What should be the treatment for risk financing premiums received in excess of risk-related expenditures in a governmental fund?

The treatment for risk financing premiums received in excess of risk-related expenditures in a governmental fund is best classified as an interfund transfer. When premiums are collected that exceed the expenditures associated with risk management, such excess funds are typically not recognized as revenue in the operational context of the governmental fund. Instead, these excess premiums represent a resource movement within the government's funds, indicating a transfer of resources from one part of the entity to another.

Interfund transfers are common in governmental accounting and are used to manage cash and fund balances between different functions of a government. This approach ensures that the excess funds are appropriately accounted for, without overstating revenue or inaccurately reflecting the financial performance of the fund. By treating these excess premiums as interfund transfers, it maintains transparency and accuracy in the financial statements, aligning with the principles of fund accounting.