What must each function in governmental activities report according to the requirements?

The requirement for each function in governmental activities to report all direct costs is crucial for transparency and accountability in financial reporting. Direct costs can be directly attributed to a specific function or activity, such as salaries of personnel who provide education in a school, or supplies used by a public health service. Reporting these costs allows stakeholders, including taxpayers and government officials, to understand the financial resources allocated to each function and how efficiently those resources are being used.

Direct costs provide a clear picture of the financial demands of each activity, enabling comparisons and evaluations of effectiveness across different governmental functions. This reporting assists in budgeting processes, audits, and performance assessments, ensuring that public funds are managed prudently.

Understanding direct costs is integral to developing a comprehensive view of the financial activities of government functions, facilitating informed decision-making and policy development. In contrast, while indirect costs can be important for certain analyses, they may not provide as clear and direct insights into individual functions' financial performance.

This focus on direct costs reflects best practices in governmental accounting and the principles of accountability and transparency that underpin public sector financial reporting.