Funds used by state and local governments are classified as governmental, proprietary, or fiduciary, depending on their activities and objectives.

• Analyze the main differences between governmental and fiduciary funds

Respond:

There are three types of funds used by the state and local government. The funds are called governmental, proprietary and fiduciary. Governmental funds are used to account for tax-supported governmental activities. Examples of governmental funds would be general fund, capital project fund, permanent fund, special revenue fund and debt service fund. This funds purpose is what the government used to be financed as well as assess the finances of the government in its entirety, including the year's operating results, determine whether the government's overall financial position improved or deteriorated and evaluate whether the government's current-year revenues were sufficient to pay for current-year services
 

Proprietary funds are used to account for business type activities. Examples of these funds include interfund loans, proceeds of tax-supported bond issues and transfers from other relevant governments. This fund's purpose is to detect fraud and account for all money. Fiduciary funds are used to account for resources held by an agency as a trustee or custodial capacity for outside parties. Examples of fiduciary funds would be agency funds, investment trust funds, pension and employee benefit trust funds and private purpose trust funds. Fiduciary funds purpose is just to hold funds for others, this is funds that can’t be touched by everyone or at any time.