Fiduciary Funds: Definition, Types, Examples

The accounting process for companies and other entities may differ. One of these entities includes government organizations. Usually, companies in the US follow accounting standards issued by the Financial Accounting Standards Board (FASB). For government bodies, they come from the Governmental Accounting Standards Board (GASB).

GASB standards guide entities on transactions that are unique to government organizations. One of those transactions includes fiduciary funds.

What are Fiduciary Funds?

“Fiduciary funds” is a term used to describe assets held in trust for others. These funds are a part of the governmental accounting process performed by entities. Similarly, these funds appear on the statement of fiduciary net position. They follow the accrual concept in accounting. Government organizations present fiduciary funds using the economic resources measurement focus.

For fiduciary funds, the government organization acts as the trustee. Usually, another entity pays these funds to the government. The government then holds those funds on behalf of others. Usually, it cannot use those funds in activities. For most government organizations, these funds come from the general public. These organizations report these funds on a separate statement.

Fiduciary funds may appear on governmental statements as Trust Funds. Usually, these include money received for a specific purpose. Government organizations cannot utilize these funds in other projects. Instead, they can only use them to meet that purpose. Government organizations report these funds separately. This treatment is in line with that required by the GASB.

What are the types of Fiduciary Funds?

There are various types of fiduciary funds. These types depend on the source or purpose of these funds. Usually, fiduciary funds may fall into the following categories.

Agency fund

An agency fund is a collection of funds that one government organization holds for another. In this case, the body keeping the funds acts as the trustee. Eventually, it may transfer those funds to the other organization. Sometimes, they will also use those funds for other purposes on mutual agreement. Another name used to describe agency funds is custodial funds.

Investment trust fund

Investment pools can have various parts. The external portion of these funds may fall under the management of a government organization. Hence, investment trust fund reports that portion as fiduciary funds. Sometimes, governments may also use these funds to manage their own investments. However, investment trust funds only account for the external portion of those assets.

Pension and employment benefit trust funds

Pension and employment benefit trust funds are also common to companies. However, it is a type of fiduciary fund when a government organization is a trustee. This organization only handles those funds to distribute to the rightful owner later. Usually, most states manage their own pension and employment benefit trust funds.

Private purpose trust funds

Private purpose trust funds involve arrangements between a government and other entities. In this case, those entities act as the beneficiary. Furthermore, private-purpose funds may come in two types. These include expendable and nonexpendable trusts. These funds only serve a specific purpose, as the name suggests. The same does not apply to other types of fiduciary funds.


The State of California gathers taxes for the City of San Francisco. In this relationship, any taxes that the state collects constitutes agency funds. The State of California acts as the custodian for these funds. Eventually, it may transfer the collected taxes to the City of San Francisco. Before that, these funds fall under fiduciary funds.


Fiduciary funds refer to assets a government organization holds in trust for others. These organizations report these funds on the statement of fiduciary net position. On top of that, they will provide movements in those funds through the statement of changes in fiduciary net position. Several types of fiduciary funds exist, including the ones listed above.

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