Fiduciary Funds Financial Statements Flashcards
What are fiduciary funds?
activities of a governmental entity that qualify for classification as a fiduciary activity must have all of the following characteristics:
assets associated with the activity are controlled by the government
assets associated with the activity are not derived from revenues that are generated by a government itself (aka own source revenues)
assets associated with the activity must have one or more of the following characteristics:
the assets are: administered through a trust which the government itself is not a beneficiary, dedicated to providing benefits to recipients in accordance with benefit terms, legally protected from the creditors of the government, for the benefit of individuals, not derived from the government’s provision of services or goods to the beneficiaries, the government does not have administrative involvement with the assets or direct financial involvement with the assets
in summary, fiduciary activities have the following characteristics: assets are controlled by the government, assets are not the government’s own-source revenue, and assets are not subject to administrative involvement by the government
What is a custodial fund?
it generally collects cash to be held temporarily for an authorized recipient to whom it will be later disbursed; a custodial fund is used when activities are not required to be reported in pension trust funds, investment trust funds, or private purpose trust funds
tax collection funds exist when one local government collects a tax for an overlapping governmental unit and remits the amount collected, less administrative charges, to the recipient unit
clearance funds are used to accumulate a variety of revenues from different sources and apportion them to various operating funds in accordance with a statutory formula or procedure
if a governmental unit has monitoring or similar administrative involvement, the special revenue fund is used
when the governmental unit is not otherwise obligated for the debt, the receivables and debt service transaction are appropriately accounted for in the custodial fund
the custodial fund is the only fiduciary fund type that excludes the word “trust” from the title
custodial funds present a statement of fiduciary net position and a statement of changes in fiduciary net position
What is an investment trust fund?
a governmental entity that sponsors one or more external investment pools should report the external portion of each pool as a separate investment trust fund
the statement of fiduciary net position is prepared on the accrual basis and reports the plan’s assets, liabilities, and net position; the statement identifies the major assets of the plan; reported liabilities should be subtracted from the total assets, and the difference reported as net position held in investment trust
the statement of changes in fiduciary net position reports the net increase or decrease in net plan position from the beginning of the year until the end of the year
What is a private purpose trust fund?
it is the designated fund for reporting all other trust arrangements under which principal and income are for the benefit of specific individuals, private organizations, or other governments that are not classified as either pension or investment trusts
assume that the principal of a private purpose trust fund is invested and the income received is transferred to a private individual
expenses (deductions) relate to the specific purpose of the trust and may relate to benefits or administrative charges
capital gains/losses are recorded as adjustments to income/expense
escheat property is property that reverts to a governmental entity in the absence of legal claimants or heirs at the time the estate is settled; escheat property generally should be reported as an asset in the governmental or proprietary fund to which the property ultimately escheats; escheat property held for individuals, private organizations, or other governments should be reported in a private purpose trust fund; revenue is reduced and a fund liability is reported to the extent that property probably will be reclaimed
What is a pension (and other employee benefit) trust fund?
pension (and other employee benefit) trust funds account for government sponsored defined benefit and defined contribution plans and other employee benefits such as postretirement healthcare benefits
pension plan assets are generally measured using the accrual basis of accounting applied on a fair value basis, and pension benefit obligations should be recognized when due and payable
the statement of plan net position is prepared on an accrual basis and reports the plan’s assets, liabilities, and net position
the net pension liability and the change in the net pension liability are not included on the balance sheet of the pension fund financial statements
the fiduciary and proprietary funds both use full accrual accounting; one significant difference between the two funds involves the cash flow statement:
fiduciary funds –> cash flow statement is not required
proprietary funds –> cash flow statement is required
