GASB Update – Elizabeth Thyer, Partner, CPA

The Governmental Accounting Standards Board (GASB) has issued Statement No. 84 Fiduciary Activities, effective for the fiscal year ended June 30, 2020. The goal of this Statement is to enhance the consistency and comparability of fiduciary activity reporting. This statement establishes criteria for identifying fiduciary activities and determines how fiduciary activities should be reported. 

The Statement identifies four types of fiduciary funds including: pension plans, investment trust funds, private purpose trust funds and custodial funds. The required reporting for these funds includes a Statement of Fiduciary Net Position and a Statement of Changes in Fiduciary Net Position. 

Most local governments will be determining if the funds formerly classified as agency funds will now be classified and reported as custodial funds. There are three criteria that must be met for classification as a custodial fund. The first is determining whether a government is controlling the assets of the fiduciary activity. This is further defined as whether or not the government holds the majority of the assets or if the government has the ability to direct the use for the benefit of specified or intended recipients.  The second test is determining where the assets were derived from. The assets cannot be derived from the government’s own-source revenue or government mandated or voluntary non-exchange transactions.  The third criteria determines the beneficiaries with whom a fiduciary relationship exists. One of the following must be determined to be the beneficiary: (1) the assets are held in a trust; (2) the assets are held for individuals –with no administrative or direct financial involvement and not from the government’s provision of services; or (3) the assets are held for organizations – not part of the reporting entity and not from the government’s provision of services.  Activities meeting these three requirements will be reported as a custodial fund on the entity’s financial statements.