Accounting For Governmental and Nonprofit Entities 17th Edition Reck Solutions Manual

Accounting for Governmental and
Nonprofit Entities 17th Edition Reck

Solutions Manual
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Chapter 08 - Accounting for Fiduciary Activities—Agency and Trust Funds
CHAPTER 8: ACCOUNTING FOR FIDUCIARY ACTIVITIES—

AGENCY AND TRUST FUNDS
OUTLINE
Number Topic Type/Task Status

(re: 16/e)
Questions:
8-1 Distinction between agency and trust funds Distinguish 8-1 revised
8-2 Identifying trust funds and their purpose Explain Same
8-3 Tax agency funds Explain New
8-4 Fiduciary and governmental fund reporting Compare New
8-5 Agency funds for “pass-through” funds Define, explain Same
8-6 Investment pools Explain Same
8-7 Defined benefit and defined contribution Compare New
pension plans
8-8 Private and public purpose trusts Distinguish Same
8-9 Total and net pension liability Explain New
8-10 Accounting for pension expenses/expenditures Explain 8-10 revised
Cases:
8-11 Research Case - CalPERS Locate, explain 8-1 revised
8-12 OPEB Plans Analyze 8-2 revised
8-13 Policy Issues Relating to Employee Pension Analyze 8-3
Plans
8-14 Research Case – Evaluating new pension Compare, analyze New
standards
Exercises/Problems:
8-15 Examine the CAFR Examine 8-1
8-16 Various agency and trust fund issues Multiple Choice Items 3, 4, 5,
9 and 10 are
new
8-17 Various agency and trust fund issues Multiple Choice Items 1, 2, 9
and 10 are
new
8-18 Tax agency fund Journal entries New
8-19 Special assessment debt JEs, analysis 8-5
8-20 Identification of fiduciary funds Analysis 8-6
8-21 Investment trust fund Journal entries 8-7
8-22 Pass-through agency fund Journal entries New
8-23 Fiduciary financial statements Financial statements 8-9
8-24 Pension calculations Calculate New
8-1
CHAPTER 8: ACCOUNTING FOR FIDUCIARY ACTIVITIES—

AGENCY AND TRUST FUNDS
Answers to Questions
8-1. Although in law there is a clear distinction between an agency relationship and a trust
relationship, in practice the legal distinctions are not sufficient to classify funds as agency
funds or trust funds. All factors, such as the enactment that created the fund and pertinent
regulations, must be examined to determine the nature of the fund and the transactions in
which it may engage. Generally, trust funds are more complicated than agency funds,
requiring greater representation and development of the beneficiary’s interest.
Fiduciary activities are reported only in the fiduciary fund financial statements; they have
no effect on the governmental or business-type activities of the primary government
reported in the government-wide financial statements. Agency fund financial information
is reported in a separate column of the statement of fiduciary net position; however, they
are not included in the statement of changes in fiduciary net position, because they have
no net position and therefore cannot have changes in net position. Trust funds are
reported in two fund financial statements: the statement of fiduciary net position and the
statement of changes in fiduciary net position. Trust funds are reported in separate
columns by type (i.e., pension [and other employee benefit] trust funds, investment trust
funds, private-purpose trusts).
General Problem Information: Distinction between agency and trust funds

Learning Objective: 8-1
Topic: Agency Funds, Trust Funds
Bloom’s Taxonomy: Remember
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Easy
8-2. There are many different types of trust funds. For reporting purposes the GASB
classifies trust funds as investment trusts, private-purpose trusts, and pension trusts (also
referred to as pension and other employee benefit trusts). An investment trust fund is
used to account for and report the fund equity in pooled investments held by fund
participants who are external to the government operating the fund. Private-purpose trust
funds record and report principal and/or interest managed by a government for the benefit
of an individual, private organization, or another government. The distinguishing
characteristic is that the party benefiting from the trust must be external to the
government operating the trust. In pension and other employee benefits trusts a
government is managing benefits that belong to government employees. In each case the
government is acting as a fiduciary, or in the best interest of parties outside the
government.
8-2
Ch. 8, Answers, 8-2, (Cont'd)
General Problem Information: Identifying trust funds and their purpose

Topic: Trust Funds
8-3. A tax agency fund is necessary when one government collects taxes for multiple
governmental funds and for other governments. The fund collects and accounts for the
tax payments from citizens and businesses, and then remits the appropriate amount of tax
money to each fund and government. One issue that makes this difficult is that taxes for
one year may actually be collected over more than one year. In addition, the tax rates and
proportions applicable to each fund or government change from year to year. When
delinquent taxes are collected there may also be associated penalties and interest to
consider.
General Problem Information: Tax agency funds

Topic: Agency Funds
8-4. Fiduciary funds are never included in the government-wide financial statements. Instead,
their activities are reported in a set of fiduciary fund financial statements. The
governmental funds, on the other hand, are reported in the government-wide financial
statements. Governmental funds are included in the Governmental Activities column of
the government-wide financial statements.
The fund financial statements are prepared using the accrual basis of accounting and the
economic resources measurement focus, while the governmental fund financial
statements use the modified accrual basis and the current financial resources
measurement focus.
General Problem Information: Fiduciary and governmental fund reporting

8-3
Ch. 8, Answers (Cont'd)
8-5. A pass-through agency fund is one wherein a level of government (such as the state
government) serves as an intermediary, transferring resources to another level of
government (such as local government). For a pass-through agency fund to be
appropriate the government acting as the conduit must have no administrative or direct
financial involvement. If the pass-through government provides monitoring, is involved
in determining eligibility of fund recipients or programs, has discretion in allocating
funds, or finances some direct program costs a pass-through agency fund is not
appropriate.
General Problem Information: Agency funds for “pass-through” funds

Topic: “Pass-through” Agency Funds
Level of Difficulty: Medium
8-6. With an internal investment pool the pool participants are all within the same
government. While accounting for an internal investment pool often occurs in an agency
fund; for external financial reporting purposes each participant reports its proportionate
share of the pooled assets and liabilities. The agency fund of an internal investment pool
is not reported in external financial statements.
The accounting for an external investment pool differs in the type of fund used and the
manner in which the pool’s assets and liabilities are reported. An external investment
pool is reported in an investment trust fund and has participants that are outside the
government administering the investment pool. As such, the GASB standards require
that a trust fund be used to account for the investment pool’s resources. External
participants’ shares of net position of the fund and additions to and deductions from net
position are reported in the investment trust fund. Those participants have no claims on
specific assets of the trust.
General Problem Information: Investment Pools

Topic: Investment Pools
8-4
Ch. 8, Answers (Cont'd)
8-7. A defined benefit plan promises a set amount of retirement income to retirees. The
government is responsible for funding the pension plan to deliver on those promises. The
risk for changes in value of pension plan assets rests with the government, not the retiree.
A defined contribution plan promises only that a defined amount will be contributed to
the individual retiree’s account by the government. Therefore, the retiree bears the risk of
changes in pension plan asset value and is not guaranteed a specific amount of retirement
income. An employee of the government would probably prefer a defined benefit plan, as
that transfers risk to the government, and the employee knows what his/her retirement
benefits will be.
General Problem Information: Defined benefit and defined contribution pension plans
Topic: Pension Trust Funds
8-8. The beneficiaries of a private purpose trust are individuals, organizations, or governments
other than the government administering the trust; whereas, the beneficiary of a public
purpose trust is the government administering the trust. Since the beneficiary of the
private purpose trust is outside the administering government, the administering
government has a fiduciary responsibility to the beneficiary and as a result the private
purpose trust is reported as a private-purpose trust fund. A public purpose trust is
generally reported as either a permanent fund (i.e., the principal must remain intact) or a
special revenue fund (i.e., the income and/or principal may be spent for a specified
purpose).
General Problem Information: Private and public purpose trusts

Topic: Private-Purpose Trust Funds
8-9. Total pension liability represents the present value of future retirement payments that are
based on prior years of service. Net pension liability is the difference between total
pension liability and plan fiduciary net position. In effect it is the amount of the existing
pension liability that has not yet been funded.
8-5
Ch. 8, Answers, 8-9 (Cont'd)
General Problem Information: Total and net pension liability

8-10. A government employer reports pension expenditures in a governmental fund on the

modified accrual basis of accounting. Thus, the amount recognized will be the actual
amount contributed to the plan and the net annual change in amounts normally expected
to be liquidated with expendable available financial resources. In proprietary funds and in
the governmental activities journal at the government-wide level, employers would
recognize the pension cost on the accrual basis. The pension expense includes current
year benefits, interest on prior pension liabilities, plan changes, amortization of deferred
amounts, and other changes to the net pension liability.
General Problem Information: Accounting for pension expenses/expenditures

Topic: Illustrative Transactions for a Defined Benefit Pension Plan
Solutions to Cases
8-11. a. CalPERS was established by legislation in 1931 and became operational in 1932.
b. Almost all types of state and local government employers contribute to CalPERS,
including state agencies, cities, special purpose governments, and schools.
c. As of June 30, 2013, 1,678,996 California public employees, retirees, and their
families are served by CalPERS. This includes 1,104,237 active and inactive
members and 574,759 retirees, beneficiaries and survivors.
d. As of 6/30/13, CalPERS administers 13 funds:
• 8 trust funds
• 2 agency funds
• 3 proprietary funds
e. The total net position will vary with the most recent financial report. As of 6/30/13
the figure is $267,268,965,000 [$261,989,904,000 for the Public Employees’
Retirement Fund (PERF) only].
f. The change in pension fund net position will vary with the most recent financial
report. The information can be obtained from the statement of changes in pension net
position. In the FYE 6/30/13, the change in net position was a $25 billion increase,
while the year before ended with a $5 billion decrease. (Recall that agency and
proprietary fund information would not be reported on a statement of changes in
fiduciary net position.)
8-6
Ch. 8, Solutions, 8-11 (Cont'd)
g. CalPERS is a fiduciary component unit of the State of California. Thus, it is blended

with other pension financial information in the state’s statement of fiduciary net
position and statement of changes in fiduciary net position, and is not reported at all
in the government-wide financial statements.
General Problem Information: Research Case - CalPERS

Bloom’s Taxonomy: Apply
8-12. Following are answers based on the 2013 fiscal year CAFRs for the City of Boston and
New York City. The answers to the questions will vary with the year of the CAFRs
examined; therefore, the answers provided serve as a guide to what should be considered
in the analysis.
a. For 2013 (based upon 2011 valuations) the unfunded actuarial accrued liability
(UAAL) was $2,908,516,000 for the OPEB-City and $3,060,632,000 for the OPEB-
Plan. The funded ratios (calculated as assets held for OPEB liabilities divided by the
UAAL) are quite low at 3.64% and 3.50%, respectively. It appears as though assets
set aside for OPEB have only been identified in the past valuation. UAAL is 278.2%
of covered payroll for OPEB-City and 277.6% for OPEB-Plan, indicating that the
liability represents close to three years of payroll.
b. For 2013 (based upon 2012 valuations) the UAAL was $ 69,301,406,000 for the City
of New York’s OPEB. The funded ratio is 3.0%, and UAAL is 342.0% of covered
payroll.
c. Based on the data available, it would appear that Boston and New York City are in
similar situations. While the size of New York’s UAAL is larger, the city’s
population of 8 million dwarfs Boston’s population of just over 636,000. The
funding ratios are relatively close at the 3% range, as are the ratio of UAAL to
covered payroll at the 300% level. In both cases, the future financial burden and cost
related to the currently earned benefits are notable.
General Problem Information: OPEB Plans

Topic: Other Postemployment Benefits
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: FN Reporting
8-7
Ch. 8, Solutions (Cont'd)
8-13. a. As defined on the issue brief’s website, defined benefit plan provides governmental
employees with lifetime retirement income based upon years of service and final
average salary. Defined contribution plans are similar to individual retirement savings
accounts where the investments are selected by the employee from a list of options
provided by the plan. The benefit at retirement depends on the value in the
employee’s account. Under a defined benefit plan, the government – hence taxpayers
– bear responsibility for future benefit payments, as well as market and inflation risk.
Defined contribution plans shift all the risk and responsibilities from the employer to
the employee.
A hybrid plan combines elements of both defined benefit plans and defined
contribution plans. They are intended to spread the risks associated with the pension
payments between the employer and the employee. In some cases employees are
required to participate in both a defined benefit and a defined contribution plan.
b. When evaluating whether to shift from a defined benefit to a defined contribution

plan or to a hybrid plan, a government should consider risks, costs, and human
resource goals. Each of these factors involves the government, governmental
employees, and taxpayers.
c. In 2011, 38 states offered a mandatory defined benefit plan, two states had a
mandatory defined contribution plan, six allowed a choice, and four allowed for
hybrid plans. Georgia, Michigan, and Utah recently introduced a mandatory hybrid
plan.
d. Each student’s memo should identify and support a position on the proposed change.
In evaluating each student’s performance on this case, we recommend placing more
weight on the quality and depth of analysis than on the student’s final conclusion.
General Problem Information: Policy Issues Relating to Employee Pension Plans

Accreditation Skills tag: AACSB: Reflective thinking, AICPA: FN Reporting
8-14. You may wish to provide more specific requirements related to the research required
(e.g., at least two articles) and more specific guidelines related to the length and format of
the paper. The GASB Web site provides good summaries of the changes, as do
accounting periodicals. Since students will likely choose different articles to evaluate, no
written solution is provided here. In evaluating each student’s performance on this case,
we recommend placing more weight on the quality and depth of analysis than on the
student’s final conclusion.
8-8
A few suggested articles include:
“GASB Improves Pension Accounting and Financial Reporting Standards” – the June 25,
2012 news release available on the GASB Web site.
“GASB Vote Places Unfunded Pension Liabilities on Government Balance Sheets” – a

Journal of Accountancy article available at
http://www.journalofaccountancy.com/news/20125927.htm.
General Problem Information: Research Case – Evaluating new pension standards

Accreditation Skills tag: AACSB: Reflective thinking, AICPA: FN Critical thinking
8-9
Solutions to Exercises and Problems
8-15. Each student will have an annual report from a different government unit; therefore, the
answers to these questions will differ from student to student.
General Problem Information: Examine the CAFR

Topic: Various
8-16. 1. a. 6. c.
2. b. 7. d.
3. a. 8. a.
4. c. 9. d.
5. b. 10. c.
General Problem Information: Various agency and trust fund issues

Topic: Various chapter topics
8-17. 1. b. 6. c.
2. d. 7. b.
3. d. 8. c.
4. a. 9. b.
5. d. 10. d.
General Problem Information: Various agency and trust fund issues

8-10
8-18. a. SUNCOAST COUNTY

TAX AGENCY FUND
GENERAL JOURNAL
Debits Credits
1. TAXES RECEIVABLE FOR OTHER FUNDS
AND GOVERNMENTS⎯CURRENT 24,843,000
DUE TO OTHER FUNDS AND GOVERNMENTS 24,843,000
2. CASH 13,700,000
TAXES RECEIVABLE FOR OTHER FUNDS
AND GOVERNMENTS⎯CURRENT 13,700,000
3. DUE TO OTHER FUNDS AND GOVERNMENTS 13,700,000

DUE TO COUNTY GENERAL FUND 5,818,294
DUE TO TOWN OF BAYSHORE 2,629,046
DUE TO SUNCOAST COUNTY CONSOLIDATED
SCHOOL DISTRICT 3,557,903
DUE TO VARIOUS TOWNS 1,694,757
Shares: COMPUTATION Taxes 1.5% Fee Agency's

Collected Liability
County 10,333,000/24,843,000 * 13,700,000 = 5,698,269 + 120,025 5,818,294
Bayshore 4,840,000/24,843,000 * 13,700,000 = 2,669,082 - 40,036 2,629,046
School 6,550,000/24,843,000 * 13,700,000 = 3,612,084 - 54,181 3,557,903
Towns 3,120,000/24,843,000 * 13,700,000 = 1,720,565 - 25,808 1,694,757
Debits Credits
4. DUE TO COUNTY GENERAL FUND 5,818,294

DUE TO TOWN OF BAYSHORE 2,629,046
DUE TO SUNCOAST COUNTY CONSOLIDATED
SCHOOL DISTRICT 3,557,903
DUE TO VARIOUS TOWNS 1,694,757
CASH 13,700,000
8-11
b. SUNCOAST COUNTY
GENERAL FUND
GENERAL JOURNAL
Debits Credits
1. TAXES RECEIVABLE⎯CURRENT 10,333,000
ESTIMATED UNCOLLECTIBLE CURRENT TAXES 413,320
REVENUES 9,919,680
4. CASH 5,818,294
TAXES RECEIVABLE⎯CURRENT 5,698,269
REVENUES (COLLECTION FEES) 120,025
c. TOWN OF BAYSHORE
GENERAL FUND
GENERAL JOURNAL
1. TAXES RECEIVABLE⎯CURRENT 4,840,000

ESTIMATED UNCOLLECTIBLE CURRENT TAXES 96,800
REVENUES 4,743,200
4. CASH 2,629,046
EXPENDITURES (COLLECTION FEES) 40,036
TAXES RECEIVABLE⎯CURRENT 2,669,082
d. The tax agency fund can prepare a statement of tax agency fund net
position reflecting the asset and liability balances of the fund. Additionally,
the fund would be combined with any other agency funds that Suncoast
County has and the total of the assets and liabilities for the agency funds
would be shown in a single agency fund column on the statement of
fiduciary net position.
8-12
General Problem Information: Tax agency fund

Topic: Tax Agency Funds
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: Financial
Reporting
8-19.
a. Since the city is providing administrative services for debt for which it has
no legal obligation, the GASB standards indicate the services should be
accounted for using an agency fund.
b. LOCAL IMPROVEMENT DISTRICT FUND

GENERAL JOURNAL
Debits Credits
1. ASSESSMENTS RECEIVABLE⎯CURRENT 500,000
ASSESSMENTS RECEIVABLE⎯NONCURRENT 4,500,000
DUE TO SPECIAL ASSESSMENT
BONDHOLDERS⎯PRINCIPAL 5,000,000
2. CASH 750,000
ASSESSMENTS RECEIVABLE⎯CURRENT 500,000
BONDHOLDERS⎯INTEREST 250,000
ASSESSMENTS RECEIVABLE⎯CURRENT 500,000
ASSESSMENTS RECEIVABLE⎯NONCURRENT 500,000
8-13
Ch. 8, Solutions, 8-19, b. 2. (Cont'd)
Debits Credits
3. DUE TO SPECIAL ASSESSMENT

BONDHOLDERS⎯PRINCIPAL 500,000
BONDHOLDERS⎯INTEREST 250,000
CASH 750,000
c. Assets and liabilities of the special assessment agency fund would be

combined with other agency funds of the reporting entity and appear in a
separate column on the statement of fiduciary net position but will appear
in no other basic financial statements. If there are several agency funds,
Foothills may opt to provide a combining statement of agency funds in its
CAFR. The combining statement would display the assets and liabilities
for each agency fund in a separate column.
d. Since the City of Foothills is not obligated in any manner for the Green
Acres special assessment debt, the debt should not be reported in
Foothills’ financial statements; however, the notes to the financial
statements should disclose the amount of the debt, as well as the fact that
the government is in no way liable for repayment but is only acting as an
agent for the property owners in collecting the assessments, forwarding
the collections to bondholders, and initiating foreclosure proceedings, if
appropriate.
General Problem Information: Special Assessment Agency Fund
Topic: Agency Fund for Special Assessment Debt
Reporting
8-14
8-20. Fiduciary funds are described in a, c, d, f, i, and j. See explanations for

each fund type below.
a. Tri-Centennial Fund. This is a private-purpose trust fund since the
resources will benefit a broad constituency rather than just the citizens
of the city.
b. Perpetual Care Fund. This describes a permanent fund as the principal
amount must be kept intact, but earnings of the fund can be used to
provide care for the city’s own cemeteries.
c. Poudre River Public Library District. Because city management simply
acts as a custodian for the resources of the funds, this fund functions
as an agency fund, a fiduciary fund.
d. School Impact Fee Fund. Since the city is acting in a custodial capacity
with no discretion in the use or distribution of these resources, the fund
is an agency fund.
e. Cultural Services and Facilities. Since the resources are funds of the
government, the program primarily benefits the government, and the
majority of resources are provided on an ongoing basis from
performing arts center and museum fees, it should be accounted for as
a special revenue fund.
f. Payroll Fund. Since payroll deductions are the assets of other
governments/organizations (e.g., federal government, state government,
pension funds), an agency fund is used to account for the deductions.
g. Telephone Commissions Fund. The city would use a special revenue
fund, since it primarily benefits from using the commissions to defray
the costs related to operation of the jail.
h. Block Grant Fund. Since the city is required to provide matching funds,
the grant would be reported in a special revenue fund.
i. Health Benefits Fund. This is a pension and other employee benefit
trust fund since the city is providing a retirement benefit to those
outside of government (employees).
8-15
j. Unclaimed Property Fund. Since the state is maintaining the property

until such time as a legal claimant can be found, a private-purpose trust
fund would be used. Until the property reverts to the state it is
considered a benefit to a party outside of government (the as yet
unfound claimant).
General Problem Information: Identification of fiduciary funds
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: Critical Thinking
8-21. a. GENERAL JOURNAL

Debits Credits
CITY OF ALBERTVILLE GENERAL FUND:
EQUITY IN POOLED INVESTMENTS 900,000
INVESTMENTS 890,000
REVENUES⎯CHANGE IN FAIR
VALUE OF INVESTMENTS 10,000
ALBERTVILLE SCHOOLS:
EQUITY IN POOLED INVESTMENTS 4,230,000
INVESTMENTS 4,200,000
RICHWOOD TOWNSHIP:
INVESTMENTS 3,890,000
8-16

Debits Credits
b. INVESTMENT POOL TRUST FUND:
1. U.S. TREASURY NOTES 900,000
CERTIFICATES OF DEPOSIT 8,100,000
DUE TO CITY’S GENERAL FUND 900,000
ADDITIONS⎯DEPOSITS IN POOLED
INVESTMENTS⎯ALBERTVILLE SCHOOLS 4,230,000
ADDITIONS⎯DEPOSITS IN POOLED
INVESTMENTS⎯RICHWOOD TOWNSHIP 3,870,000
2. U.S. TREASURY NOTES 30,000

DUE TO GENERAL FUND 3,000
ADDITIONS⎯INVESTMENT EARNINGS⎯
ALBERTVILLE SCHOOLS 14,100
RICHWOOD TOWNSHIP 12,900
CASH 3,010,000
CERTIFICATES OF DEPOSIT 3,010,000
DEDUCTIONS⎯WITHDRAWAL FROM POOLED

INVESTMENTS⎯RICHWOOD TOWNSHIP 3,010,000
CASH 3,010,000
(Note: See investment earning calculations below.)
3. CASH 50,000
UNDISTRIBUTED EARNINGS ON
POOLED INVESTMENTS 50,000
8-17

Debits Credits
4. ACCRUED INTEREST RECEIVABLE 28,000

UNDISTRIBUTED EARNINGS ON
5. UNDISTRIBUTED EARNINGS ON
DUE TO GENERAL FUND 11,700
ALBERTVILLE SCHOOLS 54,990
RICHWOOD TOWNSHIP 11,310
COMPUTATION: City’s GF Schools Township TOTAL

EQUITY AT BEGINNING OF YEAR $900,000 $4,230,000 $3,870,000 $9,000,000
% INTEREST 10.00% 47.00% 43.00% 100.00%
TREASURY NOTE DISTRIBUTION $ 3,000 $ 14,100 $ 12,900 $ 30,000
WITHDRAWAL $ 0 $ 0 $ 3,010,000 $ 3,010,000
EQUITY IN POOL BEFORE INTEREST $903,000 $4,244,100 $ 872,900 $6,020,000
% INTEREST 15.00% 70.50% 14.50% 100.00%
INTEREST DISTRIBUTION $ 11,700 $ 54,990 $ 11,310 $ 78,000
c. CITY OF ALBERTVILLE GENERAL FUND:

REVENUES⎯INVESTMENT EARNINGS 3,000
8-18

Debits Credits
RICHWOOD TOWNSHIP:
CASH 3,010,000
d. CITY OF ALBERTVILLE GENERAL FUND:

RICHWOOD TOWNSHIP:
e. The investment trust fund would not report the General Fund’s interest in
the pool since the General Fund is an internal participant. The General Fund
would report its interest in the investment pool in its financial statements.
Since the school is an external participant, the investment trust fund would
report the school’s interest in the statement of fiduciary net position and in the
statement of changes in fiduciary net position.
8-19

General Problem Information: Investment trust fund
Topic: Investment Pools
Reporting
Level of Difficulty: Hard
8-22.
a. EVERGREEN COUNTY
PASS-THROUGH AGENCY FUND
GENERAL JOURNAL
Debits Credits
12/31/17 CASH 5,000,000
DUE TO CITY OF BOULDER 2,100,000
DUE TO ASPEN TOWNSHIP 1,400,000
DUE TO SNOWTON 900,000
DUE TO FIRTREE VILLAGE 600,000
01/02/18 DUE TO CITY OF BOULDER 2,100,000

DUE TO ASPEN TOWNSHIP 1,400,000
DUE TO SNOWTON 900,000
DUE TO FIRTREE VILLAGE 600,000
CASH 5,000,000
b. Aspen Township Performing Arts Capital Projects Fund
CASH 1,400,000
REVENUES 1,400,000
Aspen Township Governmental Activities

CASH 1,400,000
PROGRAM REVENUES – CULTURE & RECREATION –
CAPITAL GRANTS AND CONTRIBUTIONS 1,400,000
8-20
c. Since the transactions are recorded in an agency fund, they would not be
reported on the government-wide financial statements. The balances in the
fund would be included in a separate column on the statement of fiduciary
net position, as required by GAAP. Since there is no net position, nothing
would be included in the statement of changes in fiduciary net position.
General Problem Information: Pass-through agency funds

Topic: “Pass-through” Agency Funds
Reporting
8-23. Some of the errors noted include:

• Each type of fiduciary fund should be reported in a separate column.
Therefore, the trust funds column should be separated into two
columns, one for the investment trust and one for the private-
purpose trust.
• A total column is generally not used since the total is combining
different types of fiduciary funds. As shown, the columns do not
foot and crossfoot, either.
• Investments are to be reported at fair value. There needs to be an
indication as to whether investments are being reported at fair value.
• While a trust fund may have capital assets and a capital lease
obligation, any capital assets would be reported net of depreciation
rather than at cost. An agency fund should not record a capital asset
or a capital lease obligation.
• An agency fund should not report accounts payable.
8-21
• The agency funds would not report net position held in trust.
However, an agency fund must report the liability (Due to Other Units
and Governments) to the participants for the assets held in the
agency fund. The agency liability has been misreported as net
position in the example given.
• Net position held in trust for the county should not be reported.
Since the county is the administering government, the assets and
liabilities of the fiduciary funds related to the county would not be
reported on the fiduciary financial statements. Rather the
information would be reported by the appropriate fund in the
county’s required fund and government-wide financial statements.
General Problem Information: Fiduciary financial statements

Accreditation Skills tag: AACSB: Knowledge application, AICPA: Critical thinking
8-22

8-24.
BLUFF COUNTY EMPLOYEE RETIREMENT SYSTEM
SCHEDULE OF CHANGES IN THE COUNTY'S NET PENSION LIABILITY AND RELATED RATIOS
LAST 3 FISCAL YEARS
2017 2016 2015

Total pension liability
Service cost $ 123,225 $ 125,440 $ 127,950
Interest 189,730 182,580 169,960
Differences between expected and actual experience 1,250 (850) 625
Benefit payments (including refunds of
employee contributions) (248,000) (231,580) (217,960)
Net change in total pension liability 66,205 75,590 80,575
Total pension liability, beginning 2,083,715 2,008,125 1,927,550
Total pension liability, ending 2,149,920 2,083,715 2,008,125
Plan fiduciary net position
Contributions—employee $ 32,450 $ 36,240 $ 30,170
Contributions—employer 98,620 102,530 91,550
Net investment income 18,990 (12,380) (21,510)
Benefit payments (including refunds of
employee contributions) (64,500) (42,780) (51,330)
Administrative expenses (3,290) (3,110) (2,840)
Net change in plan fiduciary net position 82,270 80,500 46,040
Plan fiduciary net position, beginning 1,138,220 1,057,720 1,011,680
Plan fiduciary net position, ending 1,220,490 1,138,220 1,057,720
Net pension liability, ending $ 929,430 $ 945,495 $ 950,405
Plan fiduciary net position as a percentage
of total pension liability 56.77% 54.62% 52.67%
Covered-employee payroll $ 502,160 $ 485,218 $ 489,810
Net pension liability as a percentage of
covered-employee payroll 185.09% 194.86% 194.04%
8-23
(a) 66,205 - [123,225 + 1,250 – 248,000] = 189,730

(b) 2,083,715 + 66,205 = 2,149,920
(c) 32,450 + 98,620 + 18,990 – 64,500 – 3,290 = 82,270
(d) 1,220,490 – 82,270 = 1,138,220
(e) 1,220,490/2,149,920 = .5677
(f) 929,430/1.8509 = 502,150 (slight rounding difference), 929,430/502,150 =
1.8509
(g) 75,590 – [125,440 + 182,580 -850] = (231,580)
(h) 2,083,715 – 75,590 = 2,008,125
(i) 2,083,715 = beginning 2017 balance
(j) 80,500 – [36,240 + 102,530 – 42,780 – 3,110] = (12,380)
(k) 1,057,720 = ending 2015 balance
(l) 1,057,720 + 80,500 = 1,138,220
(m) 2,083,715(i) – 1,138,220(l) = 945,495
(n) 945,495(m)/1.9486 = 485,218
(o) 127,950 + 169,960 + 625 – 217,960 = 80,575
(p) 1,927,550 + 80,575(o) = 2,008,125
(q) 46,040(r) – [91,550 – 21,510 – 51,330 – 2,840] = 30,170
(r) 1,057,720 – 1,011,680 = 46,040
(s) 2,008,125(p) – 1,057,720 = 950,405
(t) 950,405(s)/489,810 = 194.04%
General Problem Information: Pension calculations

Accreditation Skills tag: AACSB: Knowledge application, AICPA: Critical thinking
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Accounting for Governmental and

Nonprofit Entities 17th Edition Reck

CHAPTER 8: ACCOUNTING FOR FIDUCIARY ACTIVITIES—

Number Topic Type/Task Status

CHAPTER 8: ACCOUNTING FOR FIDUCIARY ACTIVITIES—

General Problem Information: Distinction between agency and trust funds

Ch. 8, Answers, 8-2, (Cont'd)

General Problem Information: Identifying trust funds and their purpose

General Problem Information: Tax agency funds

General Problem Information: Fiduciary and governmental fund reporting

Ch. 8, Answers (Cont'd)

General Problem Information: Agency funds for “pass-through” funds

General Problem Information: Investment Pools

Ch. 8, Answers (Cont'd)

General Problem Information: Private and public purpose trusts

Ch. 8, Answers, 8-9 (Cont'd)

General Problem Information: Total and net pension liability

8-10. A government employer reports pension expenditures in a governmental fund on the

General Problem Information: Accounting for pension expenses/expenditures

Ch. 8, Solutions, 8-11 (Cont'd)

g. CalPERS is a fiduciary component unit of the State of California. Thus, it is blended

General Problem Information: Research Case - CalPERS

General Problem Information: OPEB Plans

Ch. 8, Solutions (Cont'd)

b. When evaluating whether to shift from a defined benefit to a defined contribution

General Problem Information: Policy Issues Relating to Employee Pension Plans

Ch. 8, Solutions, 8-14 (Cont'd)

A few suggested articles include:

“GASB Vote Places Unfunded Pension Liabilities on Government Balance Sheets” – a

General Problem Information: Research Case – Evaluating new pension standards

Solutions to Exercises and Problems

General Problem Information: Examine the CAFR

General Problem Information: Various agency and trust fund issues

General Problem Information: Various agency and trust fund issues

Ch. 8, Solutions (Cont'd)

8-18. a. SUNCOAST COUNTY

3. DUE TO OTHER FUNDS AND GOVERNMENTS 13,700,000

Shares: COMPUTATION Taxes 1.5% Fee Agency's

4. DUE TO COUNTY GENERAL FUND 5,818,294

Ch. 8, Solutions, 8-18 (Cont'd)

1. TAXES RECEIVABLE⎯CURRENT 4,840,000

Ch. 8, Solutions, 8-18 (Cont'd)

General Problem Information: Tax agency fund

b. LOCAL IMPROVEMENT DISTRICT FUND

Ch. 8, Solutions, 8-19, b. 2. (Cont'd)

3. DUE TO SPECIAL ASSESSMENT

c. Assets and liabilities of the special assessment agency fund would be

Ch. 8, Solutions (Cont'd)

8-20. Fiduciary funds are described in a, c, d, f, i, and j. See explanations for

Ch. 8, Solutions, 8-20 (Cont'd)

j. Unclaimed Property Fund. Since the state is maintaining the property

8-21. a. GENERAL JOURNAL

Ch. 8, Solutions, 8-21 (Cont'd)

2. U.S. TREASURY NOTES 30,000

DEDUCTIONS⎯WITHDRAWAL FROM POOLED

Ch. 8, Solutions, 8-21 (Cont'd)

4. ACCRUED INTEREST RECEIVABLE 28,000

COMPUTATION: City’s GF Schools Township TOTAL