Question

Are custodial funds included in the Statement of Fiduciary Net Position and Statement of Changes in Fiduciary Net Position?

If so, list them. Describe the purposes for which they exist.

Answer 1

Custodial funds will be reported in a statement of fiduciary net position. In addition, the statement of changes in fiduciary net position will include custodial fund activity. This change will result in more detail of additions to and deductions from custodial funds than currently reported for agency funds.

GASB adopted Statement 84, Fiduciary Activities, to address important financial reporting objectives, including-

• properly identifying all of a government’s fiduciary activities,
• determining the type of fiduciary fund to use to report each fiduciary activity (including fiduciary component units), and
• presenting the financial statements of fiduciary funds appropriately.

Statement 84 specifies four types of fiduciary funds—three types of trust funds and the custodial fund type-to be used to report various fiduciary activities, including fiduciary component units. (Agency funds have been eliminated.)

1. Pension and other employee benefit trust funds are used for—

• pension plans administered through Statement 67, paragraph 3 qualified trusts;
• OPEB plans administered through Statement 74, paragraph 3 qualified trusts; and
• other employee benefit plans if administered through a Statement 84, paragraph 11c(1) qualified trust for which the contributions to the trust and related earnings are irrevocable. Note that all Statement 84, paragraph 8a qualified trusts and similar arrangements also meet the paragraph 11c(1) criteria.

2. Investment trust funds are used for the external portion of investment pools and individual investment accounts (defined in paragraph 22 of GASB Statement 31) that are administered through a GASB 84, paragraph 11c(1) qualified trust.

3. Private purpose trust funds are used to account for all other fiduciary activities required to be reported in trust funds. Note that this includes other employee benefit plans administered through Statement 84, paragraph 11c(1) trust for which the contributions and related earnings are not irrevocable.

4. Custodial Funds- Custodial funds should be used to report fiduciary activities that are not required to be reported in pension (and another employee benefit), investment, and private-purpose trust funds. The external portion of investment pools that are not held in a trust or an equivalent arrangement that meets the criteria of the GASBS 84 should be reported in a separate external investment pool fund column, under custodial funds classification.

Thanks and all the best....