Governmental Accounting

Chapter 8
Agency Funds and Cash and Investment Pools
I) Introduction
A) Nature of Fiduciary activities
B) Private Purpose vs. public purpose trust funds
C) Financial reporting of fiduciary activities
II) Agency Funds
A) Introduction and Purpose
1. Used to account for assets belonging to other parties for hich the
govern!ental unit is acting as agent.
a. No fund e"uity ## all assets offset by e"ual a!ount of liabilities
$. Co!!on e%a!ples
a. &!ployee's ithholding ta%es
b. (a% agency funds
c. Pass#through agency funds
d. )pecial assess!ent ta%es here govern!ental unit has no
obligation to assu!e debt service on the debt if property
oners default. *
e. Cash and invest!ent pools##+internal invest!ent pool) earnings
allocated proportionately.
* ,e"uired for use by -A)B standards
B) Accounting for (a% Agency Funds
1. (a%es levied by all govern!ental units and funds ithin the county are
collected by County (reasurer.
$. (reasurer !ust !a.e periodic distributions of ta%es collected in
proportion of levy of each fund to total ta%es levied.
a. Collections of ta%es for prior years !ust be distributed on the basis
of ta%es levied for those years.
/. 0ue to ad!inistrative burden of collecting and disbursing ta%es1 it is
co!!on for the collector to ithhold a certain percentage
fro! the collections of each unit as an agency fee.
2. Gross a!ount of ta% levy is recorded as a receivable and as a liability.
3. 4hen collected the ta%es receivable account is reduced. If cash is not
distributed i!!ediately the liability to each specific fund should be
recorded.
5. (he 6fee6 retained by the collector +not paid out to appropriate fund)
ould be recorded as an e%penditure in each such fund.
C) ,e"uired Financial )tate!ent.
1. Include as a separate colu!n in the Fiduciary Funds 7)tate!ent of
Fiduciary Net Assets.8
$. 9ay optionally include in the CAF, a co!bining state!ent of net
assets for the agency funds.
III) Cash and Invest!ent Pools +Invest!ent (rust Funds)
A) Purpose
1. &ffective ay of !anaging cash and invest!ents of the funds of the
govern!ent.
B) (ypes
1. Internal invest!ent pool
a. 9ay properly use an agency fund.
b. Agency funds assets and liabilities are N:( reported in e%ternal
financial state!ents. &ach participating fund reflects its
proportionate share of the pools assets.
$. &%ternal invest!ent pool
a. 9ust establish an invest!ent trust fund
b. Internal participants e"uity is Not reported in the financial
state!ents of the invest!ent trait fund.
C) Accounting Issues
1. A;; invest!ents and ithdraals are !easured at fair value.
$. &ach participant has a proportionate share of the invest!ent pools
total assets.
a) <ournal &ntry !ade by transferor=
&"uity in Pooled Cash and Invest!ents >>>
Invest!ents >>>
,evenue#Change in fair value >>>
b) <ournal entry !ade by invest!ent pool=
Cash >>
Invest!ents >>
0ue to ??????????? Fund >>
Additions 0eposits in pooled invest!ents >>

/. A;; earnings1 gains1 and losses are allocated to participants based on
their propotionate interest.
a) -ains and losses considers both reali@ed and unreali@ed.
b) 9ay accu!ulate earnings in 7Undistributed &arnings on Pooled
Invest!ents8
Cash >>
Undistributed &arnings on Pooled Invest!ents >>
c) 9ay accu!ulate gains and losses in 7,eserve for Change in Fair
Aalue of Pooled Invest!ent.8
i. Both reali@ed and unreali@ed gains and losses.
d) <ournal entries for invest!ent pool=
Cash >>
Undistributed &arnings on Pooled Invest!ents >>
Undistributed &arnings on Pooled Invest!ents >>
0ue to ?????????? Fund >>
Additions B Invest!ent &arnings >>
Invest!ents >>
,eserve for change in Fair Aalue of Invest!ents >>
,eserve for change in Fair Aalue of Invest!ents >>
0ue to ????????? Fund >>
Additions B Change is Fair Aalue of Invest!ents >>
2. Participant funds record changes in e"uity as follos +assu!e
increase)=
&"uity in Pooled Cash and Invest!ents >>>
,evenues#Invest!ent &arnings >>>
Changes in Fair Aalue of Invest!ents >>>
3. 4hen assets are contributed to or ithdran fro! the invest!ent pool1
earnings1 gains1 and losses to date should be apportioned to
participants.
a) It is very li.ely that the addition or ithdraal ill change the
proportional interest of participants.
b) 0uring closing entries for the invest!ent trust fund1 the 7additions8
accounts are transferred to 7Net Assets held in (rust for
participants8 accounts.