Question

EX. 10-3

Fiduciary funds are of four major types For each of the following indicate the type of fiduciary fund in which it is most likely the fiduciary activity should be accounted for and reported.

1. Per a trust agreement a state maintains an investment pool in which governments within the state can temporarily invest the proceeds of tax exempt bonds that they have issued. The state will invest only in securities that would not violate IRS arbitrage provisions.

2. A county collects property taxes for towns and cities within its jurisdiction and distributes them to the governments shortly after it receives them.

3. A city solicits donations from its citizens to support a local food bank. Per a trust agreement all funds must be invested in investment grade securities and each year all earnings (except for a percentage equal to an inflation index) must be distributed to the food bank.

4. The state requires banks within its jurisdiction to turn over the balances in savings and checking accounts that have been inactive for a period of five years or more. Per a trust agreement, any amounts that are not claimed by the depositors within six years revert to the state’s general fund.

5. A city makes annual contributions to a qualified OPEB trust fund.

6. Each school within a school district collects parent–teacher association dues and contributions and turns them over to the school district for safe-keeping. The district remits the funds to the associations upon request and makes no decisions, and places no restrictions, as to how they are used.

7. A state university receives cash from a not-for-profit child welfare agency that provides scholarships to students who have graduated out of the foster care system. The agency selects the students and stipulates that the scholarship is intended to cover miscellaneous expenses other than tuition and fees, such as for meals and recreation. The university dispenses the funds to the students upon their requests, usually within days after they have been received from the agency.

8. A state university maintains an endowment to provide one scholarship each year to a student who graduated from Llano County High School. As per the donor’s stipulations in a trust agreement, each year the High School selects the scholarship recipient.

Answer 1

Fiduciary funds, unlike governmental and proprietary funds, benefit parties other than the government
itself. These funds are used to account for assets held by a government in a trust or agency capacity
for others, which include employees, other governments, and specific individuals, corporations,
or not‐for‐profit organizations. Accordingly, their activities do not result in revenues or expenses
to support the government’s programs—only in additions or deductions to the fund’s net position.
Although the financial statements of fiduciary funds are included in a government’s comprehensive
annual financial report, they are not included in the government‐wide financial statements.

4 Major types of Fiduciary Funds are:-

1. Pension trust funds benefit the government’s employees by providing income, disability income, health care insurance, and related forms of remuneration to retirees and their beneficiaries.

2. Investment trust funds, which are similar to mutual funds, benefit the parties, usually other governments, which have entrusted their resources to the fund.

3. Private purpose trust funds encompass all trust funds other than pension and investment trust funds, and unlike the other trust funds, these funds may be expendable or nonexpendable.They benefit specific individuals, private organizations, governments, or businesses. It also includes abandoned and unclaimed property, such as balances in bank accounts in which there has been no activity for a specified period of time.

4. Agency funds are custodial in nature and are used to account for assets held, usually for a short period, on behalf of other governments, funds, not‐for‐profit entities, or individuals. Most com-monly they are established to maintain control over:
• Taxes collected by one government for the benefit of another
• Special assessments collected to repay debt that the government services but for which it is not responsible
• Refundable deposits

Based on the above information, the given statements are classified as:-

1. Investment trust Funds.

2. Agency/Custodial Funds.

3. Private purpose trust Funds.

4. Private purpose trust Funds.

5. Pension trust Funds.

6. Agency/Custodial Funds.

7. Private purpose trust Funds.

8. Private purpose trust Funds.