How should a government report an internal investment pool?

A government should report an internal investment pool in each participating fund. This method acknowledges that the internal investment pool consists of resources that belong to various funds or components of the government, allowing for a more accurate reflection of each fund’s financial position and results of operations.

When an internal investment pool is established, it typically serves multiple funds. By reporting the investment pool in each participating fund, the government provides transparency regarding the investments made and the proportionate share of earnings that each fund realizes. This approach maintains accountability and enhances the financial reporting of the specific funds that participate in the pool, ensuring that stakeholders can understand the financial impacts of these investments on each fund's results.

The other options do not provide a clear representation of how the pooled resources are associated with the specific funds, which is critical for comprehensive financial reporting in government accounting.