Accounting for Public Sector and Civil Society Notes
Gage University College - Accounting for Public Sector and Civil Society (ACFN 3071) Notes
Chapter 1: Overview of Financial Reporting for Governmental and NFP Entities
1.1 Distinguishing Characteristics of Not-for-profit (NFP) Entities
Definition
Governmental and Not-for-Profit entities serve the public by providing goods and services for free or on a cost-reimbursement basis.
Key Differences from Business Organizations
Benefits are not proportional to resources provided.
Lack of a profit motive/Multiple objectives
Absence of transferable/absolute equity/ownership rights
Power rests in the hands of the people.
Non-exchange transactions occur.
There is public service and accountability.
There are wide scope of operations and regulation.
Adjustment approach to income and expenditure
They have different sources of financial resources.
Coercive actions exist.
There is publicity of Budget and Nature of Perspective
Statement of Financial Accounting Concepts No.4 Characteristics
a) Receipts of significant amounts of resources from resource providers who do not expect to receive either repayment or economic benefits proportionate to the resources provided.
b) Operating purposes that are other than to provide goods or services at a profit or profit equivalent.
c) Absence of defined ownership interests that can be sold, transferred, or redeemed, or that convey entitlement to a share of a residual distribution of resources in the event of liquidation of the organization.
Governmental entities provide goods and services not feasible by business without direct return.
Non-Government Organizations (NGOs) serve society with specific purposes and no profit-making intentions.
1.2 Sources of financial reporting standards for Governmental and NFP entities in Ethiopia
Authority to set accounting and reporting standards is divided between FASB and GASB due to government-owned not-for-profit organizations.
GASB, FASB, and IASB are parallel bodies under the Financial Accounting Foundation.
GASB has been replaced by IPSASB.
1.3 Objectives of Financial Reporting in Governments and in NFP Entities
Profit-making entities aim to increase owner's welfare, usually measured by profitability.
NFPs cannot be judged via profit maximization; their effectiveness is measured via resource utilization and goal attainment.
Accountability is vital in governmental entities, ensuring resources are spent as intended, which allows citizens to know where public resources are raised and spent.
Accountability assists users in evaluating budgetary integrity, operating performance, stewardship, and adequacy of systems and controls.
1.4 IPSAS versus IFRS
IPSAS is issued by the International Public Sector Accounting Standards Board (IPSASB), supported by the International Federation of Accountants (IFAC).
IFRS is a globally recognized set of standards for financial statement preparation by business entities.
IPSAS deals with financial reporting under cash and accrual bases, applicable to the public sector.
There are about 38 IPSASs and 3 recommended practice guidelines (RPGs).
1.5 The Conceptual Framework for Public Sector Accounting [The IPSASB]
1.5.1 Objectives of financial reporting
Financial reporting aims to provide useful information for accountability and decision-making.
Public sector entities focus on delivering services rather than profit; financial performance is assessed via accountability.
Users include General Purpose Financial Reporting users and Special Purpose Financial Reporting users.
1.5.2 Fundamental concepts Recognition, measurement, and disclosure concepts
Recognition
Admitting an item into a financial statement if it meets the element definition and can be measured with qualitative characteristics.
Two criteria for recognition are the definition of an element satisfaction and measurable qualitative characteristics.
Measurement
Attaching monetary value to an item, managing uncertainties using appropriate measurement bases.
Disclosures
Providing information on items that meet an element's definition but lack sufficient measurable qualitative characteristics.
Derecognition
Removing a previously recognized element from financial statements if changes warrant its removal.
1.6 Principles of Accounting and Financial Reporting for State and Local Governments
1.6.1 Activities of government
Besides the minimum requirements for general-purpose external financial reporting under the GASBS 34 financial reporting model, there are 13 principles of accounting and financial reporting within the integrated reporting model framework set forth in GASBS 34 in public sectors entities.
List of Principles
Principle 1: Accounting and Reporting Capabilities.
Principle 2: Fund and Fund Accounting Systems.
Principle 3: Types of Funds.
Principle 4: Number of Funds.
Principle 5: Reporting Capital Assets.
Principle 6: Valuation of Capital Assets.
Principle 7: Depreciation of Capital Assets.
Principle 8: Reporting Long-Term Liabilities
Principle 9: Basis of Accounting and Measurement focus of different funds.
Principle 10: Budgeting and Budgetary Control
Principle 11: Budgetary Reporting.
Principle 12: Transfer, Revenue, Expenditure,& Expense Account Classification
Principle 13: Annual Financial Reports.
1.6.2 Summary statement of principles
Accounting and Reporting Capacities: Present fairly with full disclosure, and demonstrate compliance with finance-related legal and contractual provisions.
Fund Accounting Systems: Organized and operated on a fund basis.
Types of Funds: Categorized as Governmental Funds, Proprietary Funds, and Fiduciary Funds.
Number of Funds: Maintain minimum required by law and sound financial administration.
Reporting Capital Assets: Distinction between general capital assets and those of proprietary and fiduciary funds.
Valuation of Capital Assets: Reported at historical cost.
Depreciation of Capital Assets: Depreciated over estimated useful lives unless inexhaustible.
Reporting Long-Term Liabilities: Distinction between fund long-term liabilities and general long-term liabilities.
1.6.3 Summary Accounting characteristics of fund types
Fund Accounting Systems
Organized and operated on a fund basis. Fund is a fiscal and accounting entity with self-balancing accounts for specific activities.
Fund Financial statements report detailed information about the primary government, including blended component units.
2. Types of Funds
a) Governmental Funds:
The General Fund accounts for all financial resources except those required to be accounted for in another fund.
Special Revenue Funds account for the proceeds of specific revenue sources legally restricted to use for specified purposes.
Capital Projects Funds account for financial resources used for acquiring or constructing major capital facilities.
Debt Service Funds account for accumulating resources for paying general long-term debt principal and interest.
Permanent Funds account for legally restricted resources where only earnings, not the principal, are used to support the primary government's programs.
b) Proprietary Funds:
Enterprise Funds account for operations similar to private businesses, financed primarily through user charges.
Internal Service Funds account for the financing of goods or services provided by one department to others on a cost-reimbursement basis.
c) Fiduciary Funds:
Account for assets held by the governmental unit as a trustee or agent for individuals, private organizations, and other governmental units.
Include pension (and other employment benefit) trust funds.
investment trust funds,
private-purpose trust funds
agency funds
3. Number of Funds
Establish and maintain only the minimum number of funds consistent with legal and operating requirements.
Report only one general fund, with blended component unit's general fund reported as a special revenue fund.
4. Reporting Capital Assets
Distinguish between general capital assets and proprietary/fiduciary funds' capital assets.
Capital assets of proprietary funds are reported in both government-wide and fund financial statements.
Capital assets of fiduciary funds are reported only in the statement of fiduciary net assets.
5. Valuation of Capital Assets
Report at historical cost, including capitalized interest and ancillary charges.
Donated capital assets are reported at estimated fair value at acquisition plus any ancillary charges.
6. Depreciation of Capital Assets
Depreciate over estimated useful lives unless inexhaustible or infrastructure assets using the modified approach.
Report depreciation expense in the government-wide statement of activities, proprietary fund statement, and statement of changes in fiduciary net assets.
7. Reporting Long-Term Liabilities
Distinguish between fund long-term liabilities and general long-term liabilities.
Report proprietary funds' long-term liabilities in their statement of net assets and the government-wide statement.
Report fiduciary funds' long-term liabilities in the statement of fiduciary net assets.
9. Measurement Focus and Basis of Accounting in the Basic Financial Statements
Measurement Focus: Economic resources (all assets) vs. current financial resources (cash and near-cash).
Basis of Accounting: Accrual (revenues when earned, expenses when incurred) vs. modified accrual (revenues when available and measurable, expenditures when liability incurred).
a. Government-wide Financial Statements: Use economic resource measurement focus and accrual basis.
b. Fund Financial Statements: Use modified accrual (governmental funds) or accrual (proprietary and fiduciary funds).
1.6.4 Budgeting and uses of budget
a. An annual budget(s) should be adopted by every governmental unit.
b. The accounting system should provide the basis for appropriate budgetary control.
c. Budgetary comparison schedules should be presented as required supplementary information (RSI) for the general fund and each major special revenue fund that has legally adopted annual budget.
The budgetary comparison schedule should present both:
The original
The final appropriated budgets for the reporting period as well as
Actual inflows, outflows, and balances stated on the governmental budgetary basis.
1.6.5 Classification of budget
There are five classifications of budgets and two types within each classification;
i. Capital or Current
iv. Tentative or enacted
ii. General or Special
v. Fixed or Flexible
iii. Executive or Legislative
1.6.6 Approaches to budgeting
There are different types of budgetary approaches which differ to each other in their emphasis on planning, control and evaluation. These approaches fall in to two categories: Modern and Traditional
The modern also called rational approach consists of:
Performance Budgeting
Planning-Programming-budgeting (PPB)
Zero-Base-Budgeting (ZBB)
Traditional Approach-
Object-Of-Expenditure (OOE) budgeting
Chapter 2: International Public Sector Accounting Standards [IPSAS]
2.1 Activities of Government
There are about 38 IPSASs and 3RPGs in public sector entities.
Focus on the following IPSASs: IPSAS 21, IPSAS 22, IPSAS 23, IPSAS 24, and IPSAS 2.
Two basic types of governmental financial statements: government-wide and fund financial statements.
2.2 Summary statement of principles
Principles are guidelines followed by professionals.
GAAPs include valuation, matching, continuity, monetary, revenue realization, and entity principles.
Governmental units use twelve GAAPs developed by GASB.
Activities of government are classified as:
Governmental-type activities
Business-type activities
Fiduciary activities
Twelve GAAPs Used by Governmental Units
Principle # 1 Accounting & Reporting Capabilities
a) To present fairly & with full disclosure the financial operation of the funds & account groups of the governmental unit in conformity with generally accepted accounting principles (GAAP)
b) To determine & demonstrate compliance with finance-related legal and contractual provisions.
Governmental units may prepare two sets of financial statements if laws require practices inconsistent with GAAP.
One set in compliance with legal requirements
One set in conformity with GAAP
Principle # 2 Fund Accounting System (Fund defined)
Governmental accounting systems should be organized & operated on a fund basis.
"A fund is defined as a fiscal & accounting entity with a self-balancing set of accounts recording cash & other financial resources, together with all related liabilities & residual equities and balances, & changes there in, which are segregated for the purpose of carrying on specifies activates or attaining certain objectives in accordance with special regulations, restrictions or limitations."
Principle #3 Types of Funds
Governmental entities use seven types of funds classified into three major categories:
I. Governmental funds:
The General Fund
Special Revenue Funds
Capital Project Fund
Debt Service Funds
Permanent Fund
II. Proprietary Funds:
Enterprise Funds
Internal Service Funds
III. Fiduciary Funds
Trust And Agency Funds
I. Governmental funds
The General Fund accounts for everything else. Bread-and-butter services: police, fire, social services, sanitation, etc.
Special Revenue Funds maintained to account for the proceeds of specific revenue sources legally restricted to expenditure for specific purposes.
Capital Project Fund opened and used to account for financial resources to be used for the acquisition or construction of major capital facilities.
Debt Service Funds opened to account for the accumulation of resources for & the payment of general long term debt principal & interest.
Permanent fund is used to account for permanent endowments where earnings are used for public purposes.
II. PROPRIETARY FUNDS
Used to account for activities involving business-like interactions, either within the government or outside of it. Reporting resembles what would be used by a private business.
Enterprise Funds established to account for operations financed and operated in a manner similar to private business enterprises.
Internal Service Funds established to account for the financing of goods or services provided by one department or agency to another on a cost reimbursement basis.
III. FIDUCIARY FUNDS
Contain resources held by a government but belonging to individuals or entities other than the government (e.g., a trust fund for a public employee pension plan).
Kinds of Funds – Expendable and Non-expendable
Expendable funds used to account resources which have to be expended within one year.
Non-Expendable Funds are used when maintenance of capital is desired, and the unexpended funds are not meant to be returned.
Principle #4 Numbers of Funds
Governmental units should establish and maintain funds required by law & sound financial administration, while minimizing unnecessary funds.
Principle #5 Reporting Capital Assets
Distinction between general capital assets and capital assets of proprietary and fiduciary funds. Capital assets of proprietary funds should be reported in both the government-wide and fund statements. Proprietary fund is to accounts for operations
Capital assets of fiduciary funds should be reported in only the statement of fiduciary net assets.
Principle #6 Valuation of Capital Assets
Capital assets reported at historical cost including capitalized interest and ancillary charges. Donated capital assets reported at estimated fair value at acquisition.
Principle #7 Depreciation of Capital Assets
Capital assets should be depreciated over their estimated useful lives unless they are either inexhaustible or are infrastructure assets using the modified approach.
Principle # 8 Reporting Long-Term Liabilities
Distinction between fund long-term liabilities and general long-term liabilities. Long-term liabilities directly related to and expected to be paid from proprietary funds. should be reported in the proprietary fund statement of net assets and in the government-wide statement of net assets. Long-term liabilities directly related to and expected to be paid from fiduciary funds should be reported in the statement of fiduciary net assets.
Principle # 9 Measurement Focus and Basis of Accounting in the Basic Financial Statements
a) Government-wide Financial Statements: Prepared using the economic resources measurement focus and the accrual basis.
b) Fund Financial Statements: Use modified accrual or accrual basis as appropriate.
Governmental Funds Basis of Accounting: Revenues and expenditures recognized on the modified accrual basis.
Proprietary Fund Basis of Accounting: Revenues and expenses recognized on the accrual basis.
Fiduciary fund Basis of Accounting: Revenues and expenses (or expenses as appropriate) should be recognized on the basis consistent with the fund’s accounting measurement objective.
Inter fund transfer Basis of Accounting: Transfers should be recognized in the accounting period in which the inter fund receivable and payable arise.
Principle# 10 Budget and Budgetary Accounting
i. An annual budget (s) should be adopted by every governmental unit.
ii. The accounting system should provide the basis for appropriate budgetary control.
iii. Budgetary comparison schedules (statements) should be included (as a supplementary information) in the appropriate financial statements and schedules for governmental funds for which an annual budget has been adopted.
Principle #11 Budgetary Reporting
Budgetary comparison schedules should be presented for the General Fund and each major special revenue fund that has a legally adopted budget as part of the required supplementary information (RSI).
Principle #12 Classification and Terminology
a. Transfers should be classified separately from revenues and expenditures or expenses in the basic financial statements.
b. Proceeds of general long-term debt issues should be classified separately from revenues and expenditures.
c. Governmental fund revenues should be classified by fund and source. Expenditures should be classified by fund, function, organization unit, activity, character, and principal classes of objects.
d. Proprietary fund revenues reported by major sources, and expenses classified in the same manner as similar businesses.
e. The statement of activities should present governmental activities at least at the level of detail in the governmental fund statement of revenues, expenditures, and changes in fund balance.
Principle #13 Financial Reporting
Interim financial reports and Comprehensive Annual Financial Reports (CAFR)
The five combined statements that comprise the GPFS and that must be included in the financial section of a CAFR are
Combined balance sheet- all fund types and account groups
Combined statement of revenues, expenditures and changes in fund balances- all governmental fund types.
Combined statement of revenues, expenditures and change in fund balances- budget and actual- general and special revenue fund types
Combined statement of revenue, expenses, and changes in retained earnings (or equity)- all proprietary fund types.
Combined statement of cash flows- all proprietary fund types and non-expendable trust funds.
2.3 Impairment of Non-Cash-Generating Assets [IPSAS 21]
Impairment is a permanent value reduction of a company's assets.
Impairment is a loss in the future economic benefits or service potential of an asset, over and above the systematic recognition of the loss of the asset’s future economic benefits or service potential through depreciation or Amortization.
Cash generating assets are assets held with the primary objective of generating a commercial return where as Non-cash generating assets are assets other than cash-generating assets.
A non-cash generating asset is impaired when the carrying amount of the asset exceeds its recoverable service amount.
Recoverable service amount is the higher of a non-cash-generating asset’s fair value less costs to sell and its value in use.
2.4 Disclosure of Financial Information about the General Government Sector [IPSAS 22]
The objective of this Standard is to prescribe disclosure requirements for governments that elect to present information about the general government sector (GGS) in their consolidated financial statements.
2.5 Revenue from Non-Exchange Transactions (Taxes and Transfers) [IPSAS 23]
An exchange or exchange-like transaction is one in which each party receives and sacrifices something of approximate equal value.
This Standard addresses revenue arising from non-exchange transactions. Non-exchange transactions are transactions that are not exchange transactions.
In a non-exchange transaction, an entity/Government receives or gives value from another entity without directly giving or receiving value to another entity without directly receiving approximately equal value in exchange.
2.6 Presentation of Budget Information in Financial Statements [IPSAS 24]
IPSAS 24, Presentation of Budget Information in Financial Statements, requires that financial statements include a comparison of budget and actual amounts on a basis consistent with that adopted for the budget.
2.7 Cash Flow Statements [Cash Basis IPSAS]
The cash flow statement identifies (a) the sources of cash inflows, (b) the items on which cash was expended during the reporting period, and (c) the cash balance as at the reporting date.
The cash flow statement shall report cash flows during the period classified by operating, investing, and financing activities.
An entity presents its cash flows from operating, investing, and financing activities in a manner that is most appropriate to its activities.
The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations of the entity are funded:
By way of taxes (directly and indirectly); or
From the recipients of goods and services provided by the entity.
Chapter 3: Budgeting and Performance Reporting
3.1 Budgeting in the Public Sector
Budgeting is a process of looking at a business’ estimated incomes and expenditures over a specific period in the future, allowing a business to see if they will be able to continue operating at their expected level with these projected incomes and expenditures.
Budgeting is the process of allocating scarce resources to unlimited demands.
Question to prepare a budget
Where will we get the money from?
How much can we send?
Why will we spend it?
3.2 Classification of budget
States and local governments typically prepare and utilize several types of financial plans. It is therefore important to distinguish among the various types of budgets, to understand the phases through which each may pass and to be familiar with commonly used budgetary terminology.
Capital or Current
Tentative or enacted
General or Special
Fixed or Flexible
3.3 Approaches to budgeting
Different types of budgetary approaches which differ to each other in their emphasis on planning, control and evaluation. These approaches fall in to two categories: Modern and Traditional
Modern (Rational) Approaches to budgeting
The modern approaches to budgeting are sometimes called rational. That is because they all advocate thinking carefully about the relationship of inputs, with a special concern for the outputs.
Planning-Programming-budgeting (PPB)
Performance Budgeting
Zero-Base-Budgeting (ZBB)
3.4 Budgets and Outturn Reporting (IPSAS 24) Performance Budgeting and Reporting
Outturn reports are used to report to the Department any variations between the reported cargo and the cargo that was actually unloaded from the ship or aircraft including surplus or short landed cargo.
Budget Performance Report is the comparison of planned budget and actual performance.
A performance report is a report on the performance of something. They are routinely produced by government bodies which, being financed by public money, are required to show that the money was spent efficiently and usefully.
Chapter 4: Accounting for General and Special Revenue Funds
4.1 Definitions and purposes
General Fund is used for general governmental activities such as police, administration and the like.
Special Revenue Fund are established to account for general governmental financial resources that are restricted by law or contractual agreements to specific purpose (s) and special revenue funds are exist for the life of restriction.
The general fund and the special revenue funds have different purposes, but they are both revenue funds, and the accounting and reporting procedure is the same for both.
Accounting Characteristics
Fixed assets are not capitalized in either fund. Their purchase is considered as expenditure, the same as for salaries or utilities.
Similarly the same categories of funds account for only those liabilities incurred for normal operations that will be liquidated by use of fund assets.
4.2 Budgetary accounting
The two classifications of budget for governmental units are the same as those for business enterprises.
Three general ledger control accounts are needed to provide budgetary control; Estimated Revenue, Appropriations and Encumbrances.
Budgetary Accounts include Estimated Revenues, Appropriation, Encumbrance, Estimated OFSs, and Estimated OFUs
4.3 Revenue accounting
Revenue in accounting refers to the entire amount of money made through selling products and services from a company’s core operations.
Defining what exactly revenue is and when it is recognized is a procedure called revenue recognition.
The revenue calculation formula:
4.4 Expenditure accounting financial statements
Expenditure represents a payment with either cash or credit to purchase goods or services. It is recorded at a single point in time (the time of purchase), compared to an expense that is recorded in a period where it has been used up or expired
Expenditures in accounting comprise two broad categories: capital expenditures and revenue expenditures.
Capital Expenditure
Revenue Expenditure
Deferred Revenue
Chapter 5: Accounting for Capital Project Fund
5.1. Definitions and purposes
Capital Projects Fund (CPF) is one of governmental funds created to account for all resources to be used for the construction or acquisition of designated capital assets by a government except those financed by proprietary or fiduciary funds.
They do not account for the acquisition of smaller fixed assets nor debt repayment. Capital Projects Funds (CPF) account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by proprietary funds & trust funds).
5.2. Classification of general capital assets
Four general ledgers (2 funds and 2 accounts groups) are emerged in utilization capital project fund of which two are funds & two are account groups.
Capital Projects Fund (CPF)
General Long Term Debt Account Group (GLTDAG)
General Fixed Assets Account Group (GFAAG)
Debt Service Fund (DSF)
5.3. Sources and uses of cash flows
Sources of Capital Project Funds include:
Long-term debt.
Grants from other governmental units,
Proceeds of dedicated taxes,
Transfers from other funds,
Gifts from individuals or organizations
5.4. Methods to acquire general capital assets
Outright purchase from fund cash.
By construction, utilizing the government’s own workforce.
By construction, utilizing the services of private contractors.
By capital lease agreement.
Chapter 6: Accounting for Debt Service Fund
6.1 Definitions and purposes
From time to time governmental entities have a shortage of cash to carry out their activities. In such cases, governmental entities may turn to borrowing to supply the needed cash.
GENERAL CHARACTERISTICS OF DEBT SERVICE FUND
DSF is used to account for both the repayment of the principal and payment of interest of the long-term debt when they are due.
DSF is governmental funds and therefore is Expendable.
As expendable funds, DSF use the modified accrual basis of accounting.
The operations of DSF do not involve the use of purchase orders and contracts for goods and services. So the Encumbrance accounting is not needed.
6.2 General long-term liabilities
Types of Long Term Debts includes Bond.Term Bonds and Serial Bonds
Term Bonds- term bonds are bonds whose principal is repaid in lump-sum at their maturity date.
Serial Bonds - this are bonds, which have periodic maturities. The principal of a serial bond so repaid at various ore determined dates over the life of the issue.
6.3 Sources and uses of cash flows
Sources of finances (resources) include:
A. Special Taxes
B. Investments
C. Refinancing
D. Bond Premium and Accrued Interest on Bonds Sold
E. Residual Equity Transfers
Appropriations budget of DSF must provide for the payment of all interest on General long-term debt that will become legally due during the budget year, and for the payment of any principal amounts that will become legally due during the budget year.
With the accrual basis used by the governmental fund types which only relates to DSF is that, interests on long term debt is not accrued.
Chapter 7: Accounting for Internal Revenue Funds
7.1 Accounting principles of proprietary funds
Proprietary funds are created by government to account for business-type activities that provide goods and services to users for charges.
The accounting and financial reporting principles are similar to those for commercial business entities:
Uses of Proprietary Funds
Enhances management commitments.
Generate income and wealth
To compare benefits and costs of goods and services.
To know the full cost of goods and services.
To determine appropriate prices or fees of goods and services and
To decide whether to produce or outsource these goods and services.
Features of Proprietary Funds-Accounting
Apply full accrual basis
Focus on the flow of economic resources
Capital assets and long-term liabilities recorded within the funds
Use flexible rather than fixed budgets.
Depreciation expense and accumulated depreciation are recorded.
Uses revenue and expense accounts instead of expenditure accounts.
Follows the same accounting procedures used by businesses.
7.1.2 Types of Proprietary Funds
Internal service funds (ISF) are created to improve the management of resources and generally provide goods or services to departments or agencies of the same government and others on a cost-reimbursement basis.
Enterprise funds used to account for activities in which goods or services provided to the general public on a user charge (fee) basis
7.2 Financial statements of proprietary funds
Because proprietary funds follow business-type accounting principles, these funds prepare the same f/ statements that businesses do:
A statement of net assets (balance sheet);
A statement of revenues, expenses, and changes in fund net assets (equivalent to an income statement); and
A statement of cash flows (differs under GASB).
Statement of Cash Flows- GASB requires the preparation of the cash flows in the FS for all Proprietary funds and non-expendable trust funds:
a. Cash Flow from operating activities
b. Cash flow from non-capital financing activities
c. Cash Flow from Capital and related Financing activities
d. Cash Flows from investing activities
Chapter 8: Accounting for Fiduciary Funds
8.1 Features and Principles of Fiduciary Funds
Fiduciary funds: Fiduciary funds are those funds that are used to account for assets held by a governmental unit in a trustee capacity or as an agent for individuals, private organizations, and other governmental units. These include:
Agency Funds
Pension Trust Funds
Trust funds differ from agency funds principally in degree. This statement indicates that “Fiduciary Funds account for assets held by governmental unit, acting as trustee or an agent for individuals, organizations, other governmental units or other funds of the same governmental unit”.
Agency funds are used only if a government holds resources in a purely custodial capacity for others. Regulations include pertinent statutes, ordinances, wills, trust indentures, and other instruments of endowment, resolutions of the governing body, statements of purposes of the fund, kinds and amounts of assets held, and others.
8.2 Accounting principles of fiduciary funds
Statement of Fiduciary Net Assets
Statement of Changes in Fiduciary Net Assets
Agency fund financial information is reported in a separate column of the statement of fiduciary net assets. Because agency funds do not have net assets, they are not included in the statement of changes in fiduciary net assets
8.3 Accounting for agency fund
An agency fund is an assemblage of funds that one government agency holds on behalf of another government agency and is a type of fiduciary fund used in governmental accounting to account for assets held by a government on behalf of another entity.