The Government Accounting Standards Board (GASB) has issued a new pronouncement, number 84, Fiduciary Activities, that will be effective for periods beginning after December 15, 2018; calendar year 2019 and fiscal year 2020.
The objective of this standard is to improve guidance regarding the identification of fiduciary activities for accounting and financial reporting purposes and how those activities should be reported.
The following key factors will determine if an activity should be classified as a fiduciary fund:
1. Control of the asset by the government:
The government holds the asset or has the ability to direct the use, exchange, or employment of the asset to provide benefits to the specific or intended recipient.
2. Beneficiaries with whom a fiduciary relationship exits:
The assets are for the benefit of individuals and the government does not have administrative or direct financial involvement with the assets.
Any activity meeting these new requirements should be reported as fiduciary funds in the financial statements.
Additionally, the standard includes post‐employment benefit arrangements in fiduciary funds and discusses the criteria that would establish a fiduciary component unit.
The main funds reportable as fiduciary funds, if applicable, are as follows:
- Pension trust funds
- OPEB trust funds
- Investment trust funds
- Private purpose trust funds
- Custodial funds
The custodial fund is a new term that was adopted with this standard. It was determined that the previous term “agency fund” was found to be confusing, so GASB established the new custodial fund classification for clarification.
Another key change with adopting custodial funds is a statement of changes in fiduciary net position is required. Previously (for agency funds), only balance sheet items were reported on the financial statements. Depending on the financial system, this may involve working with the software company to ensure that the proper accounting structure is in place for the next fiscal year.
Not only is the name and structure for custodial funds changing, but also the accounts being held in the fund. To establish the appropriate accounts that should be held under the new custodial fund, see the chart below provided by the Government Accounting Standards Board. Additional information will be included in the implementation guide to be issued in May 2019.