Ace the 2026 CGFM Exam – Turbocharge Your Path to Financial Mastery!

When reconciling the governmental fund balance to the statement of net position, the primary goal is to adjust the fund balance, which reflects the available resources in the governmental funds, so that it accurately represents the overall financial position of the government as captured in the statement of net position. This process takes into consideration the various elements that affect the financial position, including long-term liabilities.

The correct answer indicates that the total governmental fund balance should have long-term liabilities subtracted from it. This adjustment is necessary because governmental funds focus on a financial resource measurement focus that only includes resources expected to be used within the current year, while the statement of net position presents a broader view that includes all assets and liabilities, both current and long-term. Long-term liabilities, such as bonds payable or pension obligations, are not included in the governmental fund balance but must be accounted for in the statement of net position to give a complete picture of the government's financial health.

In summary, reconciling the governmental fund balance involves taking the total fund balance and subtracting long-term liabilities to arrive at the net position that accurately reflects the government's financial situation. This alignment is essential for users of financial statements, such as stakeholders and policymakers, to understand not just available funds but also the obligations that