Proposed Changes to a Government’s
Reporting of Its Fiduciary Activities
On December 22, 2015, the Governmental Accounting Standards Board (GASB) issued an exposure draft, Fiduciary
Activities, proposing to provide users of both general-purpose and special-purpose financial statements more
consistent and comparable information for assessing a government’s accountability in its role as a fiduciary.
The proposed statement would delineate specific criteria for identifying activities state and local governments
should report as fiduciary activities. The focus of the criteria is whether a government controls the assets of the
fiduciary activity and the beneficiaries with whom a fiduciary relationship exists. The proposal clarifies how a
government should report those activities and beneficiary liabilities. It provides an exception to the requirements
for a business-type activity that expects to hold assets in a custodial fund for three months or less.
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.
The requirements of this proposed statement would be effective for reporting periods beginning after December
15, 2017, and earlier application would be encouraged. GASB is seeking feedback on the proposal with a comment
deadline of March 31, 2016.
Key elements of the proposed guidance address when a government should report an activity as a fiduciary
activity and how it should be reported.
Scope & Applicability
Control of the Related Assets
To determine whether an activity is a fiduciary activity of the government under the proposal, the government
should first determine whether it controls the related assets. For purposes of the exposure draft, a government
controls the assets of a fiduciary activity when it meets one or more of the following conditions:

The (primary) government holds the assets

The government has the ability to administer or direct the use, exchange or employment of the present
service capacity of the assets; restrictions from legal or other external restraints do not negate a
government’s control of the present service capacity of the assets
The board believes when a government can make decisions about the types of assets held and assign/reassign
the responsibility for those decisions, it would be considered to have sufficient responsibility for administering
the exchange of assets.
Identifying Fiduciary Activities
Under the proposed standard, an activity is a fiduciary activity of a government if the government controls the
assets of the activity (as defined above), the assets of the activity are not derived solely from the government’s
own-source revenue (as defined in paragraph 45 of Statement 44) and one or more of the following criteria is met:
1.
The assets are administered through a trust agreement or equivalent arrangement in which the government
itself is not a beneficiary and the assets are both:
Proposed Changes to a Government’s Reporting of Its Fiduciary Activities
a.
Dedicated to providing benefits to recipients in accordance with the benefit terms, and
b.
Legally protected from the creditors of the government
2.
The assets are to be provided to individuals that are not required to be residents or recipients of the
government’s goods and services as a condition of being a beneficiary
3.
The assets are to be provided to organizations or other governments that are neither part of the financial
reporting entity nor recipients of the government’s goods or services
4.
The assets result from a pass-through grant for which the government does not have administrative or
direct financial involvement (as defined in paragraph 5 of Statement 24) in the program
The proposed criteria for identifying fiduciary activities is consistent with Statement No. 34, Basic Financial
Statements—and Management’s Discussion and Analysis—for State and Local Governments, which states,
“Fiduciary funds should be used to report assets held in a trustee or agency capacity for others and therefore
cannot be used to support the government’s own programs.”
Postemployment Benefit Plans
A government would be required to report a postemployment benefit activity as a fiduciary activity when the
government controls the assets of the activity (as defined above) and any one of the following criteria is met:

The activity is a benefit arrangement under the scope of Statement No. 67, Financial Reporting for
Pension Plans – an amendment of GASB Statement No. 25

The activity is a postemployment benefit other than pension (OPEB) arrangement within the scope of
Statement 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, as
amended

The government is required to apply the provisions of paragraph 116 of Statement 73, Accounting and
Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68,
and Amendments to Certain Provisions of GASB Statements 67 and 68, as amended.
A government would evaluate all other OPEB and pension arrangements using the four criteria listed above under
“Identifying Fiduciary Activities” to determine whether the activity is a fiduciary activity. Governments reporting a
pension or OPEB plan as a fiduciary fund would follow the financial reporting requirements of Statement 67 or
Statement 74, as appropriate.
The information reported in fiduciary fund financial statements is important to assess a government’s
accountability for its fiduciary activities. The proposal aims to enhance consistency and comparability by
defining in generally accepted accounting principles what constitutes fiduciary activities in a government’s basic
financial statements and requiring a state or local government to report all fiduciary fund activity meeting the
proposed criteria in fiduciary fund financial statements. Additions to and deductions from each fiduciary fund
type would be reported in the statement of changes in fiduciary net position.
Fiduciary Funds & Fiduciary Fund Financial Statements
Classification of Fiduciary Activities in Fiduciary Funds
Governments will continue using fiduciary funds to report the fiduciary activities of a government. The proposed
statement describes four fiduciary fund types a government would be required to report, as applicable:

Pension (and other employee benefit) trust funds

Investment trust funds

Private-purpose trust funds

Custodial funds
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Proposed Changes to a Government’s Reporting of Its Fiduciary Activities
Under the proposal, a government would determine the classification of fiduciary activities as a particular fiduciary
fund in part by the presence or absence of a trust agreement or equivalent arrangement meeting specified criteria.
These agreements generally must include language that trust assets are dedicated to providing benefits to
recipients in accordance with the benefit terms and are legally protected from the creditors of the government
acting as the fiduciary.
A government would report activity administered through a trust agreement or equivalent arrangement meeting
certain criteria in an investment trust fund or private-purpose trust fund. Any fiduciary activity not administered
through a trust agreement or equivalent arrangement meeting specific criteria would be reported in a new
custodial fund type. The proposal eliminates the existing agency fund type.
Statement of Fiduciary Net Position
The statement of fiduciary net position should report the assets, deferred outflows of resources, liabilities,
deferred inflows of resources and net position for each fiduciary fund, with certain exceptions.
A government would recognize a liability in fiduciary funds when an event has occurred that compels a
government to disburse fiduciary resources. This occurs when the beneficiary makes a demand for the resources
and is not required to meet any further action or condition to be entitled to receive the resources.
GASB Statements No. 67 and No. 74 should be followed for reporting pensions and OPEB plan amounts in the
statement of fiduciary net position.
Statement of Changes in Fiduciary Net Position
A state or local government would present additions to and deductions from each fiduciary fund type in the
statement of changes in fiduciary net position in the basic financial statements, with certain exceptions, including
reporting pension and OPEB funds under Statement 67 or Statement 74, as appropriate. Governments would
report all fiduciary fund additions disaggregated by source and, if applicable, separately display investment
income, investment costs and net investment income. Likewise, governments would disaggregate deductions by
type and, if applicable, separately display administrative costs.
Governments expecting to hold custodial resources for a period of three months or less would have the option of
reporting a single aggregated total amount for both additions and deductions in the statement of changes in
fiduciary net position without disaggregating in detail, provided that the descriptions of the totals are sufficient to
indicate the nature of the resource flows.
Business-Type Activities
A stand-alone business-type activity (BTA) also engaged in fiduciary activities would present fiduciary fund financial
statements within its basic financial statements, with the exception of fiduciary resources it expects to hold for
three months or less. In those situations, the proposal allows the BTA to report resources with a corresponding
liability that otherwise should be reported in a custodial fund in the BTA’s statement of net position. A BTA
choosing to report such resources in its statement of net position should separately report additions and
deductions, if significant, as cash inflows and cash outflows, respectively, in the operating activities category of its
statement of cash flows.
Component Units
When reported in the fiduciary fund financial statements of a primary government, a fiduciary component unit
would combine its fiduciary fund information, by individual fiduciary fund, with that of its fiduciary component
units. This applies to special-purpose governments engaged in only fiduciary activities, e.g., public employee
retirement systems, that are component units of another government and have their own component units
engaged only in fiduciary activities.
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Proposed Changes to a Government’s Reporting of Its Fiduciary Activities
The presentation of fiduciary funds in the government’s basic financial statements is consistent with Statement
No. 14, The Financial Reporting Entity, which requires a government to include legally separate organizations in
its financial reporting entity “if the primary government has a fiduciary responsibility for them,” even if the
organizations do not meet the other criteria for inclusion as component units.
Transition
Governments would apply changes to conform to the provisions of this statement retroactively by restating
financial statements, if practicable, for all prior periods presented. If restatement for prior periods is not
practicable, any cumulative effect of applying this statement would be reported as a restatement of beginning net
position (or fund balance or fund net position, as applicable) for the earliest period restated. In the first period for
which this statement is applied, the government should disclose in the financial statement notes the nature of the
restatement and its effect. If applicable, the reason for not restating prior periods presented should be disclosed.
BKD will monitor developments in fiduciary responsibilities. For further information, contact your BKD advisor.
Contributor
Connie Spinelli
Director
303.861.4545
[email protected]
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