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��GASB 84 FIDUCIARY ACTIVITIES��

MCHHSA conference

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PRESENTER LISA YOUNG� OFFICE OF THE STATE AUDITOR� STANDARDS AND PROCEDURES

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GASB -WHAT IS IT?

The Governmental Accounting Standards Board (GASB) is the private, nonprofit body responsible for establishing accounting and financial reporting standards for state and local governments.

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  • State and Local Governments are required to follow GASB Standards to be in compliance with accounting standards general accepted in the United States of America.
  • GASB standards apply to the annual financial report of the overall government. Those standards may differ from other reporting requirements prepared for DHS.

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GASB STATEMENT NO. 84

  • GASB 84 – Fiduciary Activities

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    • establishes standards of accounting and financial reporting for fiduciary activities

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    • Prior to GASB 84, fiduciary activity was reported however, inconsistent treatment

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GASB STATEMENT NO. 84

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  • Skip ahead to….

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GASB STATEMENT NO. 84 PARAGRAPH 11

Fiduciary Activity if all criteria is met

  •  a. The assets associated with the activity are controlled by the government
  •  b. The assets associated with the activity are not derived either:
      • (1) Solely from the government’s own-source revenues or
      • (2) From 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.
  • c. The assets associated with the activity have one or more of the following characteristics:
      • (1) The assets are
        • (a) administered through a trust in which the government itself is not a beneficiary,

(b) dedicated to providing benefits to recipients in accordance with the benefit terms, and

        • (c) legally protected from the creditors of the government.
      • (2) The assets are for the benefit of individuals and the government does not have administrative involvement with the assets or direct financial involvement with the assets.
      • (3) The assets are for the benefit of organizations or other governments that are not part of the financial reporting entity. In addition, the assets are not derived from the government’s provision of goods or services to those organizations or other governments.

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GASB STATEMENT NO. 84

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  • Control of assets: A government controls the assets of an activity if the government
  • (a) holds the assets or
  • (b) has the ability to direct the use, exchange, or employment of the assets in a manner that provides benefits to the specified or intended recipients.

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  • Restrictions from legal or other external restraints that stipulate the assets can be used only for a specific purpose do not negate a government’s control of the assets.

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GASB STATEMENT NO. 84 PARAGRAPH 11

Fiduciary Activity if all criteria is met

  •  a. The assets associated with the activity are controlled by the government
  •  b. The assets associated with the activity are not derived either:
      • (1) Solely from the government’s own-source revenues or
      • (2) From 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.
  • c. The assets associated with the activity have one or more of the following characteristics:
      • (1) The assets are
        • (a) administered through a trust in which the government itself is not a beneficiary,

(b) dedicated to providing benefits to recipients in accordance with the benefit terms, and

        • (c) legally protected from the creditors of the government.
      • (2) The assets are for the benefit of individuals and the government does not have administrative involvement with the assets or direct financial involvement with the assets.
      • (3) The assets are for the benefit of organizations or other governments that are not part of the financial reporting entity. In addition, the assets are not derived from the government’s provision of goods or services to those organizations or other governments.

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GASB STATEMENT NO. 84 PARAGRAPH 11

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  • b. The assets associated with the activity are not derived either:
      • (1) Solely from the government’s own-source revenues or
      • (2) From 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.

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GASB STATEMENT NO. 84

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  • Own-source revenues are revenues that are generated by a government itself. They include exchange and exchange-like revenues (for example, water and sewer charges) and investment earnings. Derived tax revenues (such as sales and income taxes) and imposed nonexchange revenues (such as property taxes) also are included

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GASB STATEMENT NO. 84 PARAGRAPH 11

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  • b. The assets associated with the activity are not derived either:
      • (1) Solely from the government’s own-source revenues or
      • (2) From 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.

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GASB STATEMENT NO. 84 PARAGRAPH 11

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  • Government-mandated nonexchange transactions -  when a government at one level provides resources to a government at another level and requires the recipient to use the resources for a specific purpose (for example, federal programs that state or local governments are mandated to perform)

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  • Voluntary nonexchange transactions - legislative or contractual agreements, other than exchanges, entered into willingly by the parties to the agreement (for example, certain grants and private donations).

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GASB STATEMENT NO. 84

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  • A government has administrative involvement with the assets if, for example, it
  • (a) monitors compliance with the requirements of the activity that are established by the government or by a resource provider that does not receive the direct benefits of the activity,
  • (b) 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
  • (c) has the ability to exercise discretion over how assets are allocated.

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GASB STATEMENT NO. 84 PARAGRAPH 11

Fiduciary Activity if all criteria is met

  •  a. The assets associated with the activity are controlled by the government
  •  b. The assets associated with the activity are not derived either:
      • (1) Solely from the government’s own-source revenues or
      • (2) From 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.
  • c. The assets associated with the activity have one or more of the following characteristics:
      • (1) The assets are
        • (a) administered through a trust in which the government itself is not a beneficiary,

(b) dedicated to providing benefits to recipients in accordance with the benefit terms, and

        • (c) legally protected from the creditors of the government.
      • (2) The assets are for the benefit of individuals and the government does not have administrative involvement with the assets or direct financial involvement with the assets.
      • (3) The assets are for the benefit of organizations or other governments that are not part of the financial reporting entity. In addition, the assets are not derived from the government’s provision of goods or services to those organizations or other governments.

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GASB STATEMENT NO. 84

  •  C. assets associated with the activity have one or more of the following characteristics:
      • (1) The assets are
        • (a) administered through a trust in which the government itself is not a beneficiary,

(b) dedicated to providing benefits to recipients in accordance with the benefit terms, and

        • (c) legally protected from the creditors of the government.
      • (2) The assets are for the benefit of individuals and the government does not have administrative involvement with the assets or direct financial involvement with the assets.
      • (3) The assets are for the benefit of organizations or other governments that are not part of the financial reporting entity. In addition, the assets are not derived from the government’s provision of goods or services to those individuals.

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GASB STATEMENT NO. 84

  • Types of Fiduciary Funds
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  • Pension (and other employee benefit) trust funds
  • Investment trust funds
  • Private-purpose trust funds
  • Custodial funds

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GASB STATEMENT NO. 84 - ANALYSIS

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GASB STATEMENT NO. 84 - ANALYSIS

  • Child Support Payments
      • Control – YES if paid to the county

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      • Own Source Revenue? No!
      • Grant? No!

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      • Trust? No
      • Benefit of individuals, and the county has no administrative involvement? No (with explanation)
      • Benefit of organizations or other governments that are not part of the county AND not derived from the county’s provisions of good or services to the State? YES

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GASB STATEMENT NO. 84 - ANALYSIS

  • Estate Recoveries

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  • Two examples fall under MN Statutes 256B.15 & 256.019
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  • State portion
  • County portion

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GASB STATEMENT NO. 84 - ANALYSIS

  • Estate Recoveries – State portion: Fiduciary Fund
      • Control – YES if paid to the county

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      • Own Source Revenue? No!
      • Grant? No!

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      • Trust? No
      • Benefit of individuals, and the county has no administrative involvement? No
      • Benefit of organizations or other governments that are not part of the county AND not derived from the county’s provisions of good or services to the State? YES

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GASB STATEMENT NO. 84 - ANALYSIS

  • Estate Recoveries – County portion: Human Services Fund
      • Control – YES if paid to the county

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      • Own Source Revenue? Yes!
      • Grant? No!

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      • Trust?
      • Benefit of individuals, and the county has no administrative involvement?
      • Benefit of organizations or other governments that are not part of the county AND not derived from the county’s provisions of good or services to the State?

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GASB STATEMENT NO. 84 - ANALYSIS

  • Local Collaboratives – revenue paid from DHS: Human Services Fund
      • Control – YES if paid to the county

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      • Own Source Revenue? No!
      • Grant? (Administrative involvement of others grants?) Yes!

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      • Trust?
      • Benefit of individuals, and the county has no administrative involvement?
      • Benefit of organizations or other governments that are not part of the county AND not derived from the county’s provisions of good or services to the Collaborative?

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GASB STATEMENT NO. 84 - ANALYSIS

  • Social Welfare (representative payee accounts): Private purpose trust
      • Control – YES if paid to the county

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      • Own Source Revenue? No!
      • Grant? No

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      • Trust? Yes
      • Benefit of individuals, and the county has no administrative involvement?
      • Benefit of organizations or other governments that are not part of the county AND not derived from the county’s provisions of good or services to the those organizations?

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GASB STATEMENT NO. 84 - ANALYSIS

  • Payroll clearing accounts: liability of the governmental fund
      • Control – YES if paid to the county

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      • Own Source Revenue? Not Revenue… this does result from payroll transaction
      • Grant? No

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      • Trust? No
      • Benefit of individuals, and the county has no administrative involvement? No
      • Benefit of organizations or other governments that are not part of the county AND not derived from the county’s provisions of good or services to those organizations? No

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GASB STATEMENT NO. 84 - ANALYSIS

  • Payroll clearing accounts: liability of the governmental fund
  • 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.

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GASB STATEMENT NO. 84 - ANALYSIS

  • Amounts held on deposit: liability of the governmental fund
      • Control – YES
      • Own Source Revenue? Not Revenue… this may result from a future exchange transaction
      • Grant? No

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      • Trust? No
      • Benefit of individuals, and the county has no administrative involvement? No
      • Benefit of organizations or other governments that are not part of the county AND not derived from the county’s provisions of good or services to those organizations? No

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GASB STATEMENT NO. 84 - ANALYSIS

  • Amounts held on deposit: liability of the governmental fund
  • Q—A city hires a contractor to construct a new city building. The contractor provides the city with a cash deposit to be held by the city as an assurance that the project will be completed on schedule and in accordance with the plans and specifications. If the contractor does not complete the project satisfactorily, the deposit will be forfeited to the city. If the contractor does complete the project satisfactorily, the city will refund the deposit. Should the city report the contractor deposit in a fiduciary fund?
  • A—No. Although the control criteria in paragraph 12 of Statement 84 are met because the city is holding the cash, the deposit is the result of an exchange transaction between the contractor and the city. The city is holding the cash for its own benefit and the criteria in paragraph 11c are not met. Therefore, the cash deposit and a related liability would be reported in the city’s governmental or enterprise fund financial statements.

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GASB STATEMENT NO. 84 - ANALYSIS

  • Fiscal host for an unrelated entity (providing accounting and treasury services): Fiduciary Fund
      • Control – YES

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      • Own Source Revenue? No!
      • Grant? No (could vary including administrative involvement)

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      • Trust? No
      • Benefit of individuals, and the county has no administrative involvement? No
      • Benefit of organizations or other governments that are not part of the county AND not derived from the county’s provisions of good or services to those organizations? Yes

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GASB STATEMENT NO. 84 - ANALYSIS

  • Cancelled checks/unclaimed property: liability of the governmental fund
      • Control – YES

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      • Own Source Revenue? Not revenue… is produced from an exchange transaction
      • Grant? No

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      • Trust? No
      • Benefit of individuals, and the county has no administrative involvement? No
      • Benefit of organizations or other governments that are not part of the county AND not derived from the county’s provisions of good or services to those organizations? No

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GENERAL LEDGER & �FINANCIAL REPORTING

Does it matter if changes are made in the general ledger… OR can amounts be moved / added / calculated for financial reporting only?

  • Factors to making that determination
    • Ongoing processes versus manual entry
      • Complexities
      • Number of transactions
    • DHS reporting
    • Whether another system/general ledger is being used

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(my vote is to set up an ongoing process and to have as few manual entries as possible)

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FINANCIAL REPORTING

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Example Statements on OSA’s website or in the GASB Statement

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Statement of Fiduciary Net Position

Assets may not equal liabilities / there may be net position

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It may be appropriate to record receivables and payables

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Statement of Changes in Fiduciary Net Position

Additions and deletions

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FINANCIAL REPORTING –� WHEN TO RECORD A LIABILITY

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  • 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.

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QUESTIONS?

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Or contact me at

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  • Lisa Young
  • 651-296-4083
  • lisa.young@osa.state.mn.us