United States: Student Activity Funds (And Other Items) … Now That The GASB-84 Implementation Guide Is Final

Last Updated: July 15 2019
Article by Eric Berman

The long-awaited Implementation Guide (IG) has been released by the Governmental Accounting Standards Board (GASB). There are indeed some "a-ha" moments in the Guide that may impact the implementation of GASB-84.

Administrative & Direct Financial Involvement in Student Activity Funds

Student Activity Funds has been a hot topic in implementing GASB-84. Out of the 52 new questions and answers, 11 have something to do with clubs and similar organizations at all governmental education institutions.

GASB-84 follows the provisions of GASB-24, par. 5 for pass-through grants in explaining administrative involvement and direct financial involvement. Educational institutions (and other governments) that receive funds may be administratively involved if they:

  • Monitor for compliance such as establishing policies and procedures or adhering to state regulations,
  • Determine eligible expenditures for the clubs in more than a 'rubber stamp,' (in substance, they can disallow costs,) or
  • Can exercise discretion over the use of the funds.

The same governments may be financially involved if they finance some costs, such as matching funds raised for the club or activity.

What does this all mean? If there is administrative involvement or direct financial involvement, the student activity fund may be a governmental fund.

As these funds are not component units, nor pension or OPEB activities that are not component units, the deciding factor to be a fiduciary activity must include all three of the following:

  1. Control of the assets,
  2. The assets are not derived solely from own-source revenues such as fees, fines, taxes, and are not derived from grant and tax related transactions where the government, except in certain circumstances, and
  3. The assets have one (or more) of the following: They are deposited in an irrevocable trust, or they are for the benefit of individuals where there is no administrative involvement, nor are the funds from providing goods or services to beneficiaries or, the assets are for the benefit of organizations outside the reporting entity.

Therefore, student activity funds could be governmental funds upon implementation of GASB-84, if there is administrative involvement or direct financial involvement. If there is more of a "rubber stamp," many student activity funds will be custodial funds.

Other Important Q&As

A Pension or OPEB Plan Without a Separate Board

One important area addressed in the IG is whether a pension or OPEB has an irrevocable trust if there's not a separate governing board. Instead, another government performs these duties. These arrangements are common for 457 and similar plans where a statewide employee retirement system provides those services. The system's board members adjourn and reconvene as the 457 (or similar) plan board.

A financial burden may exist if there is an obligation to make contributions to the plan from the system (or sponsoring government). If contributions are made from the employer(s), a defined contribution plan may exist and could be a fiduciary component unit.

Fees Collected for Others, Deposits and Retainage

Questions are included in the IG on fees collected by a government for separate not-for-profits, such as cemetery associations. Such fees would be a fiduciary activity, likely a custodial fund.

Cash deposits related to construction, performance bonds and retainage also have questions included. Cash deposits that can be forfeited are likely a governmental or enterprise fund activity. Performance bonds would be handled similarly, as would retainage. The deposits and retainage would be a liability. The performance bond is a contingent asset and not be recognized until realized.

Inmate accounts would be fiduciary activities. Furthermore, even if a jail officer provides authorization to spend funds out of the accounts, the authorization may only be to assure against banned items from being bought with the funds, and therefore, still a fiduciary activity.

Clearing and Withholding Accounts

A large volume of current agency fund activity involves clearing and withholding accounts. One of the more direct questions and answers in the IG states that the accounts should not be fiduciary funds. The answer to the question states:

Although the government has control of the assets because it has custody of the cash withheld, the unremitted amounts in the clearing account are a liability of the government. When deductions are withheld from an employee's pay, the amounts withheld and accrued by the employer (are) a liability of the government.

This change in reporting of formerly agency fund activity to governmental or enterprise funds may cause a potentially large reclassification to the originating fund for many governments. Governments should review the current structure of agency fund activity as soon as possible to decide if the activity should be custodial in nature or transition to governmental funds or an enterprise funds. This transition needs to occur as of the beginning balance of the year of implementation, which for most governments is back at the start of this fiscal year.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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