Guide to Guide to Fiduciary FundsFiduciary Funds

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Fiduciary FundsFiduciary Funds Used to account for funds held by Used to account for funds held by

Govt entity as a Trustee or AgentGovt entity as a Trustee or Agent Uses Accrual basis of accounting Uses Accrual basis of accounting

and Economic Resources and Economic Resources measurement focus (2 measurement focus (2 Exceptions)Exceptions)

Only Fund Statements are Only Fund Statements are prepared by Fund Typeprepared by Fund Type– Statement of Net AssetsStatement of Net Assets– Statement of Changes in Fiduciary Statement of Changes in Fiduciary

Net AssetsNet Assets– Combining Statements Combining Statements

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Categories of Fiduciary Categories of Fiduciary FundsFunds

Agency: Assets held temporarilyAgency: Assets held temporarily Private-Purpose Trust: P and I held for Private-Purpose Trust: P and I held for

benefit of individuals, organizations, benefit of individuals, organizations, or other governments (External)or other governments (External)– Very similar to Permanent Funds, except Very similar to Permanent Funds, except

may be expendable or non-expendablemay be expendable or non-expendable Investment Trust Fund: Multi-Investment Trust Fund: Multi-

government investment poolgovernment investment pool Pension Trust Fund: Govt is the Pension Trust Fund: Govt is the

sponsor of post-employment benefit sponsor of post-employment benefit planplan

Agency FundsAgency Funds Nature of FundNature of Fund

– Assets held for one or more intergovernmental Assets held for one or more intergovernmental agencies on a temporary basisagencies on a temporary basis

– Collect and disburse funds to other govt entities Collect and disburse funds to other govt entities usually charging fees (1-3%) for effortsusually charging fees (1-3%) for efforts

Accounting PeculiaritiesAccounting Peculiarities– No Revenue, expenses or Net Assets (Exception No Revenue, expenses or Net Assets (Exception

Number 1 to accrual and economic resources) Number 1 to accrual and economic resources) – Not a part of Government-wide financial reportingNot a part of Government-wide financial reporting– Combining Statements reported in CAFR (p 183) Combining Statements reported in CAFR (p 183)

Private-Purpose Trust Private-Purpose Trust FundsFunds

GeneralGeneral– Set up by trust agreements as Set up by trust agreements as

expendable or non-expendable; expendable or non-expendable; (Permanent funds are NE)(Permanent funds are NE)

– P and I benefit individuals, external P and I benefit individuals, external governments, or private organizations governments, or private organizations (City or County Industrial Development (City or County Industrial Development Corporation)Corporation)

Accounting and ReportingAccounting and Reporting– Investments at FMV (GASB #31)Investments at FMV (GASB #31)

Investment Trust FundsInvestment Trust Funds GeneralGeneral

– Government is the Sponsor of multi-government Government is the Sponsor of multi-government investment pool (State of Tennessee Investment investment pool (State of Tennessee Investment Pool) Counties might have a similar poolPool) Counties might have a similar pool

– Internal Pools (Within the reporting govt Internal Pools (Within the reporting govt entity:General Fund; Enterprise; Private-Purposeentity:General Fund; Enterprise; Private-Purpose

– External Pools (Multi-government reporting) External Pools (Multi-government reporting) Internal portion to various funds and external Internal portion to various funds and external portion to various governments representedportion to various governments represented

– Investments carried at FMV Investments carried at FMV

Pension Trust FundsPension Trust Funds Types of PlansTypes of Plans

– Single EmployerSingle Employer– Multi-EmployerMulti-Employer

Agency: Each contributor-employer has a Agency: Each contributor-employer has a separate account and is responsible for separate account and is responsible for keeping own contributions up-to-datekeeping own contributions up-to-date

Cost Sharing: Separate accounts are not Cost Sharing: Separate accounts are not maintained so unfunded liabilities are made maintained so unfunded liabilities are made up on a total trust fund basisup on a total trust fund basis

– Contributory: Employees contributeContributory: Employees contribute– Non-Contributory: Employer only Non-Contributory: Employer only

contributescontributes

Pension Trust FundsPension Trust Funds Types of Plans, ContinuedTypes of Plans, Continued

– Defined Benefit: Retirement benefits are set Defined Benefit: Retirement benefits are set before retirement begins (2% of average 5 before retirement begins (2% of average 5 year high salary for each year of service)year high salary for each year of service)

This is the type that is typically under-fundedThis is the type that is typically under-funded– Defined Contribution: Defines the amount of Defined Contribution: Defines the amount of

annual contribution only (6% of current salary)annual contribution only (6% of current salary) Reporting RequirementsReporting Requirements

– When PERS is part of reporting entity, must be When PERS is part of reporting entity, must be included in CAFR included in CAFR

Pension Trust FundsPension Trust Funds Reporting Requirements, ContinuedReporting Requirements, Continued

– When PERS is not a part of reporting entity, it is When PERS is not a part of reporting entity, it is not included in CAFRnot included in CAFR

– So, Tennessee Consolidated Retirement System So, Tennessee Consolidated Retirement System is reported in State CAFR, but TIAA-CREF is reported in State CAFR, but TIAA-CREF participation is not, even though the State participation is not, even though the State contributes to it on behalf of its employeescontributes to it on behalf of its employees

Financial Statements Financial Statements – Statement of Net AssetsStatement of Net Assets– Statement of Changes in Net AssetsStatement of Changes in Net Assets

Pension Trust FundsPension Trust Funds Schedules for Defined Benefit PlansSchedules for Defined Benefit Plans

– Schedule of Funding ProgressSchedule of Funding Progress– Schedule of Employer ContributionsSchedule of Employer Contributions

Notes to Financial StatementsNotes to Financial Statements– Defined Benefit Plans: Much more Defined Benefit Plans: Much more

information is required to be disclosedinformation is required to be disclosed– Defined Contribution Plans: Not as much Defined Contribution Plans: Not as much

information is required information is required – See pp 192-193See pp 192-193

About Wayne Lippman

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Wayne Lippman has forty years of experience in public accounting including twenty years with Price Waterhouse, where he served as a tax partner in the San Francisco and Oakland offices. He was previously Managing Tax Partner of the Walnut Creek office of Price Waterhouse.

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