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Business and Policy Areas
Business and Policy Areas

GASB Issues Exposure Draft on Fiduciary Activities

January 11, 2016

After more than five years of research, a preliminary views due process document, and several public testimonies, the Governmental Accounting Standards Board (GASB) issued an Exposure Draft, “Fiduciary Activities,” on December 22, 2015, that would establish criteria for identifying and reporting fiduciary activities of all state and local governments. The focus of the criteria generally is whether a government is controlling the assets of a fiduciary activity. In addition to control, the governmental entity must consider the source and use of the assets.

A government controls assets related to activities used by the government to provide benefits to specified or intended beneficiaries if either:

  • The 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.

If the government controls assets, it should be reported as a fiduciary activity if the assets are not derived solely from the government’s own-source revenue, and one or more of the following criteria is met:

  • 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:
  1. Dedicated to providing benefits to recipients in accordance with the benefit terms.
  2. Legally protected from the creditors of the government.
  • The assets are to be provided to individuals who are not required to be residents or recipients of the government’s goods and services as a condition of being a beneficiary.
  • 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.
  • The assets result from a pass-through grant for which the government does not have administrative or direct financial involvement in the program.

Additionally, the proposal makes clear that a government has to report a fiduciary activity if either:

  • The activity is a pension benefit arrangement within the scope of Statement 67, “Financial Reporting for Pension Plans.”
  • The activity is a postemployment benefit other than a pension (OPEB) arrangement within the scope of Statement 74, as amended.

The proposed Statement describes four fiduciary fund types that would be required to be reported, if applicable:

  • Pension (and other employee benefit) trust funds
  • Investment trust funds
  • Private-purpose trust funds
  • Custodial funds, regardless of whether a trust or equivalent arrangement exists.

Impact on higher education

Public institutions with single-employer defined benefit pension plans or OPEB plans that are subject to the requirements of Statements 67 and 74, respectively, will have fiduciary fund reporting requirements on the pension or OPEB trusts. Although this will only impact a small number of institutions and systems, the requirement is significant because colleges and universities engaged in business-type activities (BTA) currently do not have fund-level reporting requirements.

The exposure draft offers a significant exemption for BTAs such as public colleges and universities related to custodial arrangements. A public institution BTA may report resources with a corresponding liability that otherwise should be reported in a custodial fund in the statement of net position if those resources are expected to be held for three months or fewer. Further, a BTA that chooses to report such resources in its statement of net position should separately report any significant cash inflows and cash outflows in the operating activities category of its statement of cash flows.

Although there is variation in operating and custodial account structure, public colleges and universities do hold payroll taxes, student financial aid, property taxes, student club funds, and more in a short-term custodial capacity. Institutions will not have to tease apart such custodial information and design fund statements where none exist today.

Defined contribution employee benefit plans that fall under Internal Revenue Code Sections 457, 401(k), or 403(b), and are administered by third parties, would not be subject to fiduciary fund reporting. Under the tax provisions that guide such plans, the public institution is not considered to have control over the assets, and with employee contributions, the source of funds is not exclusively derived from the college’s own revenue.

Comments on the proposal are due by March 31 and a public hearing is scheduled for April 21.


Sue Menditto
Director, Accounting Policy