Account Classification

Net Position Restricted by Enabling Legislation (GASB COD 1800): For the State primary government, constraints placed on net position use by enabling legislation are not reported as net position restrictions since such constraints are not legally enforceable. An Attorney General Advisory Opinion referenced that the Governor, pursuant to his constitutional authority under Article III, Section 5(3), may use resources restricted by enabling legislation in his discretion to meet a budget shortfall. Legal enforceability means that the State can be compelled by an external party, such as citizens, public interest groups, or the judiciary to use resources created by enabling legislation only for the purposes specified by the legislation.

For classification of governmental fund balances, the State assumes an expenditure to be made from the most restrictive resource when more than one fund balance classification is available for use.

For governmental funds of the State primary government, the accounting classification of restricted assets will be handled at a statewide level. For year-end reporting, OSC staff will prepare worksheet entries on the fund level working trial balances to reclassify unrestricted cash and cash equivalents, investments, and receivables to restricted accounts. For proprietary funds of the State primary government and for component units, the accounting classification of restricted assets should be handled at the agency level.

Prepaid items are payments for services that benefit more than one accounting period, such as insurance, rent, and subscriptions. In governmental funds (general, special revenue, capital projects, and permanent), which follow the modified accrual basis of accounting, prepaid items should be accounted for using the purchases method (i.e., considered expenditures when purchased). Balances of prepaid items in governmental funds should not be reported as assets.

These inventories consist of general supplies and materials. Where inventories are distributed among several locations, the cumulative total value should be considered in determining materiality. The exception to the foregoing is postage. Because of its liquidity, postage must be recorded when it exceeds $100.00 in value.

Cash and cash equivalents consist of the pooled cash accounts of the State Treasurer and the following items managed by agencies and institutions of the State and its component units: 

• Undeposited receipts 
• Petty cash 
• Checking accounts outside the State Treasurer 
• Time deposits outside the State Treasurer, excluding certificates of deposit, which are considered investments.