Introduction
Fund accounting is a system for tracking funds sent by citizens for specific purposes. These goals can be very diverse: schools, orphanages, hospitals, and many others. Funds come from various sources, from individuals to small organizations, so keeping this whole system in order is essential (What is government fund accounting? 2022). It should be made available to all citizens who accrue or can accrue their money to funds, regardless of their level of education or specialization. That is why there are big claims to the accounting of funds regarding transparency and comprehensibility. Funds should always be up-to-date and revised at least once a year to provide relevant information about income and expenses.
Why do Governments Use It?
Non-democratic regimes usually do not use foundation reporting, as there is no public and state demand for participation and transparency for the sake of citizens donating money to foundations. As every party is well aware, foundations personify democracy from the economic side as an opportunity to share their material wealth with those whom people support and care about. It goes into the second important reason for use, is the ability to influence the development of certain social groups. Moreover, the state bodies themselves, by receiving donations to funds and fixing it in a complicated system, get the opportunity to control the costs of citizens: their number, frequency, and concentration. In addition, creating a detailed accountability system is a social gesture that helps other people actualize themselves as subjects in society.
The involvement of citizens in the donation process and the active collection of money allow us to make decisions on critical social issues together. It is important to allow citizens to debate and listen to each other’s positions. Transparency in public accountability in foundations is fully justified by these aspects of the life of a democratic society. In addition, accountability allows for an even distribution of resources in society. With proper and truthful responsibility, no special interest groups are created that could use the help of donors for their benefit. Related to donors is the last reason discussed here: the demonstration by foundations of their fiscal responsibility to providers. This candid display allows providers and funds to build long-term trust.
Importance of Budget
Planning for economic growth is always essential, as it helps stakeholders see global processes. Budget planning enables people to keep track of projected income and expenses in the future. It allows economists and managers to understand what areas they will spend money on to determine, in other words, priorities. Budget planning will enable countries to develop their economies and attract investors. Any competent budget must try to anticipate risks, which saves investors and donors from losing money.
Control of Government Resources
State control of resources is an essential aspect of social justice. Thanks to this control, vulnerable sections of the population can count on support. Government agencies usually have a global view of social problems and can quickly assist with shelter, medicine, or education for those who need it. As a result, the state gradually softens the economic gap between citizens, making society better and better.
Governmental Accounting Standards Board (GASB)
GASB is an organization that defines standards in the public sector regarding accounting. GASB usually has very high standards, and these standards are designed to ensure that all donors and taxpayers can expect transparency in their spending (Schuster et al., 2022). GASB postulates that all the money into the funds must be distributed appropriately since the state is responsible for all its suppliers. All public organizations must adhere to the principles and rules of the GASB since their primary responsibilities are reduced to the satisfaction of donors and citizens in general. GASB rests on three main components: categorization, recognition, and measurement.
Categorization
Typically, categorization checks transactions and classifies them as either exchangeable or non-exchangeable. In addition, categorization determines whether the people who make the transaction have rights and obligations. In general, this component is responsible for a certain proportion of legal aspects in the work of state organizations and foundations. Categorization considers transactions with expenses and income, that is, in general, any transactions. There are usually four criteria by which a transaction can be regarded as reliable (category A). There are category B transactions, including fines or specialized grants or contributions. A transaction is considered under category B if one of the criteria presented on the slide is not met.
Recognition
The recognition component is responsible for classifying transactions into the categories described above. This component has a lot of sub-items, which may be suitable for different transactions. Typically, for transaction A, it is typical for the parties to reach an agreement and be satisfied. Then the transaction is considered to be completed, and the parties have no claims against each other. Transactions B is much more diverse and has a lot of options for conducting, including different purposes of operating, recipients, and orders.
Measurement
The measurement of a transaction immediately follows its definition and recognition. All measurements are clearly documented and strictly observed; otherwise, the transaction is invalid. “The foundational principle is that assets and liabilities would be measured directly, and revenues and expenses would be measured by relying on their related asset or related liability. This is consistent with current guidance.” (Schuster et al., 2022). All this should improve transparency and understandability for ordinary citizens. Then the descriptions of transactions will look as reliable as the stock reports of states or entire states. According to the principles of the GASB, each transaction must be recorded very responsibly, following the rules. And only then will it be possible to create a transparent accountability system, global and relevant for many taxpayers and donors. Measurements are always subject to a transparent methodology that is not considered flexible, therefore, it is relatively easy to follow.
Conclusion
Control of the state budget at different levels (from global to local, city, or administrative) plays a critical role in the country’s economic development. It can contribute to the growth and eliminate the gap between the rich and the poor. Special funds that exist at the expense of taxpayers and donors must demonstrate their transparency and honesty towards people since they have the right to know where their honestly earned money is going. Such people, perhaps, with their money, want to support some project or a group of the population that needs it. If the reports are transparent, they will see where the amounts they spent have gone, and confidence in the fund and government structures, in general, will grow.
References
Online, E. T. (2020). Why is it important for the govt to have a budget? The Economic Times.
Schuster, S., Hayes, J., & Parkinson, T. (2022). GASB preliminary views on revenue and expense recognition | insights | KSM (Katz, Sapper & Miller). KSM.
What is government fund accounting? (2022). MIP Fund Accounting Software.