Accounting
Financial Management
Special Revenue Funds: GASB 54 Definition, Examples and When to Create One
Last updated: October 16, 2026 · Independent guide · We do not sell rankings or coverage.
A special revenue fund is a governmental fund that accounts for the proceeds of specific revenue sources that are restricted or committed to a specified purpose other than debt service or capital projects. GASB Statement 54 sets the test: one or more restricted or committed revenues must be the foundation of the fund, and they must continue to make up a substantial portion of its inflows. If they do not, you report the activity in the general fund instead.
Definition: the GASB 54 test
Paragraph 30 of GASB Statement 54 (GASB, February 2009) defines special revenue funds as funds “used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects.” Check four conditions:
- A specific revenue source. “One or more specific restricted or committed revenues should be the foundation for a special revenue fund” (paragraph 30).
- Restricted or committed. The constraint comes from an outside party or law (restricted) or formal action of your governing body (committed).
- A substantial portion of inflows. Those proceeds “should be expected to continue to comprise a substantial portion of the inflows reported in the fund” (paragraph 31).
- Not trust resources. The fund cannot hold resources held in trust for individuals, private organizations or other governments (paragraph 30).
GASB sets no percentage for “substantial portion,” so document the judgment each year. When the test fails, paragraph 31 says to discontinue the fund and report its remaining resources in the general fund. Paragraph 32 requires a note on the purpose of each major special revenue fund.
Example: gas tax, grants and school food service
| Revenue source | Constraint | Typical fund |
|---|---|---|
| State gas tax shared with a city | Restricted by state law to street purposes | Street or gas tax special revenue fund |
| Federal or state program grant | Restricted by the grant agreement | Grant special revenue fund |
| USDA meal reimbursements and lunch sales | Restricted federal reimbursement | Food service special revenue fund, or an enterprise fund |
In California, Streets and Highways Code section 2113 bars Highway Users Tax Account payments to a city until it sets up, by ordinance, a “special gas tax street fund,” and its interest must go to street purposes (California Streets and Highways Code § 2113, updated January 1, 2020).
School food service can go either way. The National Center for Education Statistics lists “certain food service programs” as an example of enterprise fund use (NCES, April 2015). Texas uses fund 240 for food service “in a special revenue fund when the service is subsidized with federal reimbursement revenues from the USDA” (Texas Education Agency, FASRG Update 20, 2026).
Illustration (constructed numbers). A city receives $1,400,000 of state gas tax, earns $20,000 of interest on the street fund and receives a $300,000 general fund transfer for street maintenance. The restricted gas tax and its interest are 83% of the fund’s $1,720,000 of inflows, so the fund passes the substantial-portion test. If the gas tax fell to $200,000 and the transfer rose to $1,500,000, the fund would fail the test and fold back into the general fund.
How special revenue funds are used in practice and in software
When to use the general fund instead
Use the general fund when the money is unconstrained, when the board only intends a purpose (assigned, not committed), or when a department or project code can track the activity. Washington’s State Auditor advises that “only the minimum number of funds consistent with legal and operating requirements should be established” (quoted by MRSC, no date shown).
Coding in a municipal or K-12 chart of accounts
The fund is usually the first segment of the account string. Washington local governments commonly number special revenue funds in the 100 series, after 000 for the general fund (MRSC). Texas districts use a required three-digit fund code: federal special revenue programs are 201 to 289, state-funded programs 381 to 429 and local programs 461 to 499 (TEA FASRG). Give each grant or dedicated tax its own fund number so major funds report separately and nonmajor funds roll up.
Software setup
Fund accounting systems keep each fund self-balancing. Caselle Connect requires every fund to have a closing account before the year-end close will run (Caselle, updated September 12, 2017). CLA, an accounting firm that writes about Sage Intacct, describes setting each fund up as its own balancing entity (CLA, August 17, 2026). Neither setup applies the GASB 54 test for you, so record each fund’s legal basis and review it at year end.
Related terms
- GASB 54 fund balance classifications
- Modified accrual accounting
- Encumbrance accounting
- Fund accounting software
How we researched this
We read GASB Statement 54 on October 16, 2026, plus Texas, California, Washington and NCES guidance. The top-ranking pages, from Corporate Finance Institute and AccountingTools, define the term but cite no paragraphs and show no fund coding. Example figures are illustrative.
Related guides
- Restricted Funds Accounting: Restrictions and Releases
- Grant Management Software for Local Government (2026)
- SF-425 Federal Financial Report: Lines, Due Dates, Ledger
Frequently asked questions
Can a board create a special revenue fund without a legal requirement?
Yes, if the board commits a specific revenue source by formal action, such as a resolution dedicating a local tax. Intent alone does not meet the paragraph 30 test.
What fund balance class does a special revenue fund report?
Mostly restricted or committed. Amounts that are neither are assigned to the fund’s purpose under paragraph 15, and only a deficit is reported as unassigned.
Should school food service be a special revenue fund or an enterprise fund?
Both are used. A USDA-subsidized program is often a special revenue fund, while one run to recover costs through user charges may be an enterprise fund. Check your state’s accounting manual.
Sources
- GASB, Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, February 2009 (checked October 16, 2026)
- NCES, Financial Accounting for Local and State School Systems, 2014 Edition, Chapter 6: Fund Classifications, April 2015
- Texas Education Agency, Financial Accountability System Resource Guide Update 20, Financial Accounting and Reporting Appendices, 2026
- California Streets and Highways Code section 2113, updated January 1, 2020
- MRSC, A Primer on Local Government Funds, no date shown
- Caselle, How do I close year-end?, updated September 12, 2017 (vendor)
- CLA, Traditional fund accounting vs. net asset accounting in Sage Intacct, August 17, 2026 (accounting firm blog on Sage Intacct)
- Corporate Finance Institute, Special Revenue Fund, January 17, 2021 (reviewed for comparison; sells finance training)
- AccountingTools, Special revenue fund definition, no date shown (reviewed for comparison; sells accounting courses)
Sherman Hsieh
Independent analysis of enterprise software — ERP, CRM and more
