GASB No 84 Fiduciary Activities Nature Coast Chapter

GASB No. 84 Fiduciary Activities Nature Coast Chapter FGFOA April 17, 2019 Mark A. White, CPA, Audit Partner Purvis Gray & Company, CPA’s Tallahassee, Gainesville, Ocala, Orlando, Sarasota 1

Credits - From Other Presentations • • David Bean, GASB Carol Patridge, Yeo & Yeo Stephen Blann, Rehmann Chester Moyer, Rubin Brown 2

Issues For Fiduciary Activities Now • Paragraph 138 of Statement 34 provides, “Governments engaged only in business-type activities should present only the financial statements required for enterprise funds” ― Concerns about how governments engaged only in business-type activities should report their fiduciary activities. • Paragraph 143 2 c(3) of NCGA Statement 1 requires governments to include a combining statement of changes in assets and liabilities for all agency funds in a CAFR. Paragraph 110 of Statement 34, as amended, requires only the reporting of a statement of net position for agency funds in the basic financial statements ― Perceived need by users for a flows statement for agency funds 3

GASB No. 84 Fiduciary Activities Summary – Issued January 2017 – Effective for years beginning after 12/15/18, earlier application encouraged – Establishes criteria for identifying fiduciary activities – Some changes to financial statements (no more Agency Fund formats) 4

GASB No. 84 Fiduciary Activities Summary • Changes to conform to the provisions should be applied retroactively by restating financial statements, if practicable, for all prior periods presented • If not practicable, the cumulative effect, if any, of applying the provisions should be reported as a restatement of beginning net position (or fund balance or fund net position, as applicable) for the earliest period restated. • In first period that this Statement is applied, the notes to the financial statements should disclose the nature of the restatement and its effect. • The reason for not restating prior periods presented should be disclosed 5

GASB Statement 84 Fiduciary Activities When to report an asset in a Fiduciary Fund ? 4 Paths to This Determination • Component units that provide postemployment benefits • Component units that do not provide postemployment benefits • Postemployment benefit arrangements that are not component units • All other activities 6

GASB No. 84 Fiduciary Activities Fiduciary component units (GASB 14/39) – Legally separate entity – Primary government is financially accountable: • Appoints a voting majority and can impose its will; or • Appoints a voting majority and financial benefit/burden; or • Fiscally dependent and financial benefit/burden 7

GASB No. 84 Fiduciary Activities • Pension/OPEB plans administered through qualifying trusts (paragraph 3 of No. ’s 67 & 74): – Contributions are irrevocable – Plan assets are dedicated to providing benefits – Plan assets are legally protected from creditors • Generally, pension and OPEB plans administered through a trust are considered legally separate entities. • The primary government is considered to have a financial burden if it makes contributions to the pension or OPEB plan 8

GASB No. 84 Fiduciary Activities • Other component units are fiduciary activities if they have one of the following characteristics: 1. Assets are administered through a trust – Government itself is not the beneficiary – Assets are dedicated to providing benefits – Assets are legally protected from creditors 9

GASB No. 84 Fiduciary Activities • Other component units are fiduciary activities if they have one of the following characteristics: 2. Assets are for the benefit of individuals – Government does not have administrative or direct financial involvement with the assets – Assets are not derived from the government’s provision of goods or services to those individuals 10

GASB No. 84 Fiduciary Activities • Other component units are fiduciary activities if they have one of the following characteristics: 3. Assets are for the benefit of organizations or other governments – Beneficiary is not part of the reporting entity – Assets are not derived from the government’s provision of goods or services to those organizations or other governments 11

GASB No. 84 Fiduciary Activities If not a component unit, a pension/OPEB plan is a fiduciary activity if: – Administered through a trust (or accumulated for pension/OPEB benefits of other governments); and – The government CONTROLS the assets • Holds the assets; or • Has the ability to direct the use, exchange, or employment of the assets 12

GASB No. 84 Fiduciary Activities Three criteria for other fiduciary activities 1. The assets are CONTROLED by (held by, or able to have their use directed by) the government 2. The assets are not derived from the government’s own-source revenue or government-mandated/voluntary non-exchange transactions 13

GASB No. 84 Fiduciary Activities Three criteria for other fiduciary activities 3. The assets are either; • Held in a qualifying trust • Held for the benefit of individuals without the government having Administrative or Direct Financial Involvement • Held for the benefit of outside organization not part of the reporting entity 14

GASB No. 84 Fiduciary Activities Definitions; – CONTROL – a government controls the assets of an activity if it holds the assets or has the ability to direct their use (even if that ability is outsourced to a third-party) – ADMINISTRATIVE INVOLVEMENT is defined by example, and includes monitoring compliance, determining eligibility, and has the ability to exercise discretion in how funds are allocated 15

GABS No. 84 Fiduciary Activities Definitions – DIRECT FINANCIAL INVOLVEMENT is defined by example, and includes providing matching dollars or being liable for disallowed costs – OWN SOURCED REVENUES– revenues that are generated by a government itself such as taxes, charges for services, and investment earnings 16

GASB No. 84 Fiduciary Activities If Not Fiduciary Activities, Then What? – Many activities previously reported in fiduciary funds may end up in governmental/proprietary funds – They may still be liabilities… but they may not be FIDUCIARY ACTIVITIES, and therefore both the assets and liabilities should appear on the government- wide financial statements 17

GASB No. 84 Fiduciary Activities Four Types Of Fiduciary Funds Identified; 1. 2. 3. 4. Pension (and other employee benefit) trust funds Investment trust funds Private-purpose trust funds Custodial funds (replace agency) 18

Types of Fiduciary Funds 1. 2. Pension (and other employee benefit) trust funds are used to report fiduciary activities for the following: • Pension plans and OPEB plans that are administered through trusts that meet the criteria in paragraph 3 of Statement 67 or paragraph 3 of Statement 74, respectively • Other employee benefit plans for which (1) assets are held in a trust in which the government itself is not a beneficiary, the assets are dedicated to providing benefits to recipients in accordance with the benefit terms, and are legally protected from the creditors of the government and (2) contributions to the trust and earnings on those contributions are irrevocable. Investment trust funds are used to report fiduciary activities from the external portion of investment pools and individual investment accounts that are held in a trust that meets the specific criteria (dedicated and protected). 19

Types of Fiduciary Funds 3. Private-purpose trust funds are used to report all fiduciary activities that: • Are not required to be reported in pension (and other employee benefit) trust funds or investment trust funds and • Are held in a trust that meets the specific criteria (dedicated and protected). 4. Custodial funds are used to report fiduciary activities that are not required to be reported in pension (and other employee benefit) trust funds, investment trust funds, or private-purpose trust funds. 20

GASB No. 84 Fiduciary Activities Financial Statements – Statement of Fiduciary Net Position – Statement of Changes in Fiduciary Net Position – No more Agency Fund format 21

GASB No. 84 Fiduciary Activities Statement of Fiduciary Net Position – Reports the assets, deferred outflows, liabilities, deferred inflows, and fiduciary net position of fiduciary funds – Investments and receivables broken down by type 22

GASB No. 84 Fiduciary Activities Statement of Fiduciary Net Position – Pension (and other employee benefit) trust funds follow GASB 67/74 – All others, recognize liability to beneficiaries when an event has occurred that compels the government to disburse fiduciary resources 23

GASB No. 84 Fiduciary Activities Statement of Changes in Fiduciary Net Position – Reports additions to and deductions from fiduciary funds – Disaggregate and present by source: • Investment earnings • Investment costs • Net investment earnings – Custodial funds may report a single aggregated amount for additions and a single aggregated amount for deductions if typically held for three months or less 24

25

26

School District Internal Accounts • A school district maintains funds raised by and belonging to various student groups & clubs, formerly reported as Agency Fund – Do Faculty advisors/Sponsors constitute administrative involvement? 27

School District – Internal Accounts 1. 2. 3. 4. 5. 6. 7. 8. Assets held by legally separate component unit? – No Does the government control the assets? – Yes Are the assets held for pension/OPEB? – No Assets derived from own source revenue? – No Assets derived from non-exchange transactions? – No Assets held in trust and gov. not beneficiary? – No Administrative or direct financial involvement? – Yes Assets for others outside reporting entity? – No Not a Fiduciary Activity? Most Likely a SRF? Needs to be Budgeted? 28