Chapter 08 – Accounting for Fiduciary Activities—Agency and Trust Funds
8-1
CHAPTER 8: ACCOUNTING FOR FIDUCIARY ACTIVITIES—
AGENCY AND TRUST FUNDS
OUTLINE
Number
Topic
Type/Task
Status
(re: 16/e)
Questions:
8-1
Distinction between agency and trust funds
Distinguish
8-1 revised
8-2
Identifying trust funds and their purpose
Explain
Same
8-3
Tax agency funds
Explain
New
8-4
Fiduciary and governmental fund reporting
Compare
New
8-5
Agency funds for “pass–through” funds
Define, explain
Same
8-6
Investment pools
Explain
Same
8-7
Defined benefit and defined contribution
pension plans
Compare
New
8-8
Private and public purpose trusts
Distinguish
Same
8-9
Total and net pension liability
Explain
New
8-10
Accounting for pension expenses/expenditures
Explain
8-10 revised
Cases:
8-11
Research Case – CalPERS
Locate, explain
8-1 revised
8-12
OPEB Plans
Analyze
8-2 revised
8-13
Policy Issues Relating to Employee Pension
Plans
Analyze
8-3
8-14
Research Case – Evaluating new pension
standards
Compare, analyze
New
Exercises/Problems:
8-15
Examine the CAFR
Examine
8-1
8-16
Various agency and trust fund issues
Multiple Choice
Items 3, 4, 5,
9 and 10 are
new
8-17
Various agency and trust fund issues
Multiple Choice
Items 1, 2, 9
and 10 are
new
8-18
Tax agency fund
Journal entries
New
8-19
Special assessment debt
JEs, analysis
8-5
8-20
Identification of fiduciary funds
Analysis
8-6
8-21
Investment trust fund
Journal entries
8-7
8-22
Pass-through agency fund
Journal entries
New
8-23
Fiduciary financial statements
Financial statements
8-9
8-24
Pension calculations
Calculate
New
Chapter 08 – Accounting for Fiduciary Activities—Agency and Trust Funds
8-2
CHAPTER 8: ACCOUNTING FOR FIDUCIARY ACTIVITIES—
AGENCY AND TRUST FUNDS
Answers to Questions
8-1. Although in law there is a clear distinction between an agency relationship and a trust
relationship, in practice the legal distinctions are not sufficient to classify funds as agency
funds or trust funds. All factors, such as the enactment that created the fund and pertinent
regulations, must be examined to determine the nature of the fund and the transactions in
General Problem Information: Distinction between agency and trust funds
Learning Objective: 8-1
Learning Objective: 8-2
Topic: Agency Funds, Trust Funds
Bloom’s Taxonomy: Remember
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Easy
8-2. There are many different types of trust funds. For reporting purposes the GASB
classifies trust funds as investment trusts, private-purpose trusts, and pension trusts (also
referred to as pension and other employee benefit trusts). An investment trust fund is
Chapter 08 – Accounting for Fiduciary Activities—Agency and Trust Funds
8-3
Ch. 8, Answers, 8-2, (Cont’d)
General Problem Information: Identifying trust funds and their purpose
Learning Objective: 8-1
Topic: Trust Funds
Bloom’s Taxonomy: Remember
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Easy
8-3. A tax agency fund is necessary when one government collects taxes for multiple
governmental funds and for other governments. The fund collects and accounts for the
General Problem Information: Tax agency funds
Learning Objective: 8-3
Topic: Agency Funds
Bloom’s Taxonomy: Remember
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Easy
8-4. Fiduciary funds are never included in the government-wide financial statements. Instead,
their activities are reported in a set of fiduciary fund financial statements. The
General Problem Information: Fiduciary and governmental fund reporting
Learning Objective: 8-1
Topic: Agency Funds, Trust Funds
Bloom’s Taxonomy: Remember
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Easy
Chapter 08 – Accounting for Fiduciary Activities—Agency and Trust Funds
8-4
Ch. 8, Answers (Cont’d)
8-5. A pass-through agency fund is one wherein a level of government (such as the state
government) serves as an intermediary, transferring resources to another level of
General Problem Information: Agency funds for “pass–through” funds
Learning Objective: 8-3
Learning Objective: 8-4
Topic: “Pass–through” Agency Funds
Bloom’s Taxonomy: Remember
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Medium
8-6. With an internal investment pool the pool participants are all within the same
government. While accounting for an internal investment pool often occurs in an agency
General Problem Information: Investment Pools
Learning Objective: 8-5
Topic: Investment Pools
Bloom’s Taxonomy: Remember
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Medium
Chapter 08 – Accounting for Fiduciary Activities—Agency and Trust Funds
8-5
Ch. 8, Answers (Cont’d)
8-7. A defined benefit plan promises a set amount of retirement income to retirees. The
government is responsible for funding the pension plan to deliver on those promises. The
General Problem Information: Defined benefit and defined contribution pension plans
Learning Objective: 8-5
Topic: Pension Trust Funds
Bloom’s Taxonomy: Remember
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Medium
8-8. The beneficiaries of a private purpose trust are individuals, organizations, or governments
other than the government administering the trust; whereas, the beneficiary of a public
General Problem Information: Private and public purpose trusts
Learning Objective: 8-5
Topic: Private-Purpose Trust Funds
Bloom’s Taxonomy: Remember
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Medium
8-9. Total pension liability represents the present value of future retirement payments that are
Chapter 08 – Accounting for Fiduciary Activities—Agency and Trust Funds
8-6
Ch. 8, Answers, 8-9 (Cont’d)
General Problem Information: Total and net pension liability
Learning Objective: 8-5
Topic: Pension Trust Funds
Bloom’s Taxonomy: Remember
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Easy
8-10. A government employer reports pension expenditures in a governmental fund on the
modified accrual basis of accounting. Thus, the amount recognized will be the actual
General Problem Information: Accounting for pension expenses/expenditures
Learning Objective: 8-5
Topic: Illustrative Transactions for a Defined Benefit Pension Plan
Bloom’s Taxonomy: Remember
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Medium
Solutions to Cases
8-11. a. CalPERS was established by legislation in 1931 and became operational in 1932.
b. Almost all types of state and local government employers contribute to CalPERS,
including state agencies, cities, special purpose governments, and schools.
c. As of June 30, 2013, 1,678,996 California public employees, retirees, and their
Chapter 08 – Accounting for Fiduciary Activities—Agency and Trust Funds
8-7
Ch. 8, Solutions, 8-11 (Cont’d)
g. CalPERS is a fiduciary component unit of the State of California. Thus, it is blended
General Problem Information: Research Case – CalPERS
Learning Objective: 8-5
Topic: Pension Trust Funds
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Medium
8-12. Following are answers based on the 2013 fiscal year CAFRs for the City of Boston and
New York City. The answers to the questions will vary with the year of the CAFRs
examined; therefore, the answers provided serve as a guide to what should be considered
in the analysis.
a. For 2013 (based upon 2011 valuations) the unfunded actuarial accrued liability
(UAAL) was $2,908,516,000 for the OPEB-City and $3,060,632,000 for the OPEB-
General Problem Information: OPEB Plans
Learning Objective: 8-6
Topic: Other Postemployment Benefits
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: FN Reporting
Level of Difficulty: Medium
Chapter 08 – Accounting for Fiduciary Activities—Agency and Trust Funds
8-8
Ch. 8, Solutions (Cont’d)
8-13. a. As defined on the issue brief’s website, defined benefit plan provides governmental
employees with lifetime retirement income based upon years of service and final
b. When evaluating whether to shift from a defined benefit to a defined contribution
plan or to a hybrid plan, a government should consider risks, costs, and human
General Problem Information: Policy Issues Relating to Employee Pension Plans
Learning Objective: 8-5
Topic: Pension Trust Funds
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Reflective thinking, AICPA: FN Reporting
Level of Difficulty: Medium
8-14. You may wish to provide more specific requirements related to the research required
(e.g., at least two articles) and more specific guidelines related to the length and format of
Chapter 08 – Accounting for Fiduciary Activities—Agency and Trust Funds
8-9
Ch. 8, Solutions, 8-14 (Cont’d)
A few suggested articles include:
“GASB Improves Pension Accounting and Financial Reporting Standards” – the June 25,
General Problem Information: Research Case – Evaluating new pension standards
Learning Objective: 8-5
Topic: Pension Trust Funds
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Reflective thinking, AICPA: FN Critical thinking
Level of Difficulty: Medium
Chapter 08 – Accounting for Fiduciary Activities—Agency and Trust Funds
8–10
Solutions to Exercises and Problems
General Problem Information: Examine the CAFR
Learning Objective: 8-1
Learning Objective: 8-4
Topic: Various
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Medium
8-16. 1. a. 6. c.
General Problem Information: Various agency and trust fund issues
Learning Objective: 8-1
Learning Objective: 8-2
Learning Objective: 8-3
Learning Objective: 8-4
Learning Objective: 8-5
Topic: Various chapter topics
Bloom’s Taxonomy: Remember
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: FN Reporting
Level of Difficulty: Medium
8-17. 1. b. 6. c.
2. d. 7. b.
General Problem Information: Various agency and trust fund issues
Learning Objective: 8-1
Learning Objective: 8-2
Learning Objective: 8-3
Learning Objective: 8-4
Learning Objective: 8-5
Topic: Various chapter topics
Bloom’s Taxonomy: Remember
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: FN Reporting
Level of Difficulty: Medium
Chapter 08 – Accounting for Fiduciary Activities—Agency and Trust Funds
8–11
Ch. 8, Solutions (Cont’d)
8-18. a. SUNCOAST COUNTY
TAX AGENCY FUND
GENERAL JOURNAL
Debits Credits
1. TAXES RECEIVABLE FOR OTHER FUNDS
2. CASH 13,700,000
3. DUE TO OTHER FUNDS AND GOVERNMENTS 13,700,000
DUE TO COUNTY GENERAL FUND 5,818,294
Shares:
COMPUTATION
Taxes
Collected
1.5% Fee
Agency’s
Liability
County
10,333,000/24,843,000 * 13,700,000
= 5,698,269
+ 120,025
5,818,294
Bayshore
4,840,000/24,843,000 * 13,700,000
= 2,669,082
– 40,036
2,629,046
School
6,550,000/24,843,000 * 13,700,000
= 3,612,084
– 54,181
3,557,903
Towns
3,120,000/24,843,000 * 13,700,000
= 1,720,565
– 25,808
1,694,757
Debits Credits
4. DUE TO COUNTY GENERAL FUND 5,818,294
Chapter 08 – Accounting for Fiduciary Activities—Agency and Trust Funds
8–12
Ch. 8, Solutions, 8-18 (Cont’d)
b. SUNCOAST COUNTY
GENERAL FUND
GENERAL JOURNAL
Debits Credits
1. TAXES RECEIVABLE⎯CURRENT 10,333,000
ESTIMATED UNCOLLECTIBLE CURRENT TAXES 413,320
REVENUES 9,919,680
c. TOWN OF BAYSHORE
GENERAL FUND
GENERAL JOURNAL
1. TAXES RECEIVABLE⎯CURRENT 4,840,000
4. CASH 2,629,046
EXPENDITURES (COLLECTION FEES) 40,036
TAXES RECEIVABLE⎯CURRENT 2,669,082
d. The tax agency fund can prepare a statement of tax agency fund net
position reflecting the asset and liability balances of the fund. Additionally,