Project Pages

Fiduciary Responsibilities

Project Description: The primary objective of this project would be to develop guidance regarding the application of the fiduciary responsibility criteria in deciding whether and how governments should report fiduciary activities in their general purpose external financial reports. Other objectives of this project include assessing whether additional guidance should be developed to (1) clarify the difference between a private-purpose trust fund and an agency fund, (2) clarify whether a business-type activity engaging in fiduciary activities should present fiduciary fund financial statements, and (3) consider requiring a combining statement of changes in assets and liabilities for agency funds.

Status:
Currently being deliberated.
Added to Research Agenda: April 2010

Fiduciary Responsibilities—Project Plan


Background: The process of implementing GASB Statements No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, and No. 27, Accounting for Pensions by State and Local Governmental Employers (issued in November 1994) triggered numerous technical inquiries as to whether an employer should report a particular pension plan as a pension trust fund.   Existing standards did not provide a basis for a clear answer to those questions.  Moreover, staff became aware that, in the absence of authoritative guidance, preparers and auditors have tended to interpret government’s fiduciary responsibility in a variety of ways, ranging from very broadly to more narrowly (for example, focusing on custody of the trust assets).

During the deliberations that led to the issuance of Statement No. 32, Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans, in October 1997, the Board recognized that the definition of fiduciary funds provided in NCGA Statement 1, as amended, and the fiduciary responsibility provisions in Statement 14, paragraph 19, may not be sufficiently descriptive to assist all governments in determining if a potential fiduciary activity should be reported as a trust or agency fund.  The Board identified administrative involvement and investment functions as two possible characteristics of fiduciary responsibility in this situation.  However, because modifying fund reporting requirements was beyond the scope of that project, the nonauthoritative guidance was presented in the Basis for Conclusions.

Issues regarding whether, or in what way, fiduciary activities should be included in employers’ financial reports also arose during the development of the financial reporting model promulgated in Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments.  In Statement 34, the Board distinguished between (a) governmental and proprietary funds, which can be used to support the government’s programs or other services, and (b) fiduciary funds, which are held in a trustee or agent capacity for others.   Statement 34 excludes fiduciary activities from the government-wide financial statements, because they cannot be used to support the government’s programs and services, but requires that fiduciary funds and component units be reported in fund financial statements, in view of the government’s stewardship responsibility for them.

Technical inquiries concerning financial reporting for fiduciary activities continue to come to the staff. For example, questions have arisen regarding reporting of state prepaid tuition plans (Internal Revenue Code Section 529 Savings Plans), which have grown in popularity and dollar significance over the past decade.   

Accounting and Financial Reporting Issues:

This project considers whether additional guidance should be developed for determining whether a government has fiduciary responsibility and whether additional guidance should be developed to:
  • Clarify the difference between a private-purpose trust fund and an agency fund
  • Clarify whether a business-type activity engaging in fiduciary activities should present fiduciary fund financial statements
  • Consider requiring a combining statement of changes in assets and liabilities for agency funds

Project History:

  • Pre-agenda research approved: April 2010
  • Added to current technical agenda: August 2013
  • Task force established? Yes
  • Deliberations began: September 2013
Current Developments: At the May 2014 meeting, the Board confirmed the project staff’s understanding of the difference between a government that has assigned and can reassign the responsibility for administering the exchange of assets and a government that has no responsibility for administering the exchange of assets, but can establish parameters for those who are responsible (discussed above). The Board also tentatively agreed with an amended flow chart to determine if an activity should be reported in the primary government’s funds, a fiduciary fund, or not reported at all, and to include the chart in the Preliminary Views.

The Board was provided with an educational memorandum summarizing the project staff’s additional research on the value of fiduciary activities information to users of business-type activity financial statements. The research was conducted to inform the Board’s assessment of whether and how governmental entities engaged solely in business-type activities should report their fiduciary activities. The Board tentatively agreed that a stand-alone business-type activity that also engages in fiduciary activities meets the proposed tentative definition of a fiduciary, and should report that activity in general purpose external financial reports in a separate fiduciary fund section and not combined with their operations. Finally, the Board tentatively agreed to amendments to Statement 34 to provide specific guidance for reporting by special-purpose governments engaged in both business-type and fiduciary activities.

At the July 2014 meeting, the Board tentatively agreed to amend their previous tentative decision on when a liability should be recognized in a fiduciary fund and to propose that a liability should be recognized when an event has occurred that compels the government to disburse fiduciary resources. A government would be “compelled” when no other transaction or event would be required for the beneficiary to be entitled to receive the resources.

The Board also tentatively agreed that (1) additions would be disaggregated by source and, if applicable, present net investment income, including separate display of investment income and investment expense, and (2) deductions would be disaggregated by type, and if applicable, including administrative expenses. Finally, the Board tentatively agreed that these additions and deductions would be reported on the face of the financial statements.

At the August 2014 meeting, the Board discussed whether and, if so how, fiduciary component units of a fiduciary component unit should be included in a primary government’s reporting entity. The Board also considered potentially amending the proposed tentative definition of a fiduciary based on feedback received from the GASAC. Finally, the Board reviewed a draft of the table of contents and three of the four proposed chapters of the Preliminary Views.


Work Plan:

 Board Meetings Topics to be considered

September-October 2014:

Review drafts of remaining chapters of Preliminary Views.

October 2014 (T/C):

Review preballot draft of Preliminary Views.

November 2014 (T/C):

Review preballot draft and issue Preliminary Views

December 2014–February 2015:

Comment period.

March 2015: Analyze comments.
April 2015: Public hearings.

April–July 2015:

Redeliberate issues based on respondent feedback.

September 2015:

Review draft standards section.

August 2015:

Review draft standards section.

October 2015:

Review preballot draft of Exposure Draft.

October 2015 (T/C):

Review ballot draft and issue Exposure Draft.

November 2015–January 2016:

Comment period.

February–May 2016:

Redeliberate issues based on respondent feedback.

June 2016:

Review preballot draft of final Statement.

July 2016 (T/C):

Review ballot draft and issue final Statement.


FIDUCIARY RESPONSIBILITIES—RECENT MINUTES


Minutes of Meetings, August 20-22, 2014

The Board began deliberations by discussing whether and, if so, how fiduciary component units of a fiduciary component unit should be included in a primary government’s reporting entity. The Board tentatively decided to propose that fiduciary component units of a fiduciary component unit be included in a primary government’s reporting entity by use of a ‘layering approach.’ This approach would require fiduciary component units of a fiduciary component unit to be combined with the related activity of the component unit that includes them as a component unit. The combined fiduciary fund type totals would then be rolled up to the primary government reporting entity and included in the appropriate fiduciary fund type column of the primary government’s fiduciary fund financial statements.

The Board continued deliberations by considering an amendment to the proposed tentative definition of a fiduciary. The Board tentatively determined that, although conceptually sound, the present organization and language of the proposed definition functions more as a description of a fiduciary than a definition of a fiduciary. Consequently, the Board tentatively decided that the proposed tentative definition should instead be adopted as a proposed description of fiduciary and no longer be referred to as a definition. Further, the Board provided the staff with suggestions to improve the description of a fiduciary. The Board also requested that the proposed fiduciary determination flowchart be amended to support the revised description and that the flowchart be incorporated as a component of the proposed Preliminary Views document.

Finally, the Board provided its edits and comments for the draft of three of the four proposed chapters of the Preliminary Views on Fiduciary Responsibilities.

Minutes of Meetings, July 9-10, 2014

The Board began deliberations by discussing its previous tentative decisions that (a) a commitment would be recognized and reported as a liability in a fiduciary fund only when the event giving rise to the liability has occurred and (b) the event that gives rise to the liability is the beneficiary having an immediate claim on the resources. Specifically, the Board discussed how to define what is meant by “having an immediate claim.” The Board tentatively decided to amend its previous tentative decision and propose that a liability be recognized in a fiduciary fund when an event has occurred that compels the government to disburse fiduciary resources.

The Board continued deliberations by discussing potential note disclosures related to fiduciary funds. The Board reviewed fiduciary fund requirements of other standards setters and tentatively decided that no additional note disclosures should be considered as a result of this review. The Board then discussed potential note disclosures recommended by users interviewed in the project staff research, and it tentatively decided that many of the recommended disclosures pertaining to investment trust funds and pensions and OPEB trust funds were already covered by current guidance. The Board tentatively decided to propose that additions be disaggregated by source and, if applicable, by net investment income, including separate display of investment income and investment expense, and deductions be disaggregated by type and, if applicable, by administrative expenses.

The Board continued deliberations by discussing additional potential note disclosures recommended by users interviewed in the project staff research that were not already covered by current guidance. The Board tentatively decided not to propose that a government engaged in fiduciary activities be required to disclose additional information regarding its obligations beyond current reporting requirements, including the identification of those with access to the resources, responsibility for disbursing the resources, and rights to receive the resources. The Board also tentatively decided not to propose that governments that report investment trust funds be required to disclose information identifying the participants, including how much each participant has invested in the trust. Finally, the Board tentatively decided not to propose that governments engaged in fiduciary activities be required to disclose information regarding the historical performance and rate of return achieved on investments held in a government’s fiduciary funds, except for what is already required for pension trust funds and what may be required for OPEB trust funds. The Board agreed that this issue, specifically related to external investment pools will be considered for addition to the GASB’s potential topics list.

Minutes of Meetings, May 28-29, 2014

The Board began deliberations by confirming the results of the Board’s deliberations at the April 2014 meeting on the difference between a government that has assigned and can reassign the responsibility for administering the exchange of assets (column 2 in the matrix presented in the staff paper) and a government that has no responsibility for administering the exchange of assets but can establish parameters for those who are responsible (column 3 in the matrix presented in the staff paper). The Board tentatively agreed that:
In column 2:
The government has assigned or can assign the responsibility for administering the exchange of assets to another party such as an asset manager.
The government is considered to still have control over the assets if it has the ability to reassign that responsibility to someone else.
In column 3:
The government does not have responsibility for administering the exchange of assets but can establish parameters for those who are responsible for administering the exchange of assets (for example, establishing a menu of investment options).
The government allows an individual or entity other than itself to make decisions about the types of assets held (which is why the government is considered to not have control over the assets).
The government does not have the ability to reassign the responsibility for administering the exchange of assets without the agreement of the individual that has the responsibility.
 
The Board also tentatively agreed that the matrix presented by the staff to determine whether the government has control over the assets should be included as an illustration in the Preliminary Views document.

The Board continued deliberations by discussing the modifications made to the flowchart created to determine if an activity should be reported in the primary government’s funds, a fiduciary fund, or not reported at all. The Board tentatively agreed with the modifications and that the flowchart should be included as an illustration in the Preliminary View’s document.

The Board then discussed the results of the project staff’s research conducted to understand (1) the importance users of business-type activity (BTA) financial statements place on the information currently required to be reported for fiduciary funds and (2) what information users currently focus on or need to assess a BTA’s accountability for fiduciary activities. Following the discussion of the research, the Board discussed whether the tentative decisions previously reached by the Board would be applicable to stand-alone BTAs that also engage in fiduciary activities. The Board tentatively decided to propose that a stand-alone BTA also engaging in fiduciary activities (1) meets the proposed tentative definition of a fiduciary and (2) should report that activity in general purpose external financial reports in a separate fiduciary fund section and not combined with the BTA’s operations.

The Board continued deliberations by discussing potential amendments to Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, in order to clarify the tentative decision that BTAs also engaging in fiduciary activities should report that activity in general purpose external financial reports. The Board tentatively decided to propose that Statement 34 be amended to add a paragraph immediately following paragraph 141 that provides specific guidance for reporting by special-purpose governments engaged in both business-type and fiduciary activities.

Minutes of Meetings, April 8-10, 2014

The Board began deliberations by discussing the concept of control in a fiduciary capacity. The Board tentatively agreed to propose that whether a government is controlling fiduciary assets be determined by the legal structure that defines the relationship of the governing body to the fiduciary activity and when a governmental entity has a responsibility for administering the exchange of the assets.

The Board continued deliberations by discussing when a governmental entity has responsibility for administering the exchange of assets. The Board tentatively agreed to propose that a governmental entity has the responsibility for administering the exchange of assets, including when the governmental entity has the ability to reassign that responsibility. When a governmental entity can make decisions about the types of assets held or assign the responsibility for those decisions and reassign the responsibility for those decisions, the governmental entity has the ultimate responsibility for administering the exchange of assets.

The Board continued deliberations by discussing the potential relationships between the legal structure that defines the relationship of the governing body to the fiduciary activity and when a governmental entity has a responsibility for administering the exchange of the assets, and the effect these relationships have on determining whether a government is controlling fiduciary assets. The Board tentatively agreed to propose the following regarding these relationships:
  1. A governmental entity that is directly holding the assets, regardless of its responsibility for administering the exchange of those assets, would have control over those assets.
  2. A governmental entity that is directly responsible for administering the exchange of assets, regardless of the legal structures that might separate the governmental entity and the entity that is holding the assets, would have control over those assets. A governmental entity that has assigned its responsibility for administering the exchange of assets but maintains the ability to reassign that responsibility, regardless of the legal structures that might separate the governmental entity and the entity that is holding the assets, would have control over those assets.
  3. A governmental entity that is acting as a trustee for fiduciary assets and has no responsibility for administering the exchange of assets, but maintains the ability to establish parameters for those that have the responsibility, would not have control over the assets.
  4. A governmental entity that is neither directly holding nor acting as a trustee for fiduciary assets and has no responsibility for administering the exchange of assets, but maintains the ability to establish parameters for those that have the responsibility, would not have control over the assets.
  5. A governmental entity that is neither directly holding nor acting as a trustee for fiduciary assets and has no responsibility for administering the exchange of assets would not have control over the assets.
The Board then discussed whether and, if so, how to define a “government’s own programs” as referenced in the Board’s proposed tentative definition of a fiduciary. The Board tentatively agreed to amend the proposed tentative definition of a fiduciary to remove the reference to a “government’s own programs.”

The Board continued deliberations by discussing whether the concept of variance power (the ability to redirect fiduciary assets to another beneficiary or to further the government’s own purposes) should be specifically referenced in the proposed tentative definition of a fiduciary. The Board tentatively decided that the concept of variance power not be specifically referenced in the proposed tentative definition of a fiduciary.

The Board continued deliberations by reconsidering whether the concepts of administrative and direct financial involvement, provided in Statement No. 24, Accounting and Financial Reporting for Certain Grants and Other Financial Assistance, should be utilized as criteria to determine whether a government is a fiduciary. The Board tentatively agreed to propose that administrative and direct financial involvement be utilized as criteria to determine whether a government is a fiduciary in the absence of a trust or equivalent arrangement. The Board also tentatively agreed to propose that the due process document issued on the Fiduciary Responsibilities Project solicit feedback on whether the activity of a government that is controlling assets to be used to provide benefits to individuals, organizations, or other governments and meets one of the five criteria for administrative or direct financial involvement (monitors, determines eligibility, exercise discretion, matches contributions, or is liable), should be reported in the primary government’s revenues and expenses, rather than in a fiduciary fund.

The Board concluded deliberations by discussing an amended proposed tentative definition of a fiduciary. The Board tentatively agreed to propose that a fiduciary be defined as “A government that controls assets either (1) as a trustee for the sole benefit of its own employees or recipients other than the financial reporting entity or (2) for which it does not have administrative or direct financial involvement over the assets or those assets are used to provide benefits to individuals that are not part of its citizenry, or organizations or other governments that are not part of the financial reporting entity.”

Minutes of Meetings, March 3-5, 2014

The Board continued its deliberations of fiduciary responsibilities issues by discussing the reporting of pension and OPEB plans not administered through a trust agreement or equivalent arrangement. The Board tentatively decided to propose that resources of pension and OPEB plans not administered through a trust agreement or equivalent arrangement set aside for the benefit of another government’s employees be reported in a custodial fund. The Board tentatively decided to propose that administrative and direct financial involvement, as described in Statement No. 24, Accounting and Financial Reporting for Certain Grants and Other Financial Assistance, be used to distinguish between pass-through grants that are a government program and pass-through grants that are a fiduciary activity. The Board also tentatively decided that the term administering, as tentatively decided to be implied within the concept of control in the definition of a fiduciary, differs from administrative involvement in Statement 24 for pass-through grants.

The Board tentatively decided to propose that a liability is incurred from the perspective of a fiduciary fund when a beneficiary has an immediate claim on the resources. The Board discussed that as a result, certain custodial funds could potentially report a net position balance.

Minutes of Meetings, January 27-29, 2014

The Board began deliberations by discussing how to define and report agency funds in general purpose external financial reports. The board discussed how to classify fiduciary activities. The Board tentatively decided to propose that the classification of fiduciary activities be determined by the presence or the lack of presence of a trust agreement or equivalent arrangement.

The Board continued deliberations by discussing fiduciary arrangements not governed by a trust agreement or equivalent arrangement. The Board tentatively decided to propose that a fund type be established that would include any fiduciary arrangement that is not governed by a formal trust agreement or equivalent arrangement that would include certain funds previously classified as pension (and other employee benefit) trust funds, investment trust funds, private-purpose trust funds, and agency funds for which there is no trust agreement or equivalent arrangement. The Board also tentatively decided to propose that the expanded fund type be titled “custodial funds.”

The Board then discussed amendments required to Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, to reflect the tentative decisions referenced above. The Board tentatively decided to propose that paragraph 69 of Statement 34 be amended, subject to clarifications and revisions agreed to at the meeting, to reflect the new custodial funds and how to distinguish these funds from other fiduciary funds. The Board also tentatively decided to propose that paragraph 73 of Statement 34 be amended, subject to clarifications and revisions agreed to at the meeting, and to further develop a definition of custodial funds at a future meeting. Furthermore, the Board tentatively decided to propose that paragraph 72 of Statement 34 be amended, subject to clarifications and revisions agreed to at the meeting, to modify the definition of private-purpose trust funds.

The Board then discussed whether custodial fund assets meet the definition of a fiduciary and should be reported in general purpose external financial reports. The Board tentatively decided to propose that a government with custodial fund activities meets the proposed tentative definition of a fiduciary. The Board also tentatively decided to propose that custodial funds of governments meeting the proposed definition of a fiduciary be reported in general purpose external financial reports.

The Board then discussed whether fiduciary fund assets should be recognized with a corresponding restriction of net position or a liability. The Board tentatively decided to propose that a commitment be recognized and reported as a liability only when the event giving rise to the liability has occurred; otherwise, the commitment should be recognized and reported as net position restricted for beneficiaries for all fiduciary funds (pension [and other employee benefit] trusts, investment trusts, private-purpose trusts, and custodial funds).

However, the Board requested that the staff provide further research and clarification on how to define the “events” that give rise to the liability. The Board also requested that the staff provide further clarification on how the proposed tentative decisions made by the Board thus far could potentially impact Statement No. 24, Accounting and Financial Reporting for Certain Grants and Other Financial Assistance.

Minutes of Meetings, December 10-12, 2013

The Board discussed the types of trust funds reported and how to define those funds. The Board tentatively decided to propose that pension (and other employee benefit) trust funds, investment trust funds, and private-purpose trust funds of governments meeting the proposed tentative definition of a fiduciary continue to be reported in general purpose external financial reports. The Board also tentatively decided to propose that pension trust fund information not be disaggregated from other employee benefit trust fund information in the fiduciary fund financial statements. The Board also tentatively decided to propose that paragraphs 69-72 of Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, which discuss and define the trust fund types, be amended, subject to clarifications and revisions agreed to at the meeting.

Minutes of Meetings, October 29-31, 2013

The Board discussed whether a government would be considered to be controlling assets in a fiduciary capacity if they had assigned or delegated the responsibility for holding the assets to another entity, such as a trust or a third-party administrator. In these instances, the government would be indirectly controlling the assets. The Board tentatively decided to propose that a government is controlling fiduciary assets when it has assigned or delegated the responsibility for holding the assets to another entity, if it has legally or contractually been authorized to do so.

The Board then discussed a proposed definition of a fiduciary based on the Board’s major tentative decisions proposed, the Board member recommendations made to improve the definition at the September 2013 meeting, and the project staff’s analysis of these recommendations. The Board tentatively decided to propose that a fiduciary be defined as “A government that controls assets other than those that can be used to support the government’s own programs.”

Finally, the Board discussed whether the definition of an asset included in Concepts Statement No. 4, Elements of Financial Statements, encompasses fiduciary activities for financial reporting purposes and how to report fiduciary activities in general purpose external financial reports. The Board tentatively concluded that the definition of an asset in Concepts Statement 4 encompasses fiduciary activities for financial reporting purposes. The Board also tentatively decided to propose that fiduciary activities continue to be reported as basic financial statements in general purpose external financial reports.

Minutes of Meetings, September 17-19, 2013

The Board reviewed and discussed the additional relevant literature related to defining fiduciary responsibility and related terms to supplement the research already completed and outlined in the project staff paper provided to the Board for the August 2013 teleconference.

The Board began deliberations on defining a fiduciary and fiduciary responsibility. The Board’s consideration of a definition for a fiduciary included the concept of (a) control and indirect control, (b) holding, and (c) administering (receiving, managing, disbursing, budgeting, investing, and reporting), as well as other duties of a fiduciary.

The Board tentatively decided that the concept of “control” should be included in the definition of a fiduciary. The Board also tentatively decided that a government should be considered to be “controlling assets in a fiduciary capacity” if (1) the present service capacity of the asset is used to provide benefits to the beneficiaries; (2) the present service capacity of one asset can be exchanged for another asset, such as cash; or (3) the assets can be employed in any other way that provides benefits to the beneficiaries.

The Board tentatively decided that the definition of a fiduciary should not include the concept of whether the government is “holding” the assets. The Board also tentatively decided that the concept of “administering” should not be included in the definition of a fiduciary. However, the Board tentatively decided that there should be a discussion outside of the definition of a fiduciary that explains how the concepts of “holding” and “administering” are implied within the concept of “control.”

The Board then discussed other duties of a fiduciary that were identified in the relevant literature. The Board tentatively decided that these other duties should not be included in the definition of a fiduciary. However, the Board also tentatively decided that there should be a discussion outside of the definition of a fiduciary that explains how these other duties are implied as part of their fiduciary responsibility.

The Board tentatively decided that a government has a fiduciary responsibility for financial reporting if it meets the definition of a fiduciary. The Board also discussed the proposed definition of fiduciary and provided suggestions for its improvement to the project staff. The project staff will provide the Board with an amended definition, incorporating these suggestions, for discussion at the next Board meeting.

The Board did not agree to or reach any conclusions on the potential implications that these tentative board decisions may have on defined benefit pension, defined contribution, deferred compensation, and college savings plans.

FIDUCIARY RESPONSIBILITIES—TENTATIVE Board DECISIONS TO DATE


The Board tentatively decided to propose that:
  • The concept of “control” be included in the description of a fiduciary.
  • Whether a government is controlling fiduciary assets be determined by the legal structure that defines the relationship of the governing body to the fiduciary activity and when a government has a responsibility for administering the exchange of the assets as follows:
    • A government has the responsibility for administering the exchange of assets when the government has the ability to reassign that responsibility. When a government can make decisions about the types of assets held, assign the responsibility for those decisions, and reassign the responsibility for those decisions, the government has the ultimate responsibility for administering the exchange of assets.
    • A government that is directly holding the assets, regardless of its responsibility for administering the exchange of those assets, would have control over those assets.
    • A government that is directly responsible for administering the exchange of assets, regardless of the legal structures that might separate the government and the entity that is holding the assets, would have control over those assets.
    • A government that has assigned its responsibility for administering the exchange of assets but maintains the ability to reassign that responsibility, regardless of the legal structures that might separate the government and the entity that is holding the assets, would have control over those assets.
      • The government has assigned or can assign the responsibility for administering the exchange of assets to another party such as an asset manager.
      • The government is considered to still have control over the assets if it has the ability to reassign that responsibility to someone else.
    • A government that is acting as a trustee for fiduciary assets and has no responsibility for administering the exchange of assets, but maintains the ability to establish parameters for those that have the responsibility, would not have control over the assets.
    • A government that is neither directly holding nor acting as a trustee for fiduciary assets and has no responsibility for administering the exchange of assets, but maintains the ability to establish parameters for those that have the responsibility for administering the exchange of assets, would not have control over the assets.
      • The government does not have responsibility for administering the exchange of assets but can establish parameters for those who are responsible for administering the exchange of assets (for example, establishing a menu of investment options).
      • The government allows an individual or entity other than itself to make decisions about the types of assets held, which is why the government is considered to not have control over the assets.
    • A government that is neither directly holding nor acting as a trustee for fiduciary assets and has no responsibility for administering the exchange of assets would not have control over the assets.
  • A government be considered to be “controlling assets in a fiduciary capacity” if those assets are used to provide benefits to specified or intended beneficiaries and have (a) present service capacity that can be used, (b) present service capacity that can be exchanged for another asset, such as cash, or (c) the ability to be employed in any other way that provides benefits.
  • A discussion outside of the description of a fiduciary explain:
      • How other duties of a fiduciary are implied as part of its fiduciary responsibility.
    • A government has a fiduciary responsibility for financial reporting if it meets the description of a fiduciary.
    • How other duties of a fiduciary are implied as part of their fiduciary responsibility.
    • A government is a fiduciary when it controls assets either:
    • (1) in accordance with a trust agreement or equivalent arrangement in which beneficiaries are: (a) employees of the financial reporting entity, or (b) individuals that are not party of the citizenry, or organizations or other governments that are not part of the financial reporting entity, or
    • (2) outside of a trust agreement or equivalent arrangement and (a) the beneficiaries are individuals that are not part of the citizenry, or other organizations or other governments that are not part of the financial reporting entity, or (b) for which it does not have administrative or direct financial involvement.
      • Administrative and direct financial involvement, provided in Statement No. 24, Accounting and Financial Reporting for Certain Grants and Other Financial Assistance, should be utilized as criteria to determine whether a government is a fiduciary in the absence of a trust or equivalent arrangement
        • The activity of a government that is controlling assets to be used to provide benefits to individuals, organizations, or other governments and meets one of the five criteria for administrative or direct financial involvement (monitors, determines eligibility, exercise discretion, matches contributions, or is liable), should be reported in the primary government’s revenues and expenses, rather than in a fiduciary fund
          • A stand-alone BTA also engaging in fiduciary activities meets the description of a fiduciary.
  • Resources of pension and OPEB plans not administered through a trust agreement or equivalent arrangement set aside for the government’s own employees be considered for the government’s own programs. In these instances, a government should include the activity in the funds of the primary government and government-wide financial statements.
  • Fiduciary activities continue to be reported as basic financial statements in general purpose external financial reports.
  • Pension (and other employee benefit) trust funds, investment trust funds, and private-purpose trust funds of governments meeting the proposed tentative description of a fiduciary continue to be reported in general purpose external financial reports.
  • Fiduciary component units of a fiduciary component unit be included in a primary government’s reporting entity by use of a ‘layering approach.’
    • The fiduciary component units of a fiduciary component unit should be combined with the related activity of the component unit that includes them as a component unit, and the combined fiduciary fund type totals should then be rolled up to the primary government reporting entity and included in the appropriate fiduciary fund type column of the primary government’s fiduciary fund financial statements.
  • Paragraphs 69–72 of Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, be amended as follows:
      69.Fiduciary fund reporting focuses on net position and changes in net position. Fiduciary funds should be used to report resources for which the government has a fiduciary responsibility. The fiduciary fund category includes pension (and other employee benefit) trust funds, investment trust funds, private-purpose trust funds, and custodial funds. Trust funds are distinguished from custodial funds by the existence of a trust agreement or equivalent arrangement.
      70.Pension (and other employee benefit) trust funds should be used to report resources required to be held in trust for plan members of defined benefit or defined contribution pension plans, defined benefit or defined contribution other postemployment benefit plans, or other employee benefit plans.
      71.Investment trust funds should be used to report the external portion of investment pools and individual investment accounts.
      72.Private-purpose trust funds should be used to report all other trust agreements or equivalent arrangements.
  • Paragraphs 138-141 of Statement 34 be amended as follows:
  • Reporting by Special-Purpose Governments Engaged in Activities Other Than Governmental Activities
  • Reporting by Special-Purpose Governments Engaged Only in Business-Type Activities
  • 138. Governments engaged only in business-type activities should present only the financial statements required for enterprise funds. (See paragraphs 91–105.) For these governments, basic financial statements and RSI consist of:
    1. MD&A (paragraphs 8–11, as appropriate)
    2. Enterprise fund financial statements (paragraphs 91–105), consisting of:
      1. Statement of net position
      2. Statement of revenues, expenses, and changes in fund net position
      3. Statement of cash flows
    3. Notes to financial statements (paragraphs 113–123)
    4. RSI other than MD&A, if applicable (paragraphs 132–133).
  • Reporting by Special-Purpose Governments Engaged Only in Fiduciary Activities
  • 139. A special-purpose government engaged only in fiduciary activities should present only the financial statements required for fiduciary funds. For those governments, basic financial statements and RSI consist of:
    1. MD&A (paragraphs 8–11, as appropriate)
    2. Statement of fiduciary net position (paragraph 108)
    3. Statement of changes in fiduciary net position (paragraph 109)
    4. Notes to financial statements (paragraphs 113 through 123).
  • 140. A public employee retirement system (PERS) is a special-purpose government that administers one or more defined benefit pension plans and sometimes other types of employee benefit plans, including defined contribution, deferred compensation, and defined benefit other postemployment benefit (OPEB) plans.63 A PERS that administers more than one defined benefit pension or OPEB plan is required to present in its financial report combining financial statements for all plans administered by the system and, if applicable, required schedules for each plan.64 A PERS should meet this financial statement requirement by (a) presenting a separate column for each plan administered on the statement of fiduciary net position and the statement of changes in fiduciary net position or (b) presenting combining statements for those plans as part of the basic financial statements.
  • 141. For all plans other than defined benefit pension or OPEB plans, a PERS should apply the requirements of this Statement for measurement focus, basis of accounting, and display. Combining financial statements are encouraged, but not required, for those plans.
  • Reporting by Special-Purpose Governments Engaged in Business-Type and Fiduciary Activities
  • 141a. A special-purpose government engaged in both business-type and fiduciary activities should comply with the requirements in paragraphs 138 and 139.
  • The classification of fiduciary activities be determined by the presence or the lack of presence of a trust agreement or equivalent arrangement.
  • A fund type be established that includes any fiduciary arrangement that is not governed by a formal trust agreement or equivalent arrangement that would include certain funds previously classified as pension (and other employee benefit) trust funds if they are held for the benefit of employees of another government, investment trust funds, private-purpose trust funds, and agency funds for which there is no trust agreement or equivalent arrangement.
  • The expanded fund type be titled “custodial funds.”
  • Paragraph 73 of Statement 34 be amended to define custodial funds as follows:
      73. Custodial funds should be used to report fiduciary activities for which there is no trust agreement or equivalent arrangement.
  • Custodial funds of governments meeting the proposed tentative description of a fiduciary be reported in general purpose external financial reports.
  • A commitment be recognized and reported as a liability only when an event has occurred that compels the government to disburse fiduciary resources; otherwise, the commitment should be recognized and reported as net position restricted for beneficiaries for all fiduciary funds (pension (and other employee benefit) trusts, investments trusts, private-purpose trusts, and custodial funds).
    • Administrative and direct financial involvement as described in Statement 24 be used to distinguish between pass-through grants that are a government program and pass-through grants that are a fiduciary activity.
    • Additions be disaggregated by source and, if applicable, by net investment income, including separate display of investment income and investment expense; and deductions to be disaggregated by type and, if applicable by administrative expenses
  • A Preliminary Views document be issued for the Fiduciary Responsibilities Project.