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Glossary/Government, nonprofit and ERISA

Fiduciary funds

Fiduciary funds account for assets a government holds for others, such as pensions, investment pools, private-purpose trusts, and custodial arrangements, and are excluded from the government-wide financial statements.

CORAA TeamUpdated November 5, 2026

Definition

GASB Statement 84 identifies four types of fiduciary funds: pension and other employee benefit trust funds, investment trust funds, private-purpose trust funds, and custodial funds. Custodial funds are generally the fiduciary activities that are not held in a trust or equivalent arrangement meeting specific criteria. A government reports fiduciary activities only when it controls the assets and the beneficiaries are not the government itself. Fiduciary funds appear in their own statements, the statement of fiduciary net position and the statement of changes in fiduciary net position, and are not part of the government-wide statements.

Why it matters in an audit or review

Auditors test whether an activity meets the fiduciary criteria, since errors move assets in or out of the government's own statements. Common cases include student activity funds, tax collections on behalf of other governments, and deposits held for third parties. They also confirm balances with custodians and trace the activity to the fund's governing agreement.

Example

Illustrative: a county collects $900,000 of property tax on behalf of a school district and remits $850,000 by year end. The county reports $50,000 as a liability to the district in a custodial fund, not as county revenue.

Common mistakes

  • Treating pass-through collections as county revenue.
  • Leaving student activity funds off the statements.

Sources

Definitions paraphrase AICPA and FASB guidance; read the standard itself before relying on a requirement. Example figures are illustrative. This page is guidance, not professional advice. Report an error

Standards

GASB 84

Related terms

  • Governmental audit
    A governmental audit examines the financial statements of a state or local government under GAAS and, usually, GAGAS, using GASB standards and a reporting model with opinion units for each fund type and major fund.
  • GASB (Governmental Accounting Standards Board)
    The Governmental Accounting Standards Board sets accounting and financial reporting standards for US state and local governments, which auditors of governmental entities apply as GAAP alongside the GAAS or GAGAS audit requirements.
  • Modified accrual basis of accounting
    Modified accrual is the basis governments use for governmental fund statements, recognizing revenues when measurable and available to pay current liabilities and expenditures when the related liability is incurred, with exceptions.

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