What is an interfund transfer?

An interfund transfer refers specifically to the movement of money between different funds within the same government entity. This is a common practice in governmental accounting, allowing for the reallocation of resources as needed to address varying budgetary requirements across various funds, such as the general fund, special revenue funds, or capital projects funds.

These transfers may be necessary for reasons such as addressing shortfalls in one fund while having excess resources in another, ensuring that funds are available for planned projects or services, or allowing for better financial management of the overall governmental entity's fiscal responsibilities. This practice is essential in promoting efficient use of available resources within the different activities or programs managed by the government, ensuring that financial accountability is maintained within governmental reporting.

The other choices do not accurately describe interfund transfers; they relate to other financial interactions or types of funding that do not fall under the category of transferring resources internally within government funds.