B5-M6 Fiduciary Funds

Question 1

What is a distinguishing feature of Fiduciary Funds?

Answer 1

• Assets are controlled by the Government.
• Assets can’t come from government generated revenues (own source)
• Assets are administered through a trust which the gov’t is not a beneficiary
• Asset are to benefit INDIVIDUALS
• Government does not have administrative involvement/direct financial involvement

Question 2

Types of Fiduciary Funds

Answer 2

CIPPOE (Full Accrual)

Custodial
Investment Trust
Private purpose
Pension
Other
Employee benefit

Question 3

Type of financial statement for Fiduciary Funds?

Answer 3

Statement of Fiduciary Net position (Balance sheet)
Statement of Changes in Fiduciary net position (income statement)
Foot notes

Not applicable - Statement of CF Flows

Pass Key - One significant difference between fiduciary and proprietary funds involves cash flow statement:
1. Proprietary - required (split out capital and non capital financing)
2. Fiduciary - not required (why?? because a lot of the activities are presented already in the Changes in Net position so it’s redundant)
3. All GRaSPP - No cash flows as well.

Question 4

What’s the difference between special revenue fund and a custodial fund?

Answer 4

Main differentiator is “Government monitoring or administrative involvement”

Question 5

What’s the usual entry for a Custodial Fund?

Answer 5

Dr. Cash
Cr. Additions - Tax collection (Like a revenue line item but not really revenue)
cr. Due to other funds [Any fees] (Liability)

Question 6

What is a private purpose trust fund?

Answer 6

The private purpose trust fund is the designated fund for reporting all other trust arrangements under which principal and income are for the benefit of one of the following:

Specific individuals
Private organizations
Other governments

Question 7

What is escheat property?

Answer 7

It is a property that reverts to a governmental entity in the absence of a legal claimants or heirs at the time the estate is settled

Question 8

What is the difference between Special revenue fund, permanent fund and Private purpose fund?

Answer 8

1. Use -
   Special Rev - Public
   Permanent - Public
   Private Purpose - Private
2. Spending -
   Special Rev - Interest and Principal (expendable)
   Permanent - Interest only (non expendable)
   Private Purpose - Interest and/or Principal (expendable)

Question 9

How does a Pension plan report assets and liabilities?

Answer 9

Asset valuation - The plan’s net assets are reported on FV basis

Liabilities and net position - This part of the statement does not report the required actuarial liability. Pension liability is reported in the notes to FS and is described and analyzed in the required supplementary info.

Main Difference to Commercial FS - Net pension liability and change in the net pension liability are not included on the BS of the pension fund FS