Magazine article Government Finance Review

GASB Proposes New Guidance on Fiduciary Funds: The GASB's Financial Reporting for Fiduciary Responsibility Preliminary View Document Outlines How the GASB Tentatively Proposes to Clarify Authoritative Standards to Enhance Consistency in Reporting for Fiduciary Funds

Magazine article Government Finance Review

GASB Proposes New Guidance on Fiduciary Funds: The GASB's Financial Reporting for Fiduciary Responsibility Preliminary View Document Outlines How the GASB Tentatively Proposes to Clarify Authoritative Standards to Enhance Consistency in Reporting for Fiduciary Funds

Article excerpt

Ambiguity in current authoritative standards has led to inconsistent accounting and financial reporting for fiduciary funds. In November 2014, the Governmental Accounting Standards Board (GASB) published its Preliminary Views (PV) on Financial Reporting for Fiduciary Responsibility. That document outlines how the GASB tentatively proposes to clarify authoritative standards to enhance consistency in reporting for fiduciary funds.

Use of Fiduciary Funds. A fiduciary fund type should be used only when a government is, in fact, acting as a fiduciary. Unfortunately, current authoritative standards do not provide clear guidance for making that determination (other than for postemployment benefits and similar situations). The proposals in the PV are designed to fill that gap.

The PV identifies three types of resources for which a government might be considered to function as a fiduciary: 1) resources the government receives and disburses in purely "cash conduit" pass-through grants; 2) resources the government holds in trust (or an equivalent arrangement) and for which the government itself is not a beneficiary; and 3) resources held for the benefit of individuals outside the government's citizenry, or for the benefit of organizations or governments outside the financial reporting entity. For all three types of resources, the use of a fiduciary fund would be appropriate only if the government actually controls the resources. For this purpose, the PV tentatively proposes that control be determined as follows:

1. If the government holds the assets, but not in trust, it would be a fiduciary if it: 1) is responsible for administering the exchange of assets; 2) has assigned the responsibility for administering the exchange of assets to someone else, but retains the ability to reassign that responsibility; 3) is not responsible for administering the exchange of assets, but is able to set parameters for how others administer them; or 4) is not responsible for administering the exchange of assets.

2. If the government holds the assets in trust, it would be a fiduciary if it: 1) is responsible for administering the exchange of assets; or 2) has assigned the responsibility for administering the exchange of assets to someone else, but retains the ability to reassign that responsibility.

3. If a legally separate entity either directly holds the assets, or holds the assets in trust, it would be a fiduciary if it: 1) is responsible for administering the exchange of assets; or 2) has assigned the responsibility for administering the exchange of assets to someone else, but retains the ability to reassign that responsibility. …

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