Using the Interfund Transfer as a Financing Tool: A Study of County Governments
DOI:
https://doi.org/10.60154/jaepp.2025.v26n2p113Keywords:
Interfund transfer, operational transfer, general fund, governmental accountingAbstract
Conventional budgeting and financing practices provide consistent levels of funding for public services that, at times, includes the use of the interfund transfer, especially as it relates to General Fund transfers out. There has been limited research concerning interfund transfers, especially funding amounts and specific service type funding, which provides insight into this indirect funding mechanism. This study examines the level of interfund transfers out of the General Fund among county governments in North Carolina. The study also examines the types of funds that act as receivables for the transfers. Initial findings indicate proper budgeting for interfund transfers with lower actual transfers during the fiscal year. Overall organization performance was found to influence transfers with higher levels of actual transfers occurring with increases in net position, overall total fund balances, assets, and a lower auditee risk designation. Findings also indicate more diversification among fund types with more accountants on staff and if the General Fund was more stable during the fiscal year. Implications of the study include the importance of proper budgeting and fund allocation and well-trained finance personnel in the area of governmental accounting.
References
1. Arapis, T. and V. Reitano. (2018). A glimmer of optimism in government savings accumulation? An empirical examination of municipal unassigned fund balance in Florida, Public Finance Review, 46(3), 389–420.
2. Coe, C. K. and E. O’Sullivan. (1993). Accounting for hidden costs: A national study of internal service funds and other indirect costing methods in municipal governments, Public Administration Review, 53 (2), 59-64.
3. Coe, C. K. (2008). Preventing local government fiscal crises: Emerging practices, Public Administration Review, 68(4), 759-767.
4. Coe, C. K. (2007). Preventing local government fiscal crises: The North Carolina approach, Public Budgeting and Finance, 27(1), 39-49.
5. Evans, J. and J. Patton. (1983). An economic analysis of the participation in the municipal finance officers association certificate of conformance program, Journal of Accounting and Economics, 5 (2), 151–175.
6. Felix, R. (2015). The use of inter‐fund transfers to manage the “Bottom Line” in the municipal context, Journal of Governmental & Non Profit Accounting, (4), 17–31.
7. Giroux, G., and A. McLelland. (2003). Governance structures and accounting at large municipalities, Journal of Accounting and Public Policy, 22(3), 203–230.
8. Lofton, M. and M. Ivonchyk. (2021). Financial manager professionalism and use of interfund transfers: Evidence from Georgia counties, Public Budgeting & Finance 42(2), 171-195.
9. General Accounting Office (GAO). (1985). Budget Issues: State Balanced Budget Practices, Washington, DC: GAO.
10. Gore, A. 2012. Do Governments Hide Resources From Unions? The Influence of Public Sector Unions on Financial Reporting Choices. Working paper, The George Washington University.
11. Governmental Accounting Standards Board (GASB). 1999. Statement No. 34 paragraph 112a: Basic Financial Statements‐and Management's Discussion and Analysis‐for State and Local Governments. Norwalk, CT: Governmental Accounting Standards Board.
12. Governmental Accounting Standards Board (GASB). 1999. Statement No. 34 paragraph 112b(1): Basic Financial Statements‐and Management's Discussion and Analysis‐for State and Local Governments. Norwalk, CT: Governmental Accounting Standards Board.
13. Governmental Accounting Standards Board (GASB). 1999. Statement No. 34 paragraph 112b(2): Basic Financial Statements‐and Management's Discussion and Analysis‐for State and Local Governments. Norwalk, CT: Governmental Accounting Standards Board.
14. Governmental Accounting Standards Board (GASB). 2001. Statement No. 38 paragraph 14: Certain Financial Statement Note Disclosures. Norwalk, CT: Governmental Accounting Standards Board.
15. Governmental Accounting Standards Board (GASB). 2001. Statement No. 38 paragraph 15: Certain Financial Statement Note Disclosures. Norwalk, CT: Governmental Accounting Standards Board.
16. Governmental Accounting Standards Board (GASB). 2019. Financial Reporting Model - Reexamination of Statements 34, 35, 37, 41, and 46 and Interpretation 6. Available at: https://gasb.org/jsp/GASB/ GASBContent C/GASBNewsPage&cid¼1176163289827. Norwalk, CT: Governmental Accounting Standards Board.
17. Governmental Accounting Standards Board (GASB). 2021. Conceptual Framework: Disclosure Framework. Available at: https://www.gasb.org/jsp/GASB/GASBContent_C/ProjectPage&cid=1176171330326. Norwalk, CT: Governmental Accounting Standards Board.
18. Groves, S. M., Godsey, W. M., and M. A. Shulman. (1981). Financial indicators for local government, Public Budgeting and Finance, 1(2), 5-19.
19. Groves S. M. and M. G. Valente. (2003). Evaluating financial conditions: A handbook for local Government, Washington, D.C.: International City/County management Association.
20. Keating, E.K., Fischer, M., Gordon, T.P., and J. Greenlee. (2005). The Single Audit Act: how compliant are nonprofit organizations? Journal of Public Budgeting, Accounting and Financial Management, 17(3), 285–309.
21. Kloha, P., Weissert, C. S. and R. Kline. (2005). Developing and testing a new composite model to detect local fiscal distress, Public Administration Review, 65(3), 278-288.
22. Lopez, D. and G. Peters. (2010). Internal control reporting differences among public and governmental auditors: The case of city and county circular A-133 audits, Journal of Accounting and Public Policy, 29(5), 481 – 502.
23. Modlin, S. (2008). Defining involvement of county commissioners in the budget formulation process, Politics & Policy, 36(6), 1044-1065.
24. Modlin, S. (2010). Rationalizing the local government decision-making process: A model for state oversight of local government finances, Public Performance & Management Review, 33(4), 571-593.
25. Modlin, S. (2012). County government finance practices: What independent auditors are finding and what makes local government susceptible, Journal of Public Budgeting, Accounting & Financial Management, 24(4), 558-578.
26. Modlin, S. (2016A). County government fleet purchasing practices: Financial efficiency vs. Need assertion, Journal of Public and Nonprofit Affairs, 2(1), 15-30.
27. Modlin, S. (2016B). Increasing transparency and efficiency: An examination of county government note disclosures, Public Administration Research, 5(2), 59-69.
28. Modlin, S. (2017). Increasing transparency through compliance: Revisiting local government audit findings, Public Finance and Management,17(4), 325-340.
29. Modlin, S. (2018). County government fleet acquisition practices: Service demand or budget limitations, Public Works Management & Policy, 23(3), 262-273.
30. Modlin, S. (2019). Local government finance office orientation revisited: Actually, it’s all about control, International Journal of Public Administration, 42(3), 230-239.
31. Modlin, S. (2023). Increasing efficiency through accounting: Examining factors influencing uses of the internal service fund among county governments, The North American Accounting Studies, 6(1), 26-39.
32. Modlin, S. (2024A). Measuring disclosure content within the MD&A: The case of North Carolina Counties, Journal of Accounting & Finance, 24(1), 2158-3625.
33. Modlin, S. (2024B). County government funding priorities: an examination of non-major special revenue funds, American Journal of Finance and Accounting, 8(1), 81-99.
34. Modlin, S. (2024C). The Association between local government organization structure and internal controls: The case of North Carolina counties, Journal of Accounting, Ethics & Public Policy, 25(2), 71-100.
35. Modlin, S. (2025). Is service costing too much? An examination of county government fleet assets, Global Journal of Economic and Finance Research, 2(7), 470-481.
36. Municipal Finance Officers Association. (1978). Is your city heading for financial difficulty? A guide for small cities and other government units, Chicago: MFOA.
37. N.C.G.S. 159-24. (2019). Article 1. Raleigh, N.C.
38. N.C.G.S. 159-25. (2021). Article 1. Raleigh, N.C.
39. N.C.G.S. 159-28. (2021). Article 1. Raleigh, N.C.
40. N.C.G.S. 159-29. (2022). Article 1. Raleigh, N.C.
41. N.C.G.S. (NCGS) (2007) Chapter 62A-46(c). Raleigh, N.C.
42. Raman, K. (1981). Municipal reporting: Managing the numbers, Public Budgeting and Finance, 1(3), 56–61.
43. Rich, K. T., and J. X. Zhang. 2016. Municipal accounting restatements and top financial manager turnover, Journal of Public Budgeting, Accounting & Financial Management, 28(2), 222–249.
44. Rich, K. T., B. L. Roberts, J. M. Wall and J. X. Zhang. (2021). Toward an understanding of year-over- year changes in municipal management discussion and analysis disclosures, Advances in Accounting, 54(1), 1-15.
45. Roybark, H. M. (2023). An analysis of audit deficiencies based on PCAOB inspection reports issued during 2005, Journal of Accounting, Ethics & Public Policy, JAEPP, 6(2), 175-205.
46. Styles, A. and M. Tennyson. (2007). The accessibility of financial reporting of U.S. municipalities on the Internet, Journal of Public Budgeting, Accounting & Financial Management 19 (1), 56–92.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2025 Steve Modlin
This work is licensed under a Creative Commons Attribution 4.0 International License.
