The Basic Financial Statements

Fiduciary Funds Statements

We've covered governmental, proprietary, and internal service funds. The final type of fund you'll see on a government's financial statements is fiduciary funds. Fiduciary funds account for resources held for the benefit of parties outside of the reporting government. Fiduciary funds are not reported in the government-wide financial statements because the resources of those funds are not available to support the government's own programs.

Most fiduciary funds relate to retiree benefits (i.e., pension and OPEB). Different plans are managed in quite different ways. Some are managed at the state level, and beneficiaries are not only state employees but also employees of local governments that participate in state-sponsored or state-administered plans. Some governments are "self-funded," meaning they manage a plan whose members come only from their government. In Washington, most public employee pension and OPEB plans are managed by the state. For that reason, the fiduciary fund statements for the State of Washington are extensive, as they account for all retirement plans administered and managed by the state.

The City of Bothell does not report any assets held on behalf of its employees. In other words, retirement benefits for current and former employees of the city of Bothell are administered by the state. The city does not report any employee retirement benefit funds in its fiduciary funds. Rather, the city reports two trust funds: a Private-Purpose Trust Fund and a Custodial Fund. The Private Purpose Trust funds include proceeds held on behalf of beneficiaries in the Court Bail Bond Trust and Court Restitution Trust. The Custodial Fund reports court collection fees on behalf of King County and the state of Washington.

Governments also produce a Statement of Changes in Fiduciary Net Position. This statement is similar to an income statement. Instead of revenues and expenditures, it identifies additions and deductions to the fiduciary funds. Additions reflect the increase in assets – deductions account for the decrease in assets. For the city of Bothell, additions in the fiduciary fund statements included payments to the Court Bail Bond Trust, the Court Restitution Trust, and fees collected on behalf of King County and the state of Washington. Deductions reported payments in each of these accounts.

Federal Government Financial Reporting

The federal government does, in fact, prepare a set of audited financial statements known as the Financial Report of the United States Government. A division of the U.S. Treasury known as the Bureau of the Fiscal Service prepares this report according to a set of accounting principles developed by the Federal Accounting Standards Advisory Board (FASAB). Those principles are similar to modified accrual accounting, focusing on financial resources and fiscal accountability. They also incorporate some recognition concepts that speak to the unique nature of federal appropriations and budget authority. The Government Accountability Office (GAO) then audits those statements according to those standards.

The federal government has never received an audit opinion on these financial statements. GAO has yet to issue an opinion due to several material weaknesses in internal controls, especially at the Department of Defense (DOD). That said, the federal government has substantially improved its financial reporting processes. Today, almost all of the 24 major cabinet agencies have received an unqualified audit opinion, and the DOD has convened a high-level task force to address its internal control shortcomings.