Governmental Entities Get Clearer ‘Fiduciary Activity’ Guidance

NJ State House

State and local governments should be consistent in defining what constitutes ‘fiduciary activity’ for pension plan financial reporting purposes, according to Statement No. 84 issued in January by the Governmental Accounting Standards Board.

Based in Norwalk, Conn., the GASB establishes financial accounting and reporting standards for state and local governments that follow generally accepted accounting principles.

As a general rule, fiduciary activity occurs when the governmental entity controls plan assets and has a fiduciary relationship with plan beneficiaries, the statement provided.

The guidance applies to reporting on both pension plans and other postemployment benefits.

“Section 457 defined benefit plans administered by state and local governments would use the criteria in Statement 84 to determine if they are fiduciary activities,” Kip Betz, a spokesman for GASB, told Bloomberg BNA Feb 9.

Prior to Statement No. 84, there wasn’t clear guidance regarding the characteristics that should be considered in deciding whether the state or local government has a fiduciary responsibility, Betz said.

“In the absence of authoritative guidance, preparers and auditors have tended to interpret government’s fiduciary responsibility in a variety of ways, which has resulted in inconsistency in practice on the reporting of fiduciary activities,” he said.

The standard articulated in Statement No. 84 is effective for financial reporting periods starting after Dec. 15, 2018, but the GASB encourages earlier application.

Control of Assets

According to Statement No. 84, a government controls the assets of an activity if it holds the assets or “has the ability to direct the use, exchange or employment of the assets in a manner that provides benefits to the specified or intended recipients.”

“Restrictions from legal or other external restraints that stipulate the assets can be used only for a specific purpose do not negate a government’s control of the assets,” the statement provided.

The statement also includes separate criteria to identify fiduciary component units and postemployment benefit arrangements that are fiduciary activities.


The guidance states that “governments should report fiduciary activities in the fiduciary fund financial statements of the basic financial statements.” The fiduciary funds that should be reported include pension and other employee benefit trust funds, investment trust funds, private-purpose trust funds and custodial funds.

The statement clarifies that governments should use the pension plan trust fund and other employee benefit trust funds to report on pension plans that are administered through trusts where contributions to the plan and earnings on those contributions are irrevocable, assets are dedicated to providing pensions or other benefits to plan members in accordance with benefit terms, and the assets are legally protected from creditors.

Further, the statement recommends that government pension plans also present a statement of fiduciary net position reflecting the plan’s financial position as of the end of the fiscal year, as well as a statement of changes in fiduciary net position reflecting the inflows and outflows of resources that increased or decreased its net position.

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