Fiduciary Activities

Why Did the GASB Issue Proposed Guidance on Fiduciary Activities?

Governments currently are required to report fiduciary activities in fiduciary fund financial statements. Existing standards are not explicit, however, about what constitutes a fiduciary activity for financial reporting purposes. Consequently, there is diversity in practice with regard to identifying and reporting fiduciary activities.
The objective of the proposed Statement is to improve guidance regarding what constitutes fiduciary activities for accounting and financial reporting purposes and how they should be reported.

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What is a fiduciary activity?

Just what exactly constitutes a fiduciary activity seems fairly straightforward—it involves when a government is taking care of money that belongs to individuals or other outside of the government itself. But that definition could be applied to some grants and tax revenues that governments receive and use to finance providing services.

The Exposure Draft lays out a series of questions that a government would ask when evaluating whether they are engaged in a fiduciary activity.

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What is the GASB proposing?

This proposed Statement would establish criteria for identifying and reporting fiduciary activities of all state and local governments. The focus of the criteria generally is whether a government is controlling the assets of the fiduciary activity and the beneficiaries with whom a fiduciary relationship exists.

An activity meeting the proposed criteria would be required to be reported in a fiduciary fund in the basic financial statements. Governments with activities meeting the criteria would be required to present a statement of fiduciary net position and a statement of changes in fiduciary net position. An exception to that requirement is provided for a business-type activity that expects to hold assets in a custodial fund for three months or less.

This proposed Statement describes four fiduciary fund types that would be required to be reported, if applicable:
  1. Pension (and other employee benefit) trust funds
  2. Investment trust funds
  3. Private-purpose trust funds, and
  4. Custodial funds.
A fiduciary component unit, when reported in the fiduciary fund financial statements of a primary government, would combine its information with its component units that are fiduciary in nature, in the appropriate fiduciary fund types.

This proposed Statement also would require that a government recognize a liability to the beneficiaries in a fiduciary fund when an event has occurred that compels the government to disburse fiduciary resources.
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What did the GASB hear during the Comment Period?

During the comment period on the Exposure Draft, which ended in March 2016, the GASB received 37 comment letters from stakeholders. The Board gained additional feedback during a subsequent public hearing on the proposal. The GASB is using the feedback it received during redeliberations to develop enhanced financial reporting standards around fiduciary activities.
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What is Next?

The Board is scheduled to approve a final Statement in late 2016.

More information on the project can be found here.
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