ctcLink Accounting Manual | 40.10.60 Inter-Fund Loans
40.10.60 Inter-Fund Loans
Occasionally colleges will loan resources (cash) from one fund to another fund experiencing a temporary cash shortage or possibly a capital project.
Governmental Accounting Standards Board (GASB) Statement No. 34 Basic Financial Statements—and Management's Discussion and Analysis—for State and Local Governments states that inter-fund loans—amounts provided with a requirement for repayment should be reported as inter-fund receivables in lender funds and inter-fund payables in borrower funds.
This transaction creates an inter-fund receivable (1010170, 1100030) in the lending fund and inter-fund payables (2012040, 2130030) in the borrowing fund. Loan amounts due within one year should be classified as short-term and loan amounts due beyond a year should be classified as long-term.
Inter-Fund loans are reported only on the balance sheet since an inter-fund loan exchanges one asset (cash) for another (receivable).
Since the lender fund has reduced cash, it will not receive the interest it would normally receive from pooled cash investments, the borrower fund should compensate the lender funds by paying interest at least at the rate the lender fund would have received from the pooled cash investment (e.g. LGIP). Assuming an interest rate of 2.0% per annum on the principal balance prior to principal payment, the interest amount due is $14,000.
When a governmental fund loans cash to another fund, the transaction is essentially an exchange of assets (cash for a receivable). However, since cash is no longer available, Unassigned Fund Balance (3100160) must be reduced (Dr) and Non-Spendable Long Term Receivable Fund Balance (3100193) must be increased (Cr).
Original Entries
Inter-Fund Loan (Lending Fund)
| Fund | Class | Dept | Method | Subsid | Acct DR | Acct CR | Amount |
|---|---|---|---|---|---|---|---|
| 146 | 1cc | ddddd | Journal Entry | 522000 | 1100030 | 1000199 | $700,000 |
| 146 | 1cc | ddddd | Journal Entry | 3100160 | 3100193 | $700,000 |
Inter-Fund Loan (Borrowing Fund)
| Fund | Class | Dept | Method | Subsid | Acct DR | Acct CR | Amount |
|---|---|---|---|---|---|---|---|
| 522 | 264 | ddddd | Journal Entry | 145000 | 1000199 | 2130030 | $700,000 |
This entry assumes no principal payment is due in the current fiscal year.
At year-end, the portion debt expected to be repaid in the next year is reclassified from a long-term receivable (1100030) to a short-term receivable (1010170). Also, at year-end the Non-Spendable Long Term Receivable Fund Balance (3100193) should be reduced (Dr) and Unassigned Fund Balance (3100160) should be increased by the amount of the annual repayment.
Year-End Entries
Inter-Fund Loan (Lending Fund)
| Fund | Class | Dept | Method | Subsid | Acct DR | Acct CR | Amount |
|---|---|---|---|---|---|---|---|
| 146 | 1cc | ddddd | Journal Entry | 522000 | 1010170 | 1100030 | $70,000 |
| 146 | 1cc | ddddd | Journal Entry | 3100193 | 3100160 | $70,000 |
Inter-Fund Loan (Borrowing Fund)
| Fund | Class | Dept | Method | Subsid | Acct DR | Acct CR | Amount |
|---|---|---|---|---|---|---|---|
| 522 | 264 | ddddd | Journal Entry | 145000 | 2130030 | 2021040 | $70,000 |
Principal & Interest Entries
Inter-Fund Loan (Lending Fund)
| Fund | Class | Dept | Method | Subsid | Acct DR | Acct CR | Amount |
|---|---|---|---|---|---|---|---|
| 146 | 1cc | ddddd | Journal Entry | 522000 | 1000199 | 1010170 | $70,000 |
| 146 | 1cc | ddddd | Journal Entry | 522000 | 1000199 | 4030120 | $14,000 |
Inter-Fund Loan (Borrowing Fund)
| Fund | Class | Dept | Method | Subsid | Acct DR | Acct CR | Amount |
|---|---|---|---|---|---|---|---|
| 522 | 264 | ddddd | Journal Entry | 145000 | 2021040 | 1000199 | $70,000 |
| 522 | 264 | ddddd | Journal Entry | 145000 | 5110020 | 1000199 | $14,000 |
Original Entries
Inter-Fund Loan (Lending Fund)
| Fund | Class | Dept | Method | Subsid | Acct DR | Acct CR | Amount |
|---|---|---|---|---|---|---|---|
| 570 | 265 | ddddd | Journal Entry | 145000 | 1100030 | 1000199 | $700,000 |
Inter-Fund Loan (Borrowing Fund)
| Fund | Class | Dept | Method | Subsid | Acct DR | Acct CR | Amount |
|---|---|---|---|---|---|---|---|
| 146 | 1cc | ddddd | Journal Entry | 570000 | 1000199 | 2130030 | $700,000 |
This entry assumes no principal payment is due in the current fiscal year.
Year-End Entries (if payment due in next FY)
Inter-Fund Loan (Lending Fund)
| Fund | Class | Dept | Method | Subsid | Acct DR | Acct CR | Amount |
|---|---|---|---|---|---|---|---|
| 570 | 265 | ddddd | Journal Entry | 145000 | 1010170 | 1100030 | $70,000 |
Inter-Fund Loan (Borrowing Fund)
| Fund | Class | Dept | Method | Subsid | Acct DR | Acct CR | Amount |
|---|---|---|---|---|---|---|---|
| 146 | 1cc | ddddd | Journal Entry | 570000 | 2130030 | 2021040 | $70,000 |
Principal & Interest Entries
Inter-Fund Loan (Lending Fund)
| Fund | Class | Dept | Method | Subsid | Acct DR | Acct CR | Amount |
|---|---|---|---|---|---|---|---|
| 570 | 265 | ddddd | Journal Entry | 145000 | 1000199 | 1010170 | $70,000 |
| 570 | 265 | ddddd | Journal Entry | 145000 | 1000199 | 4030120 | $14,000 |
Inter-Fund Loan (Borrowing Fund)
| Fund | Class | Dept | Method | Subsid | Acct DR | Acct CR | Amount |
|---|---|---|---|---|---|---|---|
| 146 | 1cc | ddddd | Journal Entry | 570000 | 2021040 | 1000199 | $70,000 |
| 146 | 1cc | ddddd | Journal Entry | 570000 | 5110020 | 1000199 | $14,000 |
In most circumstances, long-term debt for governmental type funds is recorded in Fund 999 (General Long-Term Obligation Subsid Acct). However, because this is an inter-fund loan the debt is recorded only in the borrowing governmental fund.
According to Section 1300.120 of the Codification of Governmental Accounting and Financial Reporting Standards: “Liabilities arising from inter-fund activities do not constitute general long-term liabilities and therefore should be reported in governmental funds.”
40.10.50 Inter-Fund Transfers Provided & Used << 40.10.60 >> 40.10.70 Intra-Fund Cash Transfers
