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Accounting for Fiduciary Activities-Agency and Trust Funds
True / False Questions
1. In accounting practice, the legalistic distinctions between trust funds and agency funds are notof major significance.
True False
2. Trust funds often exist over a longer period of time than agency funds, represent and develop vested interests of a beneficiary to a greater extent, and involve more complex administration and financial accounting and reporting.
True False
3. Fiduciary funds are sometimes identified in the annual reports of state and local governments as "Ancillary Funds."
True False
4. Resources that are held in trust for the benefit of the government's own programs or its citizenry should be accounted for using a governmental fund rather than a fiduciary fund.
True False
5. Agency funds are used only if a government holds resources in a purely custodial capacity for others.
True False
6. Assets that are held in an agency fund belong to the party or parties for which the government acts as agent; however, the government retains legal right of ownership in the event of party's bankruptcy.
True False
7. The collection of taxes or other revenues by one government for several of the funds it operates and for other governments often results in the creation of a trust fund.
True False
8. It is common for an agency fund to have relatively small net position balances.
True False
9. An agency fund should be used to account for special assessment billing and collection, and related debt service of special assessment debt, if the government has no responsibility for the debt.
True False
10. It is common for a government that collects taxes on behalf of other governments to be authorized to withhold a certain percentage from the collections for each government.
True False
11. In regard to pass-through grants, a recipient government has administrative involvement if it is responsible for filing paperwork under a grant agreement.
True False
12. When an investment pool is created, the assets of each fund entering the pool should be transferred to the pool at their fair value at the date of the transfer.
True False
13. Investment trust funds and pension trust funds should be accounted for in the same manner as permanent funds.
True False
14. Agency funds should utilize the modified accrual basis of accounting.
True False
15. Trust funds should utilize the accrual basis of accounting.
True False
16. Pension trust funds should utilize budgetary accounts in the same manner that General Funds and special revenue funds do.
True False
17. 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.
True False
18. Earnings on pooled investments and changes in fair value of investments are allocated to the participants having an equity interest in the pool in proportion to their relative contributions to the pool.
True False
19. Most investment trust funds distribute investment earnings and changes in investment values on a daily basis.
True False
20. A common example of a private-purpose trust fund is a state-sponsored 529 savings plan, structured such that parents make after-tax contributions to an investment fund managed by the state government.
True False
21. A defined benefit plan specifies the amount or rate of contribution that the employer and employees must contribute to benefit the members' accounts in the pension plan.
True False
22. Other postemployment benefits (OPEB) include benefits other than pensions, such as health care, life insurance, and long-term care.
True False
23. GASB standards provide comprehensive guidance on pension accounting and financial reporting for defined benefit pension plan employers, but the FASB provides guidance for plan sponsors.
True False
24. When one participant in an investment pool withdraws part of its equity from the pool, that participant's proportionate interest is decreased and all other participants' proportionate interest is increased.
True False
25. Defined benefit pension plans are classified as either single-employer pension plans or multiple-employer pension plans.
True False
Multiple Choice Questions
26. Each of the following are reported as fiduciary funds except:
A. A permanent fund.
B. An investment trust fund.
C. An agency fund.
D. A private-purpose trust fund.
27. Which of the following statements regarding the financial reporting of agency funds is not true?
A. Agency activities are reported only in the fiduciary fund financial statements.
B. Agency fund financial information is reported in a separate column of the governmentwide statement of activities.
C. Trust funds are included in the statement of changes in fiduciary net position.
D. GASB standards allow disclosure of the assets and liabilities of agency funds in a separate column of the statement of fiduciary net position.
28. Which of the following is the most reliable means of distinguishing a trust relationship from an agency relationship for purposes of deciding which type of fiduciary fund should be used?
A. Examine the applicable documents and contact the GASB for a determination letter.
B. Examine the aggregate of factors, such as the enactment that brought the relationship into existence and regulations under which it operates.
C. Examine the length of time assets will be held; agency relationships are generally in existence longer than trust relationships.
D. Examine the wording of any agreements to determine if the word "trust" or "agency" is used.