GASB Statement No. 84 Fiduciary Activities Issued January 2017 - PowerPoint PPT Presentation

GASB Statement No. 84 Fiduciary Activities Issued January 2017 Effective Date: Periods beginning after December 15, 2018 (FY20) 1

Fiduciary Activities • What: The Board issued Statement 84 in January 2017 to clarify when a government has a fiduciary responsibility and is required to present fiduciary fund financial statements • Why: Existing standards require reporting of fiduciary activities but do not define what they are; use of private- purpose trust funds and agency funds is inconsistent; and business-type activities are uncertain about how to report fiduciary activities • When: Effective for reporting periods beginning after 2 December 15, 2018 (FY20).

Fiduciary Activities 3

Other Fiduciary Fund Types 4

Other Fiduciary Activities Key Issues of Statement 84 • Applying the fiduciary activities criteria to activities that are not pension or OPEB arrangements. • Determining which fiduciary fund type should be used to report a fiduciary activity. • Reporting fiduciary activities in fiduciary fund financial statements 5

Fiduciary Activities Flowcharts • GASB Statement 84 pages 36-38 provide in-depth flowcharts for evaluating fiduciary activities. • Pages 36 & 37 Chart 1 & 1A—Flowchart for Evaluating and Reporting Potential Fiduciary Activities • Page 38 Chart 1B—Flowchart for Evaluating and Reporting Potential Fiduciary Activities (Postemployment Benefit Arrangements) • Next slide is a condensed version. 6

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Other Fiduciary Activities 8

Control of Assets • Two possibilities • The primary government holds the assets, or • Has the ability to direct the use , exchange, or employment of the assets • Clarifications • Use – expends or consumes an asset for benefit of individuals, organizations, or other governments • Direct– designate a third party to perform a government’s fiduciary duties without assuming them • Does not alter government's ability to direct the use, 9 exchange, or employment of the assets • Unaffected by restrictions on use

Assets Not Derived from Certain Revenues • Assets associated with activity not derived either: • Solely from gov’ts own-source revenues, a) Tuition, student activity fees, deposits, investment earnings, etc. b) The government cannot be a fiduciary of its own resources. 10

Assets Not Derived from Certain Revenues • Government-mandated nonexchange transactions or voluntary nonexchange transactions with the exception of pass- through grants for which the government does not have administrative involvement or direct financial involvement. 11

Student Activity Funds • Are the resources for the benefit of the students or are part of the government’s provision for goods and services? • Funds collected from parents for student field trip VS. resources used to buy uniforms or pay salaries?? • Student Activity Funds need to be 12 evaluated individually.

Assets with Certain Characteristics • Assets associated with activity have one or more of following circumstances: • Administered through a trust or equivalent arrangement • For the benefit of individuals • Government does not have administrative or direct financial involvement • Assets not derived from government’s provision of goods and services to those individuals • For the benefit of other entities • Not part of the financial reporting entity 13 • Assets not derived from government’s provision of goods and services to other entity

Assets with Certain Characteristics Government does not have administrative or direct financial involvement • For the purpose of this provision, a government has administrative involvement with the asset if it  Monitors compliance with the requirements of the activity that are established by the government or by a resource provider that does not receive direct benefits of the activity, 14

Assets with Certain Characteristics  Determines eligible expenditures that are established by the government or by a resource provider that does not receive the direct benefits of the activity, or  Has the ability to exercise discretion over how assets are allocated. • A government has direct financial involvement with the assets if, for example, it provides matching resources for the activities. 15

Student Activity Funds • Class of 2019 Fund • Fundraising events • 4 Students determine how the funds are allocated and make the purchase • A teacher sponsor provides oversight and send to BM for payment • No policies or procedures regarding Board involvement or approval 16 • District holds the money in an account on behalf of the club

Student Activity Funds • Football Team Fund • Camp fees and Fundraising events • 4 Students determine how the funds are allocated and make the purchase • Athletic Director approval is required by governing board for all purchases from the football fund and sends to BM for payment • District holds the money in an account on 17 behalf of the club

Student Activity Funds • Student Activity Funds need to be evaluated individually. 18

Fiduciary Fund Types-Custodial • Custodial Funds--- All Other fiduciary activities not in a trust fund. • Have a measurement focus • Report all applicable financial statement elements • Assets, deferred outflows, liabilities, deferred inflows, net position, additions, and deductions 19

Statement of Fiduciary Net Position • Used to report the assets, deferred outflows of resources, liabilities, deferred inflows of resources, and fiduciary net position of pension (and other employee benefit) trust funds, investment trust funds, private-purpose trust funds, and custodial funds. • You may have to think liability of the fiduciary party not of the government. 20

Liability Recognition • Compelled to disburse resources • Demand for the resources has been made, or • No further action or condition is required to be met to be entitled to receive the resources • Example, tax collections on behalf of other governments. • Applicable to investment trust funds, 21 private-purpose trust funds and custodial funds.

GASB Implementation Guide No. 2019-2, Fiduciary Activities Statement of Fiduciary Net Position Liability to the Beneficiaries 4.47. Q—A city’s parks department sponsors a youth soccer program from April through July each year . Registration is free, but each participant is encouraged to provide resources to the uniforms and equipment fund. Uniforms and equipment are acquired by volunteer coaches who are not employees of the city. The city has determined that the resources meet the criteria in Statement 84 to be accounted for in a custodial fund. Should the city recognize a liability in the custodial fund for those expected purchases when the resources are received at registration? A—No. Liabilities should be recognized when the uniforms and equipment are acquired by the coaches. At that point, the city is compelled to disburse the resources. The city will report net position in the fund for the difference between the resources held and the liabilities incurred. 22

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Statement of Changes in Fiduciary Net Position • Used to report additions to and deductions from pension (and other employee benefit) trust funds, investment trust funds, private-purpose trust funds, and custodial funds. 24

Statement of Changes in Fiduciary Net Position • Except as noted on next slide, statement should disaggregate additions by source including, if applicable, separate display of: a) Investment earnings b) Investment costs (if separable from investment earnings and administrative costs) c) Net investment earnings • Except as noted on next slide, statement should disaggregate deductions by type and, if 25 applicable, should display administrative costs.

Statement of Change in Net Position—Additions and Deductions—Custodial Funds If resources held for 3 months or less • Option to report single aggregate totals for • Additions • Deductions • Example—County collects and remits property taxes to other taxing bodies • Additions— Property taxes collected for other governments 26 • Deductions— Property taxes remitted to other governments

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GASB Implementation Guide No. 2019-2, Fiduciary Activities • Issued June 2019 • The following slides include Q & A’s included in the Implementation Guide. 28

4.15. Q—A government uses a clearing account to accumulate resources from withholding of employee payroll deductions and accrued employer payroll taxes that will be submitted to the appropriate taxing bodies when due. Should the government report the clearing account in its fiduciary fund financial statements? A—No. Although the government has control of the assets because it has custody of the cash withheld, the unremitted amounts in the clearing account are a liability of the government. When the deductions are withheld from an employee’s pay, the amounts withheld and accrued by the employer become a present obligation to sacrifice resources that the government has no discretion to avoid and, therefore, are liabilities of the government. As a result, the government is holding the amounts for its own benefit and the criteria in paragraph 11c of Statement 84 are not met. 29