Final answer:
The governmental funds must be converted from the modified accrual to accrual basis when preparing government-wide financial statements, ensuring consistency with private sector accounting practices.
Step-by-step explanation:
The fund category that must change from modified accrual to accrual basis when preparing government-wide financial statements is the governmental funds. Governmental funds such as the general fund, special revenue funds, capital projects funds, debt service funds, and permanent funds use the modified accrual basis for accounting during the fiscal year. However, when these funds are presented in the government-wide financial statements, which include the statement of net position and the statement of activities, they must be converted to the accrual basis of accounting. This adjustment is necessary to show the financial position and results of operations in a manner that is consistent with private sector accounting.