Chapter 08 - Accounting for Fiduciary ActivitiesAgency and Trust Funds

CHAPTER 8:

ACCOUNTING FOR FIDUCIARY ACTIVITIES

AGENCY AND TRUST FUNDS
OUTLINE

Number

Topic

Type/Task

Status
(re: 15/e)

Questions:
8-1
8-2
8-3
8-4
8-5
8-6
8-7
8-8
8-9
8-10

Distinction between agency and trust funds

Identifying trust funds and their purpose
Pension plan statements and disclosures
No fund equity in agency funds
Agency funds for pass-through funds
Investment pools
Investment gains in investment trust funds
Private and public purpose trusts
Evaluating pension plans
Accounting for pension expenses/expenditures

Distinguish
Explain
Explain
Explain
Define, explain
Explain
Explain
Distinguish
Explain
Explain

Same
Same
New
Same
Same
Same
New
Same
Same
New

Internet Case - PERS

OPEB Plans
Policy Issues Relating to Employee Pension
Plans

Locate, explain
Analyze
Analyze

Same
Case 8-3
New

Examine
Multiple Choice
Multiple Choice
Journal entries
JEs, analysis
Analysis
Journal entries
Calculate
Financial statements
Analysis

Same
8-2 revised
8-3 revised
Same
New
Case 8-2
8-7 revised
Same
8-9 revised
8-10 revised

Cases:
8-1
8-2
8-3

Exercises/Problems:
8-1
Examine the CAFR
8-2
Various agency and trust fund issues
8-3
Various agency and trust fund issues
8-4
Tax agency fund
8-5
Special assessment agency fund
8-6
Identification of fiduciary funds
8-7
Investment trust fund
8-8
Defined benefit pension plan
8-9
Defined benefit pension plan statements
8-10
Fiduciary financial statements

8-1

Chapter 08 - Accounting for Fiduciary ActivitiesAgency and Trust Funds

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
which it may engage. Generally, trust funds are more complicated than agency funds,
requiring greater representation and development of the beneficiarys interest.

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
used to account for and report the fund equity in pooled investments held by fund
participants who are external to the government operating the fund. Private-purpose trust
funds record and report principal and/or interest managed by a government for the benefit
of an individual, private organization, or another government. The distinguishing
characteristic is that the party benefiting from the trust must be external to the
government operating the trust. In pension and other employee benefits trusts a
government is managing benefits that belong to government employees. As can be seen,
in each case the government is acting as a fiduciary, or in the best interest of parties
outside the government.

8-3.

The GASB standards require two financial statements (a statement of plan net position
and a statement of changes in plan net position) and two schedules of historical trend
information (a schedule of funding progress and a schedule of employer contributions)
for pension financial reporting. In addition, notes to the financial statements and notes to
the required schedules disclose a number of descriptive items, including a plan
description, a summary of significant accounting policies, and description of
contributions and reserves.

8-4.

When an agency fund is used to account for assets, the assets belong to the party or
parties for whom the government acts as an agent, and not to the government itself. Thus,
agency fund assets are offset by liabilities equal in amount and no fund equity exists.

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
government (such as local government). For a pass-through agency fund to be
appropriate the government acting as the conduit must have no administrative or direct
financial involvement. If the pass-through government provides monitoring, is involved
in determining eligibility of fund recipients or programs, has discretion in allocating
funds, or finances some direct program costs a pass-through agency fund is not
appropriate.

8-2

Chapter 08 - Accounting for Fiduciary ActivitiesAgency and Trust Funds

Ch. 8, Answers (Cont'd)

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 fund; for
external financial reporting purposes each participant reports its proportionate share of
the pooled assets and liabilities. The agency fund of an internal investment pool is not
reported in external financial statements.
The accounting for an external investment pool differs in the type of fund used and the
manner in which the pools assets and liabilities are reported. An external investment
pool is reported in an investment trust fund and has participants that are outside the
government administering the investment pool. As such, the GASB standards require
that a trust fund be used to account for the investment pools resources. External
participants shares of net position of the fund and additions to and deductions from net
position are reported in the investment trust fund. Those participants have no claims on
specific assets of the trust.

8-7.

The GASB standards require that realized and unrealized gains and losses be reported in
aggregate as Change in Fair Value of Investments, which is a component of investment
income. While gains and losses are not reported as separate amounts in the financial
statements, they may be disclosed in the notes to the financial statements, if desired.
Governments may maintain a separate Allowance for Changes in Fair Value of Pooled
Investments account (a contra-asset account) to record all changes in fair value rather
than increasing and decreasing the balance of the investment accounts.

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
purpose trust is the government administering the trust. Since the beneficiary of the
private purpose trust is outside the administering government, the administering
government has a fiduciary responsibility to the beneficiary and as a result the private
purpose trust is reported as a private-purpose trust fund. A public purpose trust is
generally reported as either a permanent fund (i.e., the principal must remain intact) or a
special revenue fund (i.e., the income and/or principal may be spent for a specified
purpose).

8-9.

Three indicators that are useful in assessing the financial health of a pension plan are the
unfunded actuarial accrued liability, the funded ratio, and the difference between the
required contribution and the amount actually contributed. Information about the
unfunded actuarial accrued liability and the funded ratio can be found on the schedule of
funding progress. If the unfunded actuarial accrued liability is growing or the funded
ratio is decreasing over time it indicates that sufficient resources are not being provided
to cover the benefits earned by employees. The schedule of employer contributions

8-3

Chapter 08 - Accounting for Fiduciary ActivitiesAgency and Trust Funds

Ch. 8, Answers, 8-9 (Cont'd)

provides information on the percentage of the required contribution that has actually been
contributed to the plan. If actual contributions are not keeping pace with the required
contributions the plans actuarial accrued liability will continue to grow. Thus, the two
required schedules provide useful information in assessing the financial health of a
pension plan. The health of a plan is best determined by looking at the trend in the
information rather than looking at a single year.
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
amount contributed to the plan during the year regardless of pension cost. In proprietary
funds and in the governmental activities journal at the government-wide level, employers
would recognize the pension cost on the accrual basis. Therefore, if the amount
contributed to the pension fund for the year is less than the annual pension cost, the
difference should be added to net pension obligation (NPO). If the contribution is greater
than the annual pension cost, the difference should be deducted from the NPO.
Solutions to Cases
8-1.

a. CalPers was established by state law 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. Over 1.6 million California public employees, retirees, and their families are served
by CalPERS.
d. CalPERS administers 15 funds:
7 pension trust funds4 of which are for defined benefit plans and 3 of which
are for defined contribution plans.
1 OPEB fund.
3 agency fundsan old age survivors fund, a special deposits fund for
earmarked funds, and a contingency reserve fund for health care payments and
remittances.
4 proprietary fundsone long-term care fund, one deferred compensation
fund, and two health care funds.
e. The total value of fiduciary assets will vary with the most recent financial report. The
information can be obtained from the statement of fiduciary net position.
f. The change in pension fund net position will vary with the most recent financial
report. The information can be obtained from the statement of changes in pension net
position. (Recall that agency and proprietary fund information would not be reported
on a statement of changes in fiduciary net position.)
g. Refer to the most recent financial reports required supplementary information
schedule of funding progress. Funding ratios vary greatly by plan and year. For some
of the time periods reported, you will find a funded ratio greater than 100%, while
other ratios are much less than 100%. A ratio less than 100% indicates that the
actuarial value of the liabilities is greater than the actuarial value of the assets,
resulting in an under funded pension as of the valuation date.

8-4

Chapter 08 - Accounting for Fiduciary ActivitiesAgency and Trust Funds

Ch. 8, Solutions, Case 8-1 (Cont'd)

h. CalPERS is a fiduciary component unit of the State of California. Thus, it is blended

with other pension financial information in the states statement of fiduciary net
position and statement of changes in fiduciary net position, and is not reported at all
in the government-wide financial statements.
8-2.

Following are answers based on the 2010 fiscal year CAFRs for the City and County of
Denver 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 2010 the DERP Health Benefits plan AAL was $141,643,000. Over the period
from 2008 to 2010 the funded ratio has somewhat declined. There was about a 6
percent decline from 2008 to 2009, and since that time the funded ratio had a net
decline of about 5.4 percent. If the DERP Health Benefits plan is compared to the
DERP (which is the pension plan) we see that the pension plan is better funded than
the Health Benefits Plan. The funded ratio for the pension has ranged from 88.4
percent to 98.2 percent during the four year time period, while the Health Benefits
Plan has ranged from 63.8 percent to 75.0 percent.
b. The most recent year for which the AAL was calculated (2007) indicates a liability of
$62,135,453,000 for the New York City Health Benefits Plan. For the same time
period the funded ratio is 4.2 percent. Over the period from 2005 to 2007 the funded
ratio ranged from 0 to 4.2 percent.
c. Based on the data available, it would appear that Denver has funded a relatively
greater percentage of its health benefit plan than New York City. As a result, the
future financial burden and cost related to the currently earned benefits may not be as
great for Denver as for New York City. The size of the programs and economic
factors also play a role in each citys ability to fund its plans.

8-3.

a. As defined on the issue briefs website, defined benefit plan provides governmental
employees with lifetime retirement income based upon years of service and final
average salary. Defined contribution plans are similar to individual retirement savings
accounts where the investments are selected by the employee from a list of options
provided by the plan. The benefit at retirement depends on the value in the
employees account. Under a defined benefit plan, the government hence taxpayers
bear responsibility for future benefit payments, as well as market and inflation risk.
Defined contribution plans shift all the risk and responsibilities from the employer to
the employee.
A hybrid plan combines elements of both defined benefit plans and defined
contribution plans. They are intended to spread the risks associated with the pension
payments between the employer and the employee. In some cases employees are
required to participate in both a defined benefit and a defined contribution plan.

8-5

Chapter 08 - Accounting for Fiduciary ActivitiesAgency and Trust Funds

Ch. 8, Solutions, Case 8-3 (Cont'd)

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
resource goals. Each of these factors involves the government, governmental
employees, and taxpayers.
c. In 2011, 38 states offered a mandatory defined benefit plan, two states had a
mandatory defined contribution plan, six allowed a choice, and four allowed for
hybrid plans. Georgia, Michigan, and Utah recently introduced a mandatory hybrid
plan.
d. Each students memo should identify and support a position on the proposed change.
In evaluating each students performance on this case, we recommend placing more
weight on the quality and depth of analysis than on the students final conclusion.
Solutions to Exercises and Problems
8-1.

Each student will have an annual report from a different government unit; therefore, the
answers to these questions will differ from student to student.

8-2.

1.
2.
3.
4.
5.

a.
b.
a.
d.
c.

6.
7.
8.
9.
10.

b.
d.
a.
d.
c.

8-3.

1.
2.
3.
4.
5.

d.
a.
d.
c.
b.

6.
7.
8.
9.
10.

c.
b.
b.
a.
c.

8-6

Chapter 08 - Accounting for Fiduciary ActivitiesAgency and Trust Funds

Ch. 8, Solutions (Cont'd)

8-4. a.

LINCOLN COUNTY
TAX AGENCY FUND
GENERAL JOURNAL
Debits

1.

Credits

TAXES RECEIVABLE FOR OTHER FUNDS

17,200,000

AND GOVERNMENTSCURRENT
DUE TO OTHER FUNDS AND GOVERNMENTS

2.

CASH

17,200,000

8,400,000

TAXES RECEIVABLE FOR OTHER FUNDS

AND GOVERNMENTSCURRENT

3.

8,400,000

DUE TO OTHER FUNDS AND GOVERNMENTS

8,400,000

DUE TO COUNTY GENERAL FUND

1,414,560

DUE TO TOWN OF SMITHTON

2,245,320

DUE TO LINCOLN COUNTY CONSOLIDATED

SCHOOL DISTRICT

3,825,360

DUE TO VARIOUS TOWNSHIPS

4.

Shares:

COMPUTATION

County
Town
School
Townships

2,752,000/17,200,000 * 8,400,000
4,644,000/17,200,000 * 8,400,000
7,912,000/17,200,000 * 8,400,000
1,892,000/17,200,000 * 8,400,000

914,760

Taxes
Collected
= 1,344,000
= 2,268,000
= 3,864,000
= 924,000

1% Fee
+ 70,560
- 22,680
- 38,640
- 9,240

DUE TO COUNTY GENERAL FUND

1,414,560

DUE TO TOWN OF SMITHTON

2,245,320

Agency's
Liability
1,414,560
2,245,320
3,825,360
914,760

DUE TO LINCOLN COUNTY CONSOLIDATED

SCHOOL DISTRICT

3,825,360

DUE TO VARIOUS TOWNSHIPS

914,760

CASH

8,400,000

8-7

Chapter 08 - Accounting for Fiduciary ActivitiesAgency and Trust Funds

Ch. 8, Solutions, 8-4 (Cont'd)

b.

1.

LINCOLN COUNTY
GENERAL FUND
GENERAL JOURNAL

TAXES RECEIVABLECURRENT

Debits
2,752,000

ESTIMATED UNCOLLECTIBLE CURRENT TAXES

82,560

REVENUES

2.

2,669,440

CASH

1,414,560

TAXES RECEIVABLECURRENT

1,344,000

REVENUES (COLLECTION FEES)

70,560

c.

1.

TOWN OF SMITHTON
GENERAL FUND
GENERAL JOURNAL
TAXES RECEIVABLECURRENT

4,644,000

ESTIMATED UNCOLLECTIBLE CURRENT TAXES

139,320

REVENUES

2.

4,504,680

CASH

2,245,320

EXPENDITURES (COLLECTION FEES)

TAXES RECEIVABLECURRENT
d.

Credits

22,680
2,268,000

The tax agency fund can prepare a statement of tax agency fund net
position reflecting the asset and liability balances of the fund. Additionally,
the fund would be combined with any other agency funds that Lincoln
County has and the total of the assets and liabilities for the agency funds
would be shown in a single agency fund column on the statement of
fiduciary net position.

8-8

Chapter 08 - Accounting for Fiduciary ActivitiesAgency and Trust Funds

Ch. 8, Solutions (Cont'd)

8-5.
a.

Since the city is providing administrative services for debt for which it has
no legal obligation, the GASB standards indicate the services should be
accounted for using an agency fund.

b.

1.

LOCAL IMPROVEMENT DISTRICT FUND

GENERAL JOURNAL

ASSESSMENTS RECEIVABLECURRENT
ASSESSMENTS RECEIVABLEDEFERRED

Debits
500,000

Credits

4,500,000

DUE TO SPECIAL ASSESSMENT

BONDHOLDERSPRINCIPAL

2.

CASH

5,000,000

750,000
500,000

ASSESSMENTS RECEIVABLECURRENT
DUE TO SPECIAL ASSESSMENT
BONDHOLDERSINTEREST

250,000

ASSESSMENTS RECEIVABLECURRENT

500,000

ASSESSMENTS RECEIVABLEDEFERRED

3.

500,000

DUE TO SPECIAL ASSESSMENT

BONDHOLDERSPRINCIPAL

500,000

DUE TO SPECIAL ASSESSMENT

BONDHOLDERSINTEREST

250,000

CASH

750,000

8-9

Chapter 08 - Accounting for Fiduciary ActivitiesAgency and Trust Funds

Ch. 8, Solutions, 8-5 (Cont'd)

c.

Assets and liabilities of the special assessment agency fund would appear
in a separate column on the statement of fiduciary net position but will
appear in no other basic financial statements. If there are several agency
funds, Foothills may opt to provide a combining statement of agency funds
in its CAFR. The combining statement would display the assets and
liabilities for each agency fund in a separate column.

d.

Since the City of Foothills is not obligated in any manner for the Green
Acres special assessment debt, the debt should not be reported in
Foothills financial statements; however, the notes to the financial
statements should disclose the amount of the debt, as well as the fact that
the government is in no way liable for repayment but is only acting as an
agent for the property owners in collecting the assessments, forwarding
the collections to bondholders, and initiating foreclosure proceedings, if
appropriate.

8-6.

Fiduciary funds are described in a, c, d, f, i, and j. See explanations for

each fund type below.
a. Tri-Centennial Fund. This is a private-purpose trust fund since the
resources will benefit a broad constituency rather than just the citizens
of the city.
b. Perpetual Care Fund. This describes a permanent fund as the principal
amount must be kept intact, but earnings of the fund can be used to
provide care for the citys own cemeteries.
c. Poudre River Public Library District. Because city management simply
acts as a custodian for the resources of the funds, this fund functions
as an agency fund, a fiduciary fund.
d. School Impact Fee Fund. Since the city is acting in a custodial capacity
with no discretion in the use or distribution of these resources, the fund
is an agency fund.
8-10

Chapter 08 - Accounting for Fiduciary ActivitiesAgency and Trust Funds

Ch. 8, Solutions, 8-6 (Cont'd)

e. Cultural Services and Facilities. Since the resources are funds of the
government, the program primarily benefits the government, and the
majority of resources are provided on an ongoing basis from
performing arts center and museum fees, it should be accounted for as
a special revenue fund.
f. Payroll Fund. Since payroll deductions are the assets of other
governments/organizations (e.g., federal government, state government,
pension funds), an agency fund is used to account for the deductions.
g. Telephone Commissions Fund. The city would use a special revenue
fund, since it primarily benefits from using the commissions to defray
the costs related to operation of the jail.
h. Block Grant Fund. Since the city is required to provide matching funds,
the grant would be reported in a special revenue fund.
i. Health Benefits Fund. This is a pension and other employee benefit
trust fund since the city is providing a retirement benefit to those
outside of government (employees).
j. Unclaimed Property Fund. Since the state is maintaining the property
until such time as a legal claimant can be found, a private-purpose trust
fund would be used. Until the property reverts to the state it is
considered a benefit to a party outside of government (the as yet
unfound claimant).

8-11

Chapter 08 - Accounting for Fiduciary ActivitiesAgency and Trust Funds

Ch. 8, Solutions (Cont'd)

8-7. a.

GENERAL JOURNAL
Debits

Credits

CITY OF ALBERTVILLE GENERAL FUND:

EQUITY IN POOLED INVESTMENTS

900,000

INVESTMENTS

890,000

REVENUESCHANGE IN FAIR
VALUE OF INVESTMENTS

10,000

ALBERTVILLE SCHOOLS:
EQUITY IN POOLED INVESTMENTS

4,230,000

INVESTMENTS

4,200,000

REVENUESCHANGE IN FAIR
VALUE OF INVESTMENTS

30,000

RICHWOOD TOWNSHIP:
EQUITY IN POOLED INVESTMENTS

3,870,000

REVENUESCHANGE IN FAIR
VALUE OF INVESTMENTS

20,000

INVESTMENTS

3,890,000

8-12

Chapter 08 - Accounting for Fiduciary ActivitiesAgency and Trust Funds

Ch. 8, Solutions, 8-7 (Cont'd)

Debits
b.

Credits

INVESTMENT POOL TRUST FUND:

1. U.S. TREASURY NOTES

900,000

CERTIFICATES OF DEPOSIT

8,100,000

DUE TO CITYS GENERAL FUND

900,000

ADDITIONSDEPOSITS IN POOLED
INVESTMENTSALBERTVILLE SCHOOLS

4,230,000

ADDITIONSDEPOSITS IN POOLED
INVESTMENTSRICHWOOD TOWNSHIP

3,870,000

2. U.S. TREASURY NOTES

30,000

DUE TO GENERAL FUND

3,000

ADDITIONSINVESTMENT EARNINGS
ALBERTVILLE SCHOOLS

14,100

ADDITIONSINVESTMENT EARNINGS
RICHWOOD TOWNSHIP

12,900

CASH

3,010,000

CERTIFICATES OF DEPOSIT

3,010,000

DEDUCTIONSWITHDRAWAL FROM POOLED

INVESTMENTSRICHWOOD TOWNSHIP

3,010,000

CASH

3,010,000

(Note: See investment earning calculations below.)

3. CASH

50,000

UNDISTRIBUTED EARNINGS ON
POOLED INVESTMENTS

50,000

8-13

Chapter 08 - Accounting for Fiduciary ActivitiesAgency and Trust Funds

Ch. 8, Solutions, 8-7 (Cont'd)

Debits
4. ACCRUED INTEREST RECEIVABLE

Credits

28,000

UNDISTRIBUTED EARNINGS ON
POOLED INVESTMENTS

28,000

5. UNDISTRIBUTED EARNINGS ON
POOLED INVESTMENTS

78,000

DUE TO GENERAL FUND

11,700

ADDITIONSINVESTMENT EARNINGS
ALBERTVILLE SCHOOLS

54,990

ADDITIONSINVESTMENT EARNINGS
RICHWOOD TOWNSHIP

COMPUTATION:
EQUITY AT BEGINNING OF YEAR

11,310

Citys GF
$900,000

Schools
$4,230,000

Township
$3,870,000

TOTAL
$9,000,000

10.00%

47.00%

43.00%

100.00%

12,900

$ 30,000

$ 3,010,000

$ 3,010,000

% INTEREST
TREASURY NOTE DISTRIBUTION

3,000

14,100

WITHDRAWAL

$4,244,100

EQUITY IN POOL BEFORE INTEREST $903,000

% INTEREST
INTEREST DISTRIBUTION

c.

15.00%

70.50%
$

$ 11,700

54,990

872,900

$6,020,000

14.50%

100.00%

11,310

78,000

CITY OF ALBERTVILLE GENERAL FUND:

EQUITY IN POOLED INVESTMENTS

3,000

REVENUESINVESTMENT EARNINGS

3,000

ALBERTVILLE SCHOOLS:
EQUITY IN POOLED INVESTMENTS
REVENUESINVESTMENT EARNINGS

8-14

14,100
14,100

Chapter 08 - Accounting for Fiduciary ActivitiesAgency and Trust Funds

Ch. 8, Solutions, 8-7 (Cont'd)

Debits

Credits

RICHWOOD TOWNSHIP:
EQUITY IN POOLED INVESTMENTS

12,900

REVENUESINVESTMENT EARNINGS

CASH

12,900

3,010,000

EQUITY IN POOLED INVESTMENTS

d.

3,010,000

CITY OF ALBERTVILLE GENERAL FUND:

EQUITY IN POOLED INVESTMENTS

11,700

REVENUESINVESTMENT EARNINGS

11,700

ALBERTVILLE SCHOOLS:
EQUITY IN POOLED INVESTMENTS

54,990

REVENUESINVESTMENT EARNINGS

54,990

RICHWOOD TOWNSHIP:
EQUITY IN POOLED INVESTMENTS

11,310

REVENUESINVESTMENT EARNINGS

e.

11,310

The investment trust fund would not report the General Funds interest in
the pool since the General Fund is an internal participant. The General
Fund would report its interest in the investment pool in its financial
statements. Since the school is an external participant, the investment
trust fund would report the schools interest in the statement of fiduciary
net position and in the statement of changes in fiduciary net position.

8-15

Chapter 08 - Accounting for Fiduciary ActivitiesAgency and Trust Funds

Ch. 8, Solutions (Cont'd)

8-8.

Calculation of annual pension cost and net pension obligation (NPO).

Refer to Illustration 8-14 and related discussion in Chapter 8 for the
information needed to solve this problem.

a. Calculation of annual pension cost:

Annual required contribution

$ 606,700

Add: i X beginning NPO =

(.07 X $535,700)

37,499

Deduct: PV of beginning NPO

(268,920)

Annual pension cost

$ 375,279

b. Calculation of net pension obligation, December 31, 2014:

Annual pension cost (from part 1)

Less: Actual contribution

$ 375,279
(385,000)

Decrease in NPO during the year

NPO, January 1, 2014

(9,721)
535,700

NPO, December 31, 2014

$ 525,979

8-16

Chapter 08 - Accounting for Fiduciary ActivitiesAgency and Trust Funds

Ch. 8, Solutions (Contd)

8-9.
Credits

Debits
a.
INVESTMENTS

58,800

ADDITIONSCHANGE IN FAIR VALUE OF

INVESTMENTS

b.

58,800

STATE OF NODAK
PUBLIC EMPLOYEE RETIREMENT SYSTEM
STATEMENT OF CHANGES IN PLAN NET POSITION
FOR THE YEAR ENDED JUNE 30, 2014
(IN THOUSANDS OF DOLLARS)

ADDITIONS:
CONTRIBUTIONS
PLAN MEMBERS

EMPLOYER

112,100
197,800

TOTAL CONTRIBUTIONS

309,900

INVESTMENT INCOME
NET CHANGE IN FAIR VALUE OF INVESTMENTS
INTEREST AND DIVIDENDS

58,800
199,700

TOTAL INVESTMENT INCOME

258,500

TOTAL ADDITIONS

568,400

DEDUCTIONS:
ANNUITY BENEFITS

53,900

DISABILITY BENEFITS

14,000

REFUNDS TO TERMINATED EMPLOYEES

28,800

ADMINISTRATIVE EXPENSES

8,800

TOTAL DEDUCTIONS

105,500

NET INCREASE

462,900

NET POSITION, JULY 1, 2013

1,577,000

NET POSITION, JUNE 30, 2014

$2,039,900

8-17

Chapter 08 - Accounting for Fiduciary ActivitiesAgency and Trust Funds

Ch. 8, Solutions, 8-9 (Cont'd)

c.

STATE OF NODAK
PUBLIC EMPLOYEE RETIREMENT SYSTEM
STATEMENT OF PLAN NET POSITION
AS OF JUNE 30, 2014

ASSETS:
CASH

16,000

ACCRUED INTEREST RECEIVABLE

33,200

INVESTMENTS, AT FAIR VALUE*

2,002,000

EQUIPMENT AND FIXTURES

$25,200

LESS ACCUMULATED DEPRECIATION

22,100

3,100

TOTAL ASSETS

2,073,300

LIABILITIES:
ACCOUNTS PAYABLE AND ACCRUALS
NET POSITION HELD IN TRUST FOR PENSION BENEFITS

33,400
$2,039,900

* Beginning balance + adjustment (see part a)

d.

If the fund uses modified accrual the employer (Nodak) would report an
expenditure for the actual contribution made to the pension plan. If the fund
uses accrual accounting an expense would be reported for the annual
pension cost, with any difference between the amount actually contributed
to the plan and the annual pension cost increasing or decreasing the net
pension obligation.

At the government-wide level the reporting is made based on accrual

accounting; therefore, the reported expense would equal the annual pension
cost with any difference between actual contribution and annual pension
cost increasing or decreasing the reported net pension obligation.

8-18

Chapter 08 - Accounting for Fiduciary ActivitiesAgency and Trust Funds

Ch. 8, Solutions (Cont'd)

8-10.

Some of the errors noted include:

Each type of fiduciary fund should be reported in a separate column.

Therefore, the trust funds column should be separated into two
columns, one for the investment trust and one for the privatepurpose trust.

A total column is generally not used since the total is combining

different types of fiduciary funds.
Investments are to be reported at fair value. There needs to be an
indication as to whether investments are being reported at fair value.
While a trust fund may have capital assets and a capital lease
obligation, any capital assets would be reported net of depreciation
rather than at cost. An agency fund should not record a capital asset
or a capital lease obligation.
An agency fund should not report accounts payable.
The agency funds would not report net position held in trust.
However, an agency fund must report the liability (Due to Other Units
and Governments) to the participants for the assets held in the
agency fund. The agency liability has been misreported as net
position in the example given.
Net position held in trust for the county should not be reported.
Since the county is the administering government, the assets and
liabilities of the fiduciary funds related to the county would not be
reported on the fiduciary financial statements. Rather the
information would be reported by the appropriate fund in the
countys required fund and government-wide financial statements.

8-19