If a donation is made to benefit the government or citizenry and the principal is expendable, which fund is established?

When a donation is made to benefit the government or citizenry with the stipulation that the principal is expendable, a Special Revenue Fund is established. This fund type is specifically designed to account for revenues derived from specific sources that are restricted for specific purposes, typically related to governmental functions or services benefiting the public.

In the context of the question, since the principal is expendable, it means that the funds can be used up to serve those designated purposes, which aligns perfectly with how Special Revenue Funds operate. They allow government entities to manage and track resources that are not intended for long-term capital projects or for purposes defined by private individuals or organizers, but rather for direct benefits to the community or government services.

In contrast, a Permanent Fund would have a principal that cannot be spent, only the income generated from it can be utilized. A Private-purpose Fund is intended for funds that benefit specific individuals or groups rather than the public at large. A Capital Projects Fund is used for the construction and acquisition of major capital assets, which does not fit the description of an expendable donation for general public benefit. Thus, the nature and purpose of the funds lead to the establishment of a Special Revenue Fund in this scenario.