sources and net cost of operations are required to be shown 

separately in the Statement of Changes in Net Position. For the U.S. 

Government-wide financial statements, the components of earmarked funds 

activity should be shown separately on the U.S. Government Statement of 

Operations and Changes in Net Position. The Board believes that it is 

equally as important to show the earmarked funds activity during the period 

as it is to show the cumulative results of operations. Each gives a different 

and complementary perspective on the proportion of activity financed by 

general versus earmarked resources: the cumulative results of operations 

show the effect of all reporting periods up to a single point in time, whereas 

reporting of the earmarked funds activity shows the inflows and outflows 

during the reporting period. The relative importance indicated by each 

measure may differ because of trends in financing or special timing needs. 

Disclosure

67. The Board determined that a number of earmarked funds were not being 

reported as intended under the existing standard. Therefore, in addition to 

clarifying the definition of earmarked funds, the standard requires that each 

component provide either a list of all earmarked funds for which it has 

program management responsibility or a statement as to where the 

information can be obtained. This requirement would ensure that no 

earmarked fund is omitted from the financial statements and that users could 

more easily locate information on a specific earmarked fund and determine its 

status. This information would not be required at the Government-wide level 

since program management responsibility does not reside at that level. 

68. This standard requires condensed information on selected earmarked funds 

to be disclosed individually, with aggregate condensed information required 

for all others. In response to several requests from respondents to the 

exposure draft, the Board included, in paragraph 24 of this Statement, 

examples of quantitative and qualitative factors to be considered in selecting 

earmarked funds to be presented individually. 

69. A component entity is required to disclose any change in legislation that 

significantly changes the purpose of the fund or that redirects a significant 

portion of the accumulated balance. In the opinion of the Board, the 

characteristic of special accountability requires that any significant change in 

the legislation governing the earmarked fund be disclosed in order to provide 

greater accountability for the earmarked revenues. 

Other Changes 

70. If more than one component entity is responsible for carrying out the program 

financed with earmarked revenues and other financing sources, and the 

separate portions of the program can be clearly identified with the responsible 

component entity, then each component entity should report its portion in 

accordance with this standard. In the existing standard, SFFAS 7, paragraph 

87, requires that “If more than one component entity is responsible for 

carrying out the program financed with the dedicated collections, then the 
Appendix A: Basis for Conclusions 

Federal Accounting Standards Advisory Board 

Identifying and Reporting Earmarked Funds 

December 28, 2004 

18

entity with the largest share of the activity should be responsible for reporting 

all revenues, other financing sources, assets, liabilities, and costs of the 

fund.”16 The Board believes that this revision will assist users to evaluate the 

service efforts, costs and accomplishments of the component entity with 

actual program management responsibility, by relating relevant costs directly 

to the associated mission and performance. 

71. For funds meeting the definition criteria of earmarked funds, paragraph 86 of 

SFFAS 7 is replaced by this standard. In the opinion of the Board, the 

necessary guidance is provided in this standard in paragraph 35. 

Implementation

72. Early implementation of this standard is not permitted because of the 

difficulties that might arise when component financial statements are 

consolidated into the Government-wide financial statements. For example, a 

problem might arise if a component entity, which had previously reported all 

of the activity of an earmarked fund based on the requirements of the existing 

standard, decided upon early implementation of the standard, which allows it 

to report only that portion of the earmarked fund for which it has program 

management responsibility. This choice would cause portions of the 

earmarked fund not to be reported in the consolidated financial statements 

unless the component entities with management responsibility for the other 

portions of the earmarked fund also chose early implementation of the 

standard. For the same reason, restatement of the prior period columns in 

the initial year of implementation is not permitted. 

Board Approval 

73. This statement was approved for issuance by all members of the Board. 

 

16 SFFAS 7, Accounting for Revenue and Other Financing Sources. 
Appendix B: Glossary 

Federal Accounting Standards Advisory Board 

Identifying and Reporting Earmarked Funds 

December 28, 2004 

19

Appendix B: Glossary 

Component Entity – A “component entity” that prepares financial statements is a unit of the 

Government. The Federal Government as a whole is composed of organizations that manage 

resources and are responsible for operations, i.e., delivering services. These include major 

departments and independent agencies, which are generally divided into sub-organizations, i.e., 

smaller organizational units with a wide variety of titles, including bureaus, administrations, 

agencies, and corporations. “Component entity” is used in this standard to distinguish between 

the Financial Report of the United States Government’s consolidated financial statements and 

financial statements of its components. Also see “Entity.” 

Earmarked – Statutory dedication of specifically identified revenues and other financing 

sources to designated activities, benefits or purposes. 

Earmarked Fund – Earmarked funds are financed by specifically identified revenues, often 

supplemented by other financing sources, which remain available over time. These specifically 

identified revenues and other financing sources are required by statute to be used for 

designated activities, benefits or purposes and must be accounted for separately from the 

Government’s general revenues. The three required criteria for an earmarked fund are: 

• A statute committing the Federal Government to use specifically identified revenues 

and other financing sources only for designated activities, benefits or purposes; 

• Explicit authority for the earmarked funds to retain revenues and other financing 

sources not used in the current period for the future benefit of the designated 

activities, benefits, or purposes; and 

• A requirement to account for and report on the receipt, use, and retention of the 

revenues and other financing sources that distinguishes the earmarked fund from the 

Government’s general revenues. 

Entity – An entity may be the Government as a whole or a unit of the Federal Government, 

such as a department, agency, bureau, or program, for which a set of financial statements 

would be prepared. Entity also encompasses a group of related or unrelated commercial 

functions, revolving funds, “trust funds,” and/or other accounts for which financial statements will 

be prepared in accordance with OMB guidance. Also see “Component Entity.” 

Fiduciary Activity – An activity that relates to the collection or receipt, management, protection, 

accounting, investment and disposition by the Federal Government of cash or other assets in 

which non-Federal individuals or entities have an ownership interest that the Federal 

Government must uphold. 

Fiduciary Relationship – A fiduciary relationship exists when an authorized agent or entity of 

the Government accepts, recognizes, agrees to or consents to undertake fiduciary activity. 

Fund – “Fund” has more than one meaning. Depending on the context it may mean merely a 

resource as in “funds” available to pay an obligation. Or, for budgetary accounting, it may mean 

“Federal funds” or “trust funds,” the two major groups of funds in the budget. The Federal funds 

include all transactions not classified by law as being in trust funds. The main financing 

component of the Federal funds group is referred to as the “General Fund,” which is used to 
Appendix B: Glossary 

Federal Accounting Standards Advisory Board 

Identifying and Reporting Earmarked Funds 

December 28, 2004 

20

carry out the general purposes of Government rather than being restricted by law to a specific 

program and consists of all collections not earmarked by law to finance other funds. 

A fund can also mean a fiscal and accounting entity with a self-balancing set of accounts 

recording cash and other financial resources, together with all related liabilities and residual 

equities or balances, and changes therein, which are segregated for the purpose of carrying on 

specific activities or attaining certain objectives in accordance with special regulations, 

restrictions, or limitations.17 Fund financial statements can be used to report additional and 

detailed information. The term “fund” is used in this standard to refer to a fiscal and accounting 

entity. 

General Fund – The general fund accounts for receipts not earmarked by law for specific 

purposes, the proceeds of general borrowing, and the expenditure of these monies. General 

fund receipts constitutes the greater part of the budget, e.g., almost all income tax receipts are 

general fund receipts. General fund appropriations draw from general fund receipts and 

borrowing collectively and, therefore, are not specifically linked to earmarked receipts. [See The 

Budget of the United States FY 2004, The Budget System and Concepts and Glossary.]

Intragovernmental Fund – Revolving funds that conduct business-type operations primarily 

within and between Government agencies. 

Non-Federal Individuals or Entities – Individuals and entities acting in their private capacities 

outside of the authority and control of the Federal Government. Federal employees are “nonFederal individuals” when acting in their private capacities, e.g., with respect to their private 

retirement assets managed by a Federal plan. 

 

17 National Council on Governmental Accounting Statement 1, par. 16. 
Appendix C: Pro Forma Illustrations 

Federal Accounting Standards Advisory Board 

Identifying and Reporting Earmarked Funds 

December 28, 2004 

21

Appendix C: Pro Forma Illustrations 

Table of Illustrations 

Transactions – Component Entity Receives Revenue and Purchases Securities 

1.A. Entries recording receipt of earmarked revenue by Component Entity 

1.B. Entries recording the Component Entity’s purchase of Treasury Securities 

1.C. Entries recording interest on Treasury Securities 

Pro Forma Statements showing effect on Component Entity’s basic financial statement 

reporting 

1.D. (1) Component Entity Statement of Changes in Net Position 

1.D. (2) Component Entity Balance Sheet 

Pro Forma Statements showing effect on the U.S. Government-wide Financial Statements 

1.E. (1) U.S. Government-wide Consolidation Worksheet: 

1.E. (2) U.S. Government Statement of Operations and Changes In Net Position 

1.E. (3) U.S. Government Balance Sheet 

Transactions– Component Entity Receives Revenue and Purchases Securities 

 

1. A. Entries recording receipt of earmarked revenue collected by the Component Entity: 

 DR CR 

 Component Entity 

 

 Fund Balance with Treasury (FBWT) 1,000 

 Nonexchange revenue 600 

 Exchange revenue18 400 

To record receipts credited to earmarked fund. 

 

 Treasury General Fund Entity 

 

 Treasury General Fund Cash 1,000 

 General Fund’s Liability for FBWT 1,000 

 To record earmarked revenue collected by Component Entity. 

 

1.B. Entries recording the Component Entity purchase of Treasury securities: 

 DR CR 

 Component Entity 

 

 Investments in Treasury Securities 1,000 

 Fund Balance with Treasury 1,000 

 To record Treasury securities purchased. 

 

 

18 This standard does not require exchange revenue for earmarked funds to be separately shown on the Statement of Net Cost 
Appendix C: Pro Forma Illustrations 

Federal Accounting Standards Advisory Board 

Identifying and Reporting Earmarked Funds 

December 28, 2004 

22

Treasury General Fund Entity 

 

 General Fund's Liability for FBWT (Component Entity) 1,000 

 General Fund’s Liability for FBWT (Treasury BPD) 1,000 

To record payment to Treasury Bureau of Public Debt for securities purchased. 

 

 Treasury Bureau of Public Debt Entity 

 

 Fund Balance with Treasury 1,000 

 Liability for Intragovernmental Debt- Treasury Securities 1,000 

To record sale of securities to Component Entity earmarked fund. 

 

 

1.C. Entries recording interest earned on Treasury securities 

 

 Component Entity 

 

 Fund Balance with Treasury (FBWT) 10 

 Interest Revenue- Exchange 4 

 Interest Revenue- Nonexchange19 6 

To record interest income on Treasury securities. 

 

 Treasury Bureau of Public Debt Entity 

Interest Expense 10 

 Fund Balance with Treasury (FBWT) 10 

To record interest expense. 

 

 Treasury General Fund Entity 

General Fund’s Liability for FBWT (Treasury BPD) 10 

 General Fund’s Liability for FBWT (Component Entity) 10 

To record payment of interest to Component Entity by Treasury BPD. 

 

 

19 For classification of exchange and nonexchange interest revenue, see SFFAS 7, Appendix B, paragraphs 306-308. 
Appendix C: Pro Forma Illustrations 

Federal Accounting Standards Advisory Board 

Identifying and Reporting Earmarked Funds 

December 28, 2004 

23

Pro Forma Statements showing effect of illustrative transactions on 

Component Entity’s basic financial statement reporting20

(This is only one example of how the required information could be displayed.)

 1.D. (1) Component Entity 

 Statement of Changes in Net Position 

 Cumulative Results 

 Of Operations 

 

Social Security and 

Other Earmarked 

Funds All Other 

 

 Beginning balance of net position $ - $ -

 Budgetary financing sources: 

 Non-exchange revenue 606 

 

 

 Net cost of operations [from statement of net cost] (404)

 Change in net position 1,010

 Ending balance of net position $ 1,010 $ -

 

1.D. (2) Component Entity 

 Balance Sheet 

 

Social Security and 

Other Earmarked 

Funds All Other 

 ASSETS 

 Fund balance with Treasury $ 10 $ - 

 Investments in Treasury securities 1,000

 Total assets $ 1,010 

 

 LIABILITIES $ - $ - 

 

 NET POSITION 

 Unexpended Appropriations $ - $ -

 Cumulative Results of Operations 1,010

 Total Net Position 1,010 

 Total liabilities and net position $ 1,010 $ - 

 

20 This standard does not require earmarked funds to be separately shown on the Statement of Net Cost. 
Appendix C: Pro Forma Illustrations 

Federal Accounting Standards Advisory Board 

Identifying and Reporting Earmarked Funds 

December 28, 2004 

24

 

1.E. (1) Consolidation Worksheet for U.S. Government-wide 

Financial Statements 

 Component Treasury Treasury Eliminations Gov’t-

 Entity General Fund BPD wide 

ASSETS 

Treasury General Fund Cash Account $ - $ 1,000 $ - $ - $ 1,000

Fund balance with Treasury 10 - 990 -1,000 -

 

Investments in Treasury Securities 1,000 -1,000 -

Total assets $ 1,010 $ 1,000 $ 990 $ - $ 1,000 

 

LIABILITIES 

Treasury General Fund Liability for 

FBWT $ - $ 1,000 $ - $-1,000 

Treasury BPD Liability for 

 Intragovernmental Debt 1,000 

 

-1,000 -

Total Liabilities $ - $ 1,000 $ 1,000 $ - $ -

 

NET POSITION 

Net Position of Other Funds - - - - -

Net Position of Federal OldAge Survivors Insurance 

and Other Earmarked Funds $ 1,010 $ - $ -10 $ - $ 1,000
Appendix C: Pro Forma Illustrations 

Federal Accounting Standards Advisory Board 

Identifying and Reporting Earmarked Funds 

December 28, 2004 

25

Pro Forma Statements showing effect of illustrative transactions on U.S. Government-wide 

financial reporting 

1.E. (2) U.S. Government Statement of Operations and Changes in Net Position 

 

Operating Results: 

Earmarked Funds Activity 

 Revenue: 

 Social Security Tax Revenue $ 600 

 Other Revenue and Other Financing Sources 400

 Total revenue 1,000 

 Less net cost of operations --

 

Net operating revenue 1,000 

 

General Activities 

Revenue -- 

 Less net cost of operations --

 Net operating cost --

 

Total net operating revenue (cost), all government 

activities $ 1,000

 

 Net Position: 

NNet Position, Beginning of Period 

 Social Security and Other Earmarked Funds $ -- 

 All Other -- 

 Net Position, End of Period 

 Social Security and Other Earmarked Funds 1,000 

 All Other -- 

Total Net Position $ 1,000

1.E. (3) U.S. Government Balance Sheet

 

 ASSETS 

 Treasury Government-wide Cash Account $ 1,000 

 

 Total assets $ 1,000 

 

 LIABILITIES $ -- 

 NET POSITION 1,000 

 

 Social Security and Other Earmarked Funds 1,000 

 All Other --

Total liabilities and net position $ 1,000
Appendix D: Example of Note Disclosure Summary Financial Information 26 

_________________________________________________________________________

Federal Accounting Standards Advisory Board 

Identifying and Reporting Earmarked Funds 

December 28, 2004 

Appendix D: Example of Note Disclosure Summary Financial 

Information for Component Entity 

The following illustrates the component entity summary financial information required in 

paragraph 22. The illustration has been simplified by not showing prior year comparative 

statements. 

ABC Fund CDE Fund

Other 

Earmarked 

Funds

Total Earmarked 

Funds

Balance Sheet as of September 30 

(In thousands) 

ASSETS 

Fund balance with Treasury $ 20,635 $ 15,000 $ 5,000 $ 40,635 

Investments 1,364,823 9,000,000 350,000 10,714,823 

Taxes and Interest Receivable 10,000 10,000 

 Total Assets $ 1,385,458 $ 9,015,000 $ 365,000 $ 10,765,458 

 

LIABILITIES and NET POSITION 

Cumulative Results of Operations $ 1,385,458 $ 9,015,000 $ 365,000 $ 10,765,458 

 

 Total Liabilities and Net Position $ 1,385,458 $ 9,015,000 $ 365,000 $ 10,765,458 

 

Statement of Net Cost For the 

Period Ended September 30 

Program Costs $ 383,547 $ 450,000 $ 247,000 $ 1,080,547 

Less Earned Revenues 5,000 5,000 

Net Program Costs 383,547 450,000 242,000 1,075,547 

Less Earned Revenues Not 

 Attributable to Programs 

Net Cost of Operations $ 383,547 $ 450,000 $ 242,000 $ 1,075,547 

 

Statement of Changes in Net 

Position For the Period Ended 

September 30 

Net Position Beginning of Period $ 1,317,760 $ 8,715,000 $ 287,000 $ 10,319,760 

 

Net Cost of Operations 383,547 450,000 242,000 1,075,547 

Taxes and Other Nonexchange 

Revenue 451,245 750,000 320,000 1,521,245 

 

Change in Net Position 67,698 300,000 78,000 445,698 

Net Position End of Period $ 1,385,458 $ 9,015,000 $ 365,000 $ 10,765,458 

 
Appendix E: List of Abbreviations 27 

_________________________________________________________________________

Federal Accounting Standards Advisory Board 

Identifying and Reporting Earmarked Funds 

December 28, 2004 

Appendix E: List of Abbreviations 

FASAB Federal Accounting Standards Advisory Board 

GAO Government Accountability Office 

MD&A Management Discussion and Analysis 

OMB Office of Management and Budget 

RSSI Required Supplementary Stewardship Information 

SFFAC Statement of Federal Financial Accounting Concepts 

SFFAS Statement of Federal Financial Accounting Standards 

Treasury FMS Treasury Financial Management Service 

U.S. United States 
FASAB Board Members

David Mosso, Chairman 

Joseph V. Anania, Sr. 

Philip T. Calder (through July 31, 2004) 

Claire Gorham Cohen 

Robert F. Dacey (from August 1, 2004) 

John A. Farrell 

James M. Patton 

Robert N. Reid 

Elizabeth M. Robinson 

Alan H. Schumacher 

David M. Zavada 

FASAB Staff

Wendy M. Comes, Executive Director 

Project Staff: 

Eileen W. Parlow 

 ____________________________________________________ 

Federal Accounting Standards Advisory Board

441 G Street NW 

Suite 6814 

Mailstop 6K17V 

Washington, DC 20548 

Telephone (202) 512-7350 

FAX (202) 512-7366 

www.fasab.gov 

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