by Brian Nicholson, CPA
BACKGROUND: GASB Statement No. 84, Fiduciary Activities, was issued in January 2017, and is effective for reporting periods beginning after December 15, 2018. As such, GASB 84 was effective for entities with fiscal year ends of December 31, 2019, and continuing with entities of various year ends going forward. However, due to COVID–19, GASB extended this statement one year meaning it is now effective for entities with fiscal year ends of December 31, 2020, and going forward (applicable for June 30, 2021 year ends). This statement establishes standards of accounting and financial reporting for fiduciary activities. The requirements of this Statement apply to the financial statements of all state and local governments.
Even though GASB 84 was not required to be implemented until fiscal year ends of December 31, 2020, and after, several entities implemented based on the original dates. After working with several entities to implement this new standard, we would like to take the opportunity to share some lessons learned.
EFFECTS AND TAKEAWAYS OF REPORTING FIDUCIARY ACTIVITIES:
If an entity has already been reporting fiduciary activities, or is now required to report fiduciary activities due to GASB Statement No. 84, the entity will no longer just report a “Statement of Fiduciary Assets and Liabilities,” but will now be required to report a “ Statement of Fiduciary Net Position” (balance sheet) and a “Statement of Changes in Fiduciary Net Position” (income statement).
The statement of changes in fiduciary net position should be used to report additions to and deductions from pension (and other employee benefit) trust funds, investment trust funds, private-purpose trust funds, and custodial funds. Except for entities that apply paragraph 24 or are required to apply paragraph 25, the statement of changes in fiduciary net position should disaggregate additions by source including, if applicable, separate display of:
Investment earnings
Investment costs (including investment management fees, custodial fees, and all other significant investment-related costs)
Net investment earnings (investment earnings minus investment costs)
Investment-related costs should be reported as investment costs if they are separable from (a) investment earnings and (b) administrative costs. The statement of changes in fiduciary net position should disaggregate deductions by type and, if applicable, should separately display administrative costs.
24. A government may report a single aggregated total for additions and a single aggregated total for deductions of custodial funds in which resources, upon receipt, are normally expected to be held for three months or less. The descriptions of the aggregated totals of additions and deductions should indicate the nature of the resource flows. An example of a custodial fund addition description is property taxes collected for other governments. An example of a custodial fund deduction description is property taxes distributed to other
governments.
25. A government that reports a pension plan or OPEB plan in a pension (or other employee benefit) trust fund should report changes in the plan’s fiduciary net position in accordance with Statement 67 or Statement 74, as applicable.
TIPS AND TRICKS FOR IMPLEMENTATION:
Restating Net Position for Fiduciary Activities: Now that GASB Statement No. 84 requires a “Statement of Changes in Fiduciary Net Position, a restatement of beginning net position will be necessary. If an entity is a June 30, 2021 year-end, this means that beginning net position as of July 1, 2020 (or June 30, 2020) will be restated. In short, this means that during the year of implementation Mauldin & Jenkins will need to audit two (2) years of information.
Maintaining a Trial Balance for agency funds, now custodial funds under GASB Statement No. 84: Should entities consider incorporating custodial funds (Tax Commissioner Fund, Sheriff Fund, Clerk of Superior Court Fund, Clerk of Court Fund, Magistrate Court Fund, etc.) into the primary accounting system? We think so and have been recommending to those who have early implemented to do just that. The reason being is that these custodial funds and now considered the same as any other fund of the government and we believe entities should treat them as such.
Reporting Liabilities in Fiduciary Funds: GASB Statement No. 84 paragraph 21, states that except for entities that are required to apply paragraph 22, a liability to the beneficiaries of a fiduciary activity should be recognized in a fiduciary fund when an event has occurred that compels the government to disburse fiduciary resources. Events that compel a government to disburse fiduciary resources occur when a demand for the resources has been made or when no further action, approval, or condition is required to be taken or met by the beneficiary to release the assets. For example, a county government should recognize a liability when it collects taxes for other governments, even though it may not be required to distribute the taxes to those governments until a specified time in the future. Liabilities other than those to beneficiaries should be recognized in accordance with existing accounting standards using the economic resources measurement focus.
