Fiduciary Activities Robert M Apple CPA MSA Fiduciary

Fiduciary Activities Robert M. Apple, CPA, MSA

Fiduciary Activities Understanding GASB statement number 84

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Fiduciary Activities �Who/what are Governmental Accounting Standards Board (GASB) and Generally Accepted Accounting Principles (GAAP)? �Criteria for identifying and reporting �Descriptions �Component unit reporting �Recognizing liabilities �Effective December, 2018

What is GAAP? �Proper accounting �Decades of accounting practice �No authoritative book

What is GAAP? �Does not account for every situation �Make the best choice �Rule makers leave room for options

What is GAAP? �The grey area of materiality �Qualitative aspects �Quantitative aspects

Who Sets Up GAAP? �GASB sets the GAAP rules �GASB provides: • Accounting principles • Interpretations • Guidance for implementation

GASB Statement No. 76 � Category A • GASB Statements � Category B • GASB Technical Bulletins • GASB Implementation Guides • American Institute of Certified Public Accountants (AICPA) literature cleared by GASB

GASB Statement No. 76 �If not Specified in Category A or B • AICPA literature not cleared by the GASB • Practices widely practiced by state and local government agencies • Literature from professional organizations, regulatory agencies, and authoritative accounting texts

Part 1 Scope and Applicability of This Statement GASB Statement No. 84

Scope and Applicability of This Statement �Establishes standards of accounting and financial reporting for fiduciary activities �Transactions and other events reported for fiduciary funds requirements unchanged

Part 2 Identifying Fiduciary Activities GASB Statement No. 84

Identifying Fiduciary Activities �Primary governments or its component units may be engaged in fiduciary activities �Criteria must be met to qualify as a fiduciary activity as we will see

Fiduciary Component Units GASB Statement No. 84

Fiduciary Component Units �Meets criteria if one of the following arrangements: • Pension plan administered through a trust meeting criteria established in GASB 67 • Other postemployment benefit (OPEB) administered through a trust following GASB 73 criteria

Fiduciary Component Units • Assets not a part of the reporting entity accumulated for OPEB following criteria in GASB 74 �Administered through a trust whereas the government is not a beneficiary �Provides benefits to recipients �Legally protected from the creditors of the government

Fiduciary Component Units �Assets are a benefit of individuals �Government does not have admin or direct financial involvement with the assets �Benefits the organization or government not part of the financial reporting entity

Fiduciary Component Units �Control of assets of the component unit by the primary government is not a factor �Not derived from the government’s provision of goods or services to • those individuals, • organizations • or other governments

Pension and OPEB Arrangements That are not Component Units GASB Statement No. 84

Pension and OPEB Arrangements That are not Component Units �Non component unit pension and OPEB’s are fiduciary activities if controlled by the government • Pension plans administered through a trust (GASB 67) • OPEB plan administered through a trust (GASB 74)

Pension and OPEB Arrangements That are not Component Units • Assets not part of the reporting entity accumulated for a pension (GASB 73) • Assets from entities not a part of the reporting entity accumulated for OPEB (GASB 74)

Other Fiduciary Activities GASB Statement No. 84

Other Fiduciary Activities �Activities not addressed previously must meet the following criteria: • Assets associated with the activity controlled by the government

Other Fiduciary Activities • Assets associated with the activity are not derived either: �Solely from the government’s own-source revenues or �Government-mandated or voluntary nonexchange transactions except pass-through grants not administrated or financially involved in

Other Fiduciary Activities • Assets have one or more of the following characteristics: �Assets administered through a trust and the government is not a beneficiary �Dedicated to providing benefits to recipients �Legally protected from the creditors of the government

Other Fiduciary Activities • Assets are for the benefit of individuals or organizations • Government does not have admin or direct financial involvement with the assets • Assets not derived from the government’s provision of goods or services to those individuals or organizations

Control of Assets GASB Statement No. 84

Control of Assets �A government controls the assets of an activity if: • Holds the assets • Ability to direct the use, exchange, or employment of assets

Own-Source Revenues GASB Statement No. 84

Own-Source Revenues �Revenues generated by a government itself �Exchange and exchange-like revenues (water and sewer charges) �Investment earnings

Own-Source Revenues �Imposed nonexchange revenues like property taxes �Derived tax revenues like sales and income taxes

Part 3 Reporting Fiduciary Activities in Fiduciary Funds GASB Statement No. 84

Reporting Fiduciary Activities in Fiduciary Funds �Report the fiduciary activities in the fiduciary financial statements of the basic financial statements �Must meet the previously discussed requirements

Reporting Fiduciary Activities in Fiduciary Funds �Pensions and OPEB meeting criteria �Investment trust funds reporting external portion of investment pools and individual investment accounts �Private-purpose funds that are not pensions and OPEB

Reporting Fiduciary Activities in Fiduciary Funds �Custodial funds not held in trusts �Business-type activity assets and liabilities held for three months or less • Separately report additions and deductions in the operating activities category of its statement of cash flows

Part 4 Statement of Fiduciary Net Position GASB Statement No. 84

Statement of Fiduciary Net Position �Reports: • • Assets Deferred outflows of resources Liabilities Deferred inflows of resources Fiduciary net position of pension trust funds Investment trust funds Private-purpose trust funds Custodial funds

Statement of Fiduciary Net Position �Liabilities such as taxes collected for other governments are recognized in the fiduciary fund �Report pension and OPEB trust fund information derived from previous slide’s Report’s list

Part 5 Statement of Changes in Fiduciary Net Position GASB Statement No. 84

Statement of Changes in Fiduciary Net Position �Reports • • additions and deductions from: Pension trust funds Investment trust funds Private-purpose trust funds Custodial funds

Statement of Changes in Fiduciary Net Position �Separately display: • Investment earnings • Investment costs • Net investment earnings �Can report custodial funds held for three months or less as a single aggregate

Part 6 Reporting Fiduciary Component Units GASB Statement No. 84

Reporting Fiduciary Component Units �Includes the combined information of its own component units that are fiduciary component units �Aggregated with the primary government’s fiduciary funds

Closure �Enhances consistency and comparability by: • Establishing criteria for identifying fiduciary activities • Clarifying whether and how business-type activities should report their fiduciary activities

Questions? GASB Statement No. 84