GASB-84: Diving Into Implementation

February 7, 2020 | Article

By Joe Escobar

The changes resulting from Governmental Accounting Standards Board Statement No. 84, Fiduciary Activities (GASB-84) are in the process of being implemented for many governments. However, there are still questions and matters to be determined in the implementation of GASB-84. GASB has published an Implementation Guide that will help governments with many situations they may have. However, those clarifications within the Implementation Guide have raised additional issues. GASB-84 is one standard for which governments might not be able to look to a peer for assistance, as seemingly similar activities could have very different consequences.

Potential Impacts on Benefit and Pension Plans
For most single-employer defined benefit pension and OPEB plans that are held in irrevocable trusts, GASB-84 may have minimal change from reporting prior to GASB-84. For defined benefit pension and OPEB plans, and for external investment pools that have been presented as component units that are fiduciary in nature, minimal changes will occur based on implementation of GASB-84 for most governments. Plans recognized as pension or OPEB plans held in trust that are not component units, or for situations in which assets are being accumulated for pensions and OPEB that are not part of the government’s reporting entity, will also be fiduciary activities. Such asset accumulation activities were reported in agency funds prior to GASB-84. For defined benefit plans, only one major reporting change was made by GASB-84 solely for these entities: GASB-84 now requires a liability to be recognized, based on the event occurring, that requires the employer to disburse plan resources to beneficiaries or investors. There is also a clarification on investment cost.

Criteria for Analysis
GASB-84 makes it much more difficult to determine other potential fiduciary activities. Governments must focus on the following criteria, all of which must be met for assets to be considered fiduciary activities:

  • The assets are controlled by the government, with “control” occurring in many ways
  • The assets are not derived exclusively from the government’s own revenues or from transactions that are primarily taxation or grant driven, except for pass-through grants without administrative involvement
  • The assets have one or more of the following elements:
    • They are administered through a trust usually found in pension or OPEB irrevocable trusts
    • The assets are for the benefit of individuals and the government does not have administrative or direct financial involvement with the assets
    • The assets are for the benefit of organizations beyond the government’s reporting entity

Administrative Involvement
The administrative involvement and direct financial involvement provisions are extremely difficult to understand. Using federal grant activities as an example, administrative involvement may include:

  • Monitoring of subrecipients for compliance
  • Determining eligible recipients or projects (even if the grantor establishes criteria)
  • Having discretion on how funds are allocated

In the same sense, direct financial involvement includes the financing of program costs due to a grantor-imposed matching requirement (commonly known as matching or level of effort).

Student activity funds may require special scrutiny based on administrative involvement decisions. The Implementation Guide does not directly answer if a fiduciary activity is present or not regarding these funds for clubs and similar organizations.

Other Major Changes in Reporting
Another major change made by GASB-84 is the reporting of clearing account, payroll withholding and similar activity that may have formerly been presented in agency funds. Due to GASB-84, most transactions and results of operations of such funds will now be reported in the originating governmental or business-type activity. In the past, these activities were technically allowable in the General Fund, but for operating purposes were reported in agency funds. Beginning balance restatements may be needed in governmental and proprietary funds to implement GASB-84 due to the removal of these funds from the fiduciary statements. After implementation of GASB-84, custodial funds will only be used to report fiduciary activities not presented in pension (and other postemployment benefit trust funds), investment trust funds or private-purpose trust funds.

Presentation, disclosure and audit procedures may also change due to GASB-84—the impact is not just cosmetic! If you have any questions on GASB Statement No. 84 implementation and reporting, our government team can help.

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