FASAB: Changes Would Fix Confusion Over “Earmarking”

The Federal Accounting Standards Advisory Board (FASAB) issued a proposal Wednesday that would modify the definition of earmarked funds in Statement of Federal Financial Accounting Standards (SFFAS) no. 27. One key amendment in the exposure draft would change the term “earmarked funds” to “funds from dedicated collections.”

The ED, Revisions to Identifying and Reporting Earmarked Funds: Amending Statement of Federal Financial Accounting Standards 27, would clarify that (1) at least one source of funds external to the federal government must exist for a fund to qualify as earmarked, and (2) a specific exclusion is proposed for any funds that are established to account for pensions, other retirement benefits, and other post-employment or other benefits provided for federal employees (civilian and military).

The ED says that the term “earmarked funds” has become confusing to readers because of the increased focus on a similar term, “earmarking,” which refers to earmarked spending. Earmarking occurs when legislation designates appropriations for a specific purpose. In contrast, the reporting requirements of SFFAS no. 27 are focused on collections that are distinct from the government’s general revenues and are dedicated for a specific purpose. The ED says the proposed new term “funds from dedicated collections” is a unique and descriptive term that will not be confused with other commonly used terms.

The proposal would give component entities the option to continue using the existing format of separate lines or columns to display information on earmarked funds on the face of the balance sheet and statement of changes in net position, or to use an alternative format. In addition, component entities would be permitted to report either consolidated or combined information and would be required to label the information accordingly.

The board also proposes explicitly requiring that component entities report information in sufficient detail to support governmentwide reporting requirements.

Comments on the ED are due Aug. 22.