Fund Accounting from the Italian Early Tradition to the U.S. GAAP for Governments

ABSTRACT

Surprising correspondences emerge from the parallel investigation of fund accounting practices in Italian entities until the late nineteenth century and in the contemporary U.S. public sector. The analysis attempts to interpret similarities and differences in light of dissimilar environmental features, and wonders if the Italian tradition could have some explanatory capability on the U.S. present standards. The “fund” concept and its use are strictly similar; they are founded on information needs for governance and internal control. Contemporary requirements for democracy and transparency, and opportunities coming from modern ICT tools bring U.S. organizations to be accountable to the citizenry.

KEYWORDS:

• Accounting history
• Fabio Besta
• fund accounting
• U.S. GAAP for governments

Notes

^1. Correspondingly, in a recent article on the IASB/FASB accounting standards, Macve (2010) invokes the authority of Luca Pacioli in support of his theses concerning the objectives of financial accounting.

^2. The academic relevance of the latter has recently been proposed again to international audiences by Sargiacomo, Servalli, and Andrei (2012).

^3. Ruppel’s book is updated every year and is generally considered as a valuable source of information on the topic (Hou, 2003; Mulazzani, 2002; Pozzoli, 2005; Van Lent, 2012).

^4. In dealing with the fall of Rome in 476, Jacob Soll says “its heir, the Catholic Church and its massive monasteries, continued to administer land, goods, and payments through basic accounting and auditing.” (2014, p. 7).

^5. According to B.S. Yamey “Lodovico Flori was the author of one of the most interesting and sophisticated of the early treatises on bookkeeping and accounts” (2012, p. 13).

^6. Again on the topic “The application of the double entry method to incomplete equity systems of every kind is at present, and it was in the past, a very common practice of the bookkeeping art. In fact, I dare say that, except for collective enterprises, very few business entities applied or apply at present that method to complete equity systems” (Besta, 1922, vol. III, p. 144).

^7. The fund accounting practice in England was known by Besta who writes “revenues were divided into three funds the Aggregate fund, the General fund and the South sea fund, each one aimed to specific outlay categories; balances of the three funds, after the payments of the related expenses, had to be collected in a fourth fund aimed at extinguishing the debts (Sinking fund).” As mentioned earlier, public monies were gathered “in 1816 only in a fund called consolidated fund, and the unification was accomplished when the treasury services were delegated to the Bank” (Besta, 1880, pp. 57–58).

^8. The hypothesis is consistent with that given by Besta about the first spread of the double-entry method (vol III, pp. 360–391), duly cited by Sargiacomo et al. (2012, p. 256).