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Governmental Accounting--Ch 12: Trust and Agency Funds

Agency Funds
are conduit, or clearinghouse, funds established to account for assets (usually cash) received for and paid to other funds, individuals, or organizations. The assets thus received are usually held very briefly.
Intergovernmental Agency Funds
are used to alleviate some of the awkwardness caused by using numerous fund accounting entities in governments. These internal Agency Funds are also used to establish clear-cut audit trails, where a single transaction effects several funds. Thus, although a special imprest bank account will often suffice, some governments establish an Agency Fund, in which (1) receipts must be allocated among several funds or (2) a single expenditure is financed through several funds.
Tax Agency Funds (TAF)
are used to account for all taxes a government is responsible to collect (both its own taxes and taxes for other governments). However, only taxes receivable held for other governments are reported in this Fund GAAP-based financial statements.
Imprest Checking Account
is one to which deposits are made periodically in an account equal to the sum of the checks written thereon. When all checks written have cleared, the bank account balance will equal a predetermined amount, often zero. These are often used to enhance cash control and/or to facilitate bank to book reconciliations.
"Pure" Pass-Through Grants
the primary recipient serves only as a "cash conduit" between the grantor agency and the subrecipient. The primary recipient is a cash conduit if it has no administrative or direct financial involvement in the grant program. The government should record the receipt and disbursement of this in an Agency Fund rather than as revenues and expenditures.
Statement of Net Assets for a Tax Agency Fund (TAF) does not include this balance since money belongs to the administering government.
Trust Funds
The GASB classifies these, for financial reporting purposes, as Pension (or Other Postemployment Benefit) Trust Funds, Investment Trust Funds, and Private-Purpose Trust Funds. The flow of economic resources measurement focus and accrual basis of accounting are required for each type of this. Reporting is oriented towards providing accountability for the sources, uses, and balances or resources held in trust for others.
Pension Trust Funds
should be used to report resources that are required to be held in trust for the members and beneficiaries of defined benefit pension plans, defined contribution plans, other post-employment benefit plans, or other employee benefit plans.
Investment Trust Funds
should be used to report the external portion of investment pools reported by the sponsoring government, as required by GASB Statement No. 31.
Private-Purpose Trust Funds
should be used to report all other trust arrangements under which principal and income benefits individuals, private organizations, or other governments.
Cost-Sharing Plan
are essentially one large pension plan with cost-sharing arrangements. All risks and costs, are shared proportionately by the participating entities. Only one actuarial valuation is performed for this as a whole.
Single Employer (or Agent) Plan
each agency receives a separate actuarial valuation to determine its required periodic contribution.