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Project Pages

Fiduciary Responsibilities

Project Description: The objective of this project is to assess whether additional guidance should be developed regarding the application of the fiduciary responsibility criterion in deciding whether and how governments should report fiduciary activities in their financial reports.

Status: Added to Research Agenda: April 2010

• Background
• Major Research Issues
• Project History
• Current Developments
• Research Work Plan
• Project staff:
  • Teddy Minch
  • Lisa Parker

Fiduciary Responsibilities—Project Plan

Background: The process of implementing GASB Statements No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, and No. 27, Accounting for Pensions by State and Local Governmental Employers (issued in November 1994) triggered numerous technical inquiries as to whether an employer should report a particular pension plan as a pension trust fund.   Existing standards did not provide a basis for a clear answer to those questions.  Moreover, staff became aware that, in the absence of authoritative guidance, preparers and auditors have tended to interpret government’s fiduciary responsibility in a variety of ways, ranging from very broadly to more narrowly (for example, focusing on custody of the trust assets).

During the deliberations that led to the issuance of Statement No. 32, Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans, in October 1997, the Board recognized that the definition of fiduciary funds provided in NCGA Statement 1, as amended, and the fiduciary responsibility provisions in Statement 14, paragraph 19, may not be sufficiently descriptive to assist all governments in determining if a potential fiduciary activity should be reported as a trust or agency fund.  The Board identified administrative involvement and investment functions as two possible characteristics of fiduciary responsibility in this situation.  However, because modifying fund reporting requirements was beyond the scope of that project, the nonauthoritative guidance was presented in the Basis for Conclusions.

Issues regarding whether, or in what way, fiduciary activities should be included in employers’ financial reports also arose during the development of the financial reporting model promulgated in Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments.  In Statement 34, the Board distinguished between (a) governmental and proprietary funds, which can be used to support the government’s programs or other services, and (b) fiduciary funds, which are held in a trustee or agent capacity for others.   Statement 34 excludes fiduciary activities from the government-wide financial statements, because they cannot be used to support the government’s programs and services, but requires that fiduciary funds and component units be reported in fund financial statements, in view of the government’s stewardship responsibility for them.

Technical inquiries concerning financial reporting for fiduciary activities continue to come to the staff. For example, questions have arisen regarding reporting of state prepaid tuition plans (Internal Revenue Code Section 529 Savings Plans), which have grown in popularity and dollar significance over the past decade.   

Accounting and Financial Reporting Issues:

• Should the determination of whether a government has a fiduciary responsibility be based on a traditional fiduciary view, on a legal trustee notion, on required contributions to a benefit plan, on management or investing responsibilities, or on some other combination of criteria depending on the type of fiduciary relationship?
• Is different guidance appropriate for different types of fiduciary activities (defined benefit, defined contribution, deferred compensation, and so forth)?
• If a stand-alone business-type activity also engages in fiduciary activities, should the fiduciary activities be reported? If so, how?
• If one government reports a multi-government fiduciary activity (such as a multiple-employer defined benefit plan), do the other governments still have a fiduciary responsibility that requires some form of reporting?
• Which governments are most likely to have private-purpose trust funds and what are the financial statement information needs of those particular users?
• Does the notion of fiduciary responsibility need to be modified or applied differently for agency funds, and should a different term be used to describe agency funds in order to assist a user’s understanding of a governmental entity’s fiduciary funds held by a government?
• What decision-useful or accountability information would be needed to meet user needs regarding a government’s fiduciary activities?
• What additional or different disclosures are appropriate for activities for which a government has fiduciary responsibility?
• How do the decisions reached in this project impact other accounting guidance, such as reporting pass-through grants and food stamps under Statement 24 and reporting endowments under Statements 33?

Project History: The project was added to the research projects list in 2000.   The project was transferred from the research agenda to the potential projects list in January 2006.   In April 2008, the project was combined with the project reexamining Statement 14. In November 2009, the Board decided to remove fiduciary responsibilities from the scope of the Statement 14 reexamination project and add it to the potential projects list. In 2010, additional research was conducted regarding user needs. Based on that, a draft project prospectus was prepared and presented to the GASAC at its October 2010 meeting. A project prospectus was presented to the GASB at its December 2010 meeting.

The completed research and a project prospectus were discussed and feedback was provided at the February 2011 GASAC meeting. At that time the project was ranked in the top 5 by the GASAC.

The GASAC also reviewed a draft report summarizing the results of the survey on fiduciary activities and the staff’s conclusions at its March 2012 meeting.

Current Developments: At its February 2013 meeting, the GASAC ranked the project third in priority among research and potential projects. The staff will conduct further research on the above questions to address whether and how governments should report fiduciary activities in their financial reports.

Research Work Plan: