On February 1, 2017, the Governmental Accounting Standards Board (GASB) issued Statement No. 84, Fiduciary Activities, establishing new criteria for identifying fiduciary activities and clarifying and changing the types of fiduciary funds reported, among other changes.
This two-part series on the new standard will explore its impact on the financial statements of tribes and their business enterprises, such as casinos. In this article, we’ll provide a general overview of the changes in the standard. The next article will outline the effects of the new standard on typical tribal fiduciary activities, including 401(k) plans and minors’ trust accounts.
Criteria for Determining Fiduciary Activity
Statement No. 84 establishes new criteria for determining if a particular item or activity is considered a fiduciary activity. These criteria generally focus on whether a government controls the assets of the potential fiduciary activity and who its beneficiaries are. Additional criteria identify component units that are fiduciary in nature.
The analysis required to determine if an entity has a reportable fiduciary activity differs for the following types of activities:
- Pension and other postemployment benefits (OPEB) component units, including defined benefit and defined contribution plans, such as 401(k)plans
- Other component units, potentially including minors’ trust accounts
- Pension and OPEB arrangements that aren’t component units
- All other fiduciary activities not covered above
Changes to Types of Fiduciary Funds
Statement No. 84 revises the four types of fiduciary funds that should be reported in a tribe’s financial statements to include:
- Pension and OPEB trust funds
- Investment trust funds (external portion of investment pools)
- Private purpose trust funds
- Custodial funds
The biggest change is the removal of an agency fund type—it’s been replaced with the term custodial funds, which should be used for fiduciary activities that don’t meet the definition of the other three fiduciary fund types.
A good resource for correctly assessing potential fiduciary activities is the flowcharts included in Appendix C of the statement.
Changes to the Presentation and Accounting of Fiduciary Funds
The statement requires that a statement of net position (SNP) and statement of changes in fiduciary net position (SCFNP) be presented for all fiduciary fund types, including custodial funds. This is a change from prior guidance, which didn’t require a SCFNP for agency funds.
Additionally, Statement No. 84 indicates that the SNP should only present a liability to the beneficiaries of the fund when an event has occurred that compels the government to disburse fiduciary resources.
The statement also requires the SCFNP to separately display investment earnings and costs as well as a subtotal for net investment earnings. Investment costs include:
- Investment management fees
- Custodial fees
- All other significant investment-related costs
The SCFNP should also disaggregate deductions by type and, if applicable, separately display administrative costs.
The statement is effective for periods beginning after December 15, 2018, which for most tribes will be fiscal years ending December 31, 2019, or September 30, 2020.
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The next issue of our Tribal Finance Quarterly will contain the second part of this series. In the meantime, if you have additional questions about how Statement No. 84 affects your tribe, contact your Moss Adams representative.