Based on the asset amounts provided, should either the Development Special Revenue Fund or the Debt Service Fund be reported as major funds?

• A. Yes, both should be major
• B. The Development Special Revenue Fund should be major
• C. The Debt Service Fund should be major
• D. Neither the Development Special Revenue Fund nor the Debt Service Fund should be reported as major

Answer: (D)

A fund becomes major when its resources are large enough to stand out in the overall financial picture. The standard uses a two-part threshold: a fund must represent at least 10% of the total for all funds of that category (for example, all special revenue funds or all debt service funds) and at least 5% of the total for all governmental funds combined. Only if both conditions are met is the fund reported as major; otherwise it remains nonmajor.

Applying this to the provided asset amounts, neither the Development Special Revenue Fund nor the Debt Service Fund reaches those thresholds. They do not constitute at least 10% of their category’s total and do not reach the 5% of all governmental funds. Therefore, neither fund qualifies as major, and both would be reported as nonmajor funds.