Accounting and Financial Reporting for Fiduciary Activities

Begin discussions, identify all potential fiduciary activities, identify types of fiduciary funds, determine when to recognize a fiduciary fund liability, and apply the Standard retroactively and prepare the disclosures.

GFOA Advisories identify specific policies and procedures necessary to minimize a government's exposure to potential loss in connection with its financial management activities. It is not to be interpreted as GFOA sanctioning the underlying activity that gives rise to the exposure.

GASB Statement No. 84, Fiduciary Activities, paragraphs 6-11, defines fiduciary activities for purposes of accounting and financial reporting.  It focuses on 1) whether a government is controlling the assets, and 2) the beneficiaries with whom the relationship exists. Separate criteria apply for fiduciary component units and postemployment benefit arrangements that are fiduciary activities.

Governments may report a number of activities within their fiduciary funds as trust or agency funds. GASB 84 improves the guidance regarding the identification of fiduciary activities for accounting and financial reporting. GFOA recommends that governments begin to review their current fiduciary activities and devote time to developing a plan for the implementation of GASB 84 within their organization. The list of key considerations below has been developed to provide guidance.1

  1. Begin discussions government-wide to educate stakeholders on the new GASB guidance. Stakeholders should include, for example, those working with the budget, information technology, local school councils, principals, attorneys, and OPEB plan administrators. 
  2. Identify all potential fiduciary activities.
    • Consider developing a questionnaire for all departments and component units to determine what types of revenue are being collected and for which activities they are being used. Examples of the types of questions to include in the questionnaire are:
      • What activities do you currently raise money or collect fees to support?
      • Do you maintain a separate bank account for these revenues?
        • Who has access to this account?
        • Who is the person responsible for this account?
      • Do you accept credit or debit cards for these transactions? 
        • If so, for what type of transactions?
        • Where are these fees deposited?
    • Review how you are using your agency funds to determine if they will now qualify as custodial funds under the new Standard. Examples of resources that are currently held in agency funds include building fees and bid deposits.
    • Review the criteria for fiduciary activities with your OPEB plan administrator to determine whether the plan qualifies as a trust under the new guidance, and document the results.
      • Determine if a trust or equivalent arrangement exists. All three are required.
        • Are the contributions irrevocable?
        • Are the assets dedicated to providing benefits to recipients in accordance with the benefit terms?
        • Are the assets legally protected from the creditors of the government?
      • Identify fiduciary component units.
        • Apply the criteria contained in GASB Codification 2100.121-.136 to determine whether a component unit relationship exists. 
        • GASB Statement No. 84, paragraphs 6-9, provides specific guidance to determine whether a component unit is a fiduciary component unit
  3. Identify the types of fiduciary funds.
    • Pension (and other employee benefit/OPEB) trust funds
    • Investment trust funds
    • Private purpose trust funds
    • Custodial funds
      • Custodial funds require additions and deductions be reported by the nature of the resource flows (for all years presented).
      • Administrative costs should be reported separately.
  4. Determine when to recognize a fiduciary fund liability.
    • Pension/OPEB trusts report liabilities in accordance with GASB Statements 67/74, when due and payable.
    • All other fiduciary fund types record a liability to beneficiaries when an event has occurred that compels the government to disburse fiduciary resources.
    • Record all other liabilities using the economic resources measurement focus.
  5. Apply the Standard retroactively and prepare the disclosures.
    • May require a prior period adjustment and restatement of fund financial statements in the year of implementation.
    • Disclose reason for not restating prior periods, if applicable.
  • Board approval date: Friday, September 28, 2018