Is your school district ready for GASB 84? New accounting standard starts this fiscal year

by Cathy L. Harlow

How schools report everything from student activities to band boosters could change this fiscal year under the latest regulations from the Governmental Accounting Standards Board (GASB) designed to further balance sheet transparency.

Under GASB 84, whether expenditures are part of the regular budget or separated as “fiduciary activities’’ will largely depend on the level of school district control over the activity.

For example, a student activity club that the school does not have administrative or spending control over is now considered a fiduciary account and subject to GASB 84’s new reporting requirements. However, a similar club in another district that administration has to approve club expenditures would report it in a governmental account.

GASB 84 breaks down fiduciary funds into four areas and determining what qualifies can get complicated. Below are some overall guidelines, but we recommend districts consult with their financial advisor to ensure proper implementation.

What fiduciary fund types apply to Pennsylvania school districts?

• Pension and other employee benefit trust funds: Because school pensions are managed and controlled by PSERS, they do not fall under the GASB 84 reporting requirement for fiduciary funds. However, depending on how they are structured, trusts established to provide for Other Post-Employment Benefits (OPEB) may qualify as reportable fiduciary funds.
• Investment trust funds: Not applicable to Pennsylvania school districts.
• Private-purpose trust funds: The most common example are scholarship funds held in a trust and not managed or directed by the school district.
• Custodial funds (Formerly agency funds): Funds not held in a trust, such as a student activity or pass-through grants, which the district does not have administrative control.

The GASB 84 fiduciary fund test

Whether something is a fiduciary fund under GASB 84 boils down to whether the school district has administrative or direct financial involvement over the assets. Does the district have spending authority? Is the school directly contributing money through tax dollars or state aid, or grants?

If the answer is no – meaning the district has no direct control – then the asset is a fiduciary fund and subject to the new GASB 84 reporting requirements.

Under GASB 84, fiduciary funds have one or more of the following characteristics:

• The assets are (a) administered through a trust in which the school district itself is not a beneficiary, (b) dedicated to providing benefits to trust recipients, and (c) legally protected from the creditors of the school district.
• The assets are for the benefit of individuals or other organizations, and the school district does not have administrative or direct financial involvement.  In addition, the assets are not derived from the school district’s provision of goods or services to those individuals or organizations.

This new “fiduciary fund” definition may mean activities reported as governmental funds now qualify as fiduciary activities and vice versa.

GASB 84 fiduciary fund reporting requirements

Under GASB 84, fiduciary fund reporting must have the following:

• Statement of Fiduciary Net Position: Reports the assets, liabilities, and fiduciary net position.  Liabilities should be recognized when an event occurs that compels the school district to disburse funds, such as when there is demand for the resources or when no further action, approval, or condition is required to release the funds.  Assets may not equal liabilities as in the past.
• Statement of Changes in Fiduciary Net Position: This statement is new and is used to report additions to and deductions from fiduciary funds.  Additions to the fund should be disaggregated by source, and deductions should be disaggregated by type. 

Moving forward

Adhering to GASB 84 may require some changes in how districts have reported assets. Some districts may find that activities previously reported in trust funds no longer qualify as such and should be reported as custodial funds. Most agency funds will qualify under GASB 84 as custodial funds.

Additionally, the new statement of Changes in Fiduciary Net Position will require school districts to report additions and deductions of custodial funds. Previously, agency funds did not require this level of reporting.

The Boyer & Ritter team is ready to help your district work through the complexities of GASB 84. With the new regulations impacting this year’s financial statements, there is little time to lose.