Special Revenue Funds: Definition, Functionality, and Case Studies

A special revenue fund is a financial tool utilized by governmental entities to segregate and manage funds earmarked for specific purposes or projects. Unlike general funds, which cover day-to-day expenses, special revenue funds are dedicated to financing particular initiatives. Municipalities commonly allocate funds into various categories, including general funds, capital funds, “rainy day” funds, and special revenue funds.

In the budgeting process, governments negotiate and allocate funds to different categories based on priority and need. While general funds cater to routine expenses, capital funds finance major projects, and “rainy day” funds serve as emergency reserves. Special revenue funds, on the other hand, are established to support smaller-scale projects with specific objectives, such as parks, libraries, beaches, or infrastructure improvements.

Each special revenue fund operates independently, maintaining separate financial records to track revenues and expenditures associated with its designated project. The Government Accounting Standards Board (GASB) issued Statement No. 54 in 2011 to provide clear guidelines on defining and reporting special revenue funds, ensuring consistency and transparency in financial management.

For instance, a municipality might establish a special revenue fund to finance road maintenance projects. Revenues collected within this fund would be exclusively allocated for road repairs, resurfacing, and related infrastructure enhancements. By segregating funds for specific purposes, governments can ensure that taxpayer dollars are efficiently utilized and allocated to address identified needs.

Special revenue funds offer transparency and accountability in government spending by segregating funds for specific projects. This ensures that taxpayer dollars are efficiently utilized and allocated to address identified needs, enhancing public trust and confidence in governmental financial management.

Special revenue funds are earmarked for specific projects or purposes, whereas general funds cover day-to-day operating expenses of the government. Special revenue funds provide transparency and accountability by ensuring that funds are allocated and utilized for their intended purposes.

Yes, special revenue funds are subject to auditing to ensure compliance with financial regulations and proper utilization of funds. Auditors review the financial records of special revenue funds to verify that revenues are properly accounted for and expenditures align with the designated project or purpose.