**Nonfiduciary Deposit Funds with Investment Authority and Clearing Accounts**

**Effective Fiscal 2016**

###### GUIDE FOR BASIC ACCOUNTING AND REPORTING

**NONFIDUCIARY DEPOSIT FUNDS WITH INVESTMENT AUTHORITY AND CLEARING ACCOUNTS**

**EFFECTIVE FISCAL YEAR 2016**

**UNITED STATES STANDARD GENERAL LEDGER DIVISION**

**GOVERNMENTWIDE ACCOUNTING**

**BUREAU OF THE FISCAL SERVICE**

**U.S. DEPARTMENT OF TREASURY**

**Table of Contents**

Version History3

Proprietary Attributes3

Crosswalks Impacted 4

Background 5

References: Deposit Funds 6

Reference: Clearing Accounts 10

Changes to Existing USSGL Account (Effective FY 2012) 12

New USSGL Account (Effective FY 2012)12

Listing of USSGL Accounts Used in This Scenario13

Section I. Case Study: Nonfiduciary Deposit Funds with Investment Authority 15

Section II. Case Study: Clearing Accounts 36

Section II. I. Unidentified Collection from Nonfederal Sources37

Section II. II. Unidentified Collection from Federal Sources51

###### Version History

**Proprietary Attributes**

*Effective with USSGL Bulletin 2016-05 with the Period 11 GTAS reporting window there will be a validation to no longer allow the Z domain value with Deposit Funds.  

**Crosswalks Impacted – Prior to Bulletin 2016-05 update**

## Crosswalks Impacted by Fed/NonFed Attribute Change: Investments in U.S. Treasury Securities – Bulletin 2016-05 update

**Background**

Prior to FY 2012, USSGL account 2400, “Liability for Nonfiduciary Deposit Funds, Clearing Accounts, and Undeposited Collections,” was used to report both deposit fund and clearing account activities.  Monies deposited into a clearing account belong to the Federal government, whereas deposit funds do not.

***Nonfiduciary Deposit Funds***

Nonfiduciary deposit funds are deposit funds that do not meet the definition and characteristics of fiduciary activities in SFFAS 31.  For example, deposit funds that are excluded from being reported as fiduciary activities in SFFAS 31, paragraphs 13-15 are nonfiduciary deposit funds.  According to SFFAS No 31, Accounting for Fiduciary Activities, paragraph 31. “ . . . .non-entity assets under an entity’s custody or management should be reported in the entity’s financial statements**,**except for non-entity assets meeting the definition of fiduciary assets, which should not be recognized on the balance sheet, but should be disclosed in accordance with the provisions of SFFAS 31, *Accounting for Fiduciary Activities.*Non-entity assets recognized on an entity’s balance sheet should be segregated from entity assets. An amount equal to non-entity assets recognized on the balance sheet****should be recognized as a liability (due to Treasury or other entities).” It is acknowledged that deposit funds should only record non-entity asset and corresponding liability on the agencies balance sheet.  If any flow accounts are recorded in a deposit fund then the agency’s net position will also be impacted resulting in a distortion of the agency’s net position.  

### Clearing Accounts

USSGL guidance recognizes an offsetting liability for clearing account deposits.  The two arguments for recognizing the offsetting liabilities for clearing account deposits are:

1) *Accrual Method of Accounting*

If agencies adhere to basic accounting principles of accrual method, then the performing agency should have recorded the revenue with corresponding receivable when the revenue was earned.  We have determined that if a financing resource is recorded in a clearing account for this particular event, then it will result in double counting of revenue, therefore overstating the net position of the performing agency.  

2) *Principle of Conservatism*

We recognize a clearing account may have many different types of collections and may require different accounting treatments.  As a result, we have applied conservatism principle to the clearing account collections.  Conservatism should be used when a degree of skepticism is warranted and where prudence in financial accounting and reporting is applied.  If there are two reasonable alternatives, the more conservative option should be chosen to have an alternative that will result in less income or less asset value.  Conservatism principle anticipates or discloses losses but gains do not have a similar treatment.  For clearing account collections, recognition of liability was chosen over recognition of the financing source to prevent any possible double counting of revenue.  

## References: Deposit Funds

FASAB, SFFAS No. 1, *Selected Assets and Liabilities,*Paragraph 26

Both entity assets and non-entity assets under an entity's custody or management should be reported in the entity's financial statements. Non-entity assets reported in an entity's financial statements should be segregated from entity assets. An amount equal to non-entity assets should be recognized as a liability (due to Treasury or other entities) in the entity's financial statements.

FASAB, SFFAS 7, *Accounting for Revenue and Other Financing Sources,* Paragraph 239 

The final group of transactions in this appendix consists of transactions that produce amounts not recognized as revenues, gains, or other financing sources. Although in some instances there is overlap with other groups, they are presented together as a convenient reference to amounts not classified in any of the other categories. They include:

· A number of transactions in which there is no net inflow of resources (or the net inflow is less than the full amount of the transaction) because one asset is exchanged for another or there is an increase in both assets and liabilities.

· Certain transfers and donations that do not affect net cost or net position.

· A number of transactions involving direct loans and loan guarantees, which are recognized as expenses or reductions in expenses according to the standards in SFFAS No. 2, Accounting for Direct Loans and Loan Guarantees.

· Deposit fund transactions.

FASAB, SFFAS 31, *Accounting for Fiduciary Activities*, Paragraphs 7, 31, 26, 29, and 35

[7] Numerous “fund groups” are used in reporting to the Treasury Fiscal Service and the OMB.  For example, “**deposit funds**” may be used for monies that do not belong to the Federal Government. Regardless of how a fund group may be classified in reporting to the Treasury Fiscal Service or to the OMB, only those activities that meet the definition of fiduciary activity promulgated in this standard are subject to the reporting requirements of this standard. Activities that do not meet the definition of fiduciary activities promulgated in this standard are not subject to the reporting requirements of this standard. Deposit funds that do not meet the definition of fiduciary activities, and therefore are not disclosed in the fiduciary note disclosure, should be recognized in the principal financial statements.

[31] This standard affects current standards for reporting non-entity assets. Paragraphs 26 and 29 of SFFAS 1, *Accounting for Selected Assets and Liabilities,*are amended as follows:

[26] Both entity assets and non-entity assets under an entity’s custody or management should be reported in the entity’s financial statements**, except for non-entity assets meeting the definition of fiduciary assets, which should not be recognized on the balance sheet, but should be disclosed in accordance with the provisions of SFFAS 31, *Accounting for Fiduciary Activities.***Non-entity assets ~~reported in~~**recognized on**an entity’s ~~financial statements~~**balance sheet**should be segregated from entity assets. An amount equal to non-entity assets **recognized on the balance sheet**should be recognized as a liability (due to Treasury or other entities) ~~in the entity’s financial statements~~.

[29] ***Non-entity cash.***Non-entity cash is cash that a federal entity collects and holds on behalf of the U.S. Government or other entities. In some circumstances, the entity deposits cash in its accounts in a ~~fiduciary~~**custodial**capacity for the U.S. Treasury or other **federal component**entities**, or in a fiduciary capacity for non-federal parties.**

**(a)**Non-entity cash **recognized on the balance sheet**should be reported separately from entity cash.

**(b) Non-entity cash meeting the definition of a fiduciary asset should not be recognized on the balance sheet, but should be disclosed in accordance with the provisions of SFFAS 31, *Accounting for Fiduciary Activities.***

[35] This standard also amends paragraphs 84 and 102 of SFFAC 2, *Entity and Display*, as follows:

Paragraph [102] Custodial collections do not include deposit funds, i.e., amounts held temporarily by the government (e.g., bidders’ earnest money or guarantees for performance) or amounts held by the Government as an agent for others, (e.g., state income taxes withheld from Federal employees’ salaries that are to be transferred to the states.)**.**~~Both of~~ These types of collections ~~can be considered assets and liabilities until they are returned to the depositor or forwarded to the organization entitled to the funds~~**should be reported in accordance with the provisions of SFFAS 31, *Accounting for Fiduciary Activities***.

Treasury Financial Manual (TFM), Volume 1, Part 2, Chapter 1500, DESCRIPTION OF ACCOUNTS RELATING TO FINANCIAL OPERATIONS

Section 1535—Deposit Fund Accounts****are defined as**:**

Fiscal Service establishes deposit fund accounts to record monies that do not belong to the Federal Government. Deposit funds are a liability in the Government’s central summary general ledger since those assets do not belong to the Government. The deposit fund account (liability) classification is proper for any account that meets one of the following three criteria:

· Monies withheld from Government payments for goods and services received. Agencies may treat this transaction as a deposit fund liability only when they have charged a budget account and the Government is holding the funds pending payment (for example, payroll deductions for savings bonds or State income taxes).

· Monies the Government is holding awaiting distribution based on a legal determination or investigation. This category includes monies in dispute (between the Government and outside parties) where ownership is in doubt and there is no present basis for estimating ultimate distribution.

· Deposits received from outside sources for which the Government is acting solely as a banker, fiscal agent, or custodian. This includes certain cash and investments held outside of Treasury. Also, refer to TFM Volume I, Part 2, Chapter 3400 for additional information.

TFM Volume 1, Part 2-4700 (currently in draft status to be published May 2016)

**4705.20e—Reporting of Government Account Series (GAS) Investments with Fiscal Service Purchased by Agencies Using Fiduciary or Non-fiduciary Funds.**Treasury GAS securities purchased using a non-fiduciary fund are normally classified as intragovernmental.  The investments in GAS securities by non-fiduciary funds and the associated USSGL accounts should be reported with a federal/non-federal attribute domain value of “F” with a corresponding federal trading partner of 020 for Treasury.  Treasury GAS securities purchased using a **fiduciary** fund are classified as public/non-federal. The investments in GAS securities by a fiduciary fund and the associated USSGL accounts should be reported with a federal/non-federal attribute domain value of “N” and no trading partner.

OMB Circular A11, *Preparation, Submission and Execution of the Budget*

20.12(f) ***Deposit funds.***

You use deposit funds to account for monies that do not belong to the Government. This includes monies held temporarily by the Government until ownership is determined (such as earnest money paid by bidders for mineral leases) or held by the Government as an agent for others (such as State and local income taxes withheld from Federal employees' salaries and not yet paid to the State or local government). We exclude deposit fund transactions, as such, from the budget totals because the funds are not owned by the Government. Therefore, the budget records transactions between deposit funds and budgetary accounts as transactions with the public. For example, when the mineral leasing process has been completed, the winning bidder's earnest money is transferred from the deposit fund to the appropriate receipt account and the budget records a receipt. Similarly, outlays are recorded in an agency's salaries and expense account when a Federal employee is paid, even though some of the amount is transferred to a deposit fund for State and local income taxes withheld and paid later to the State and local government. Deposits and associated disbursements are recorded in the same account.

OMB Circular A-136, *Financial Reporting Requirements*

II.4.3.3 Assets****

**Investments.**Investments in Federal securities will be reported separately from investments in non-Federal securities. Investments in Federal securities include non-marketable par value Treasury securities, market-based Treasury securities, marketable Treasury securities, and securities issued by other Federal entities. Non-Federal securities include those issued by State and local governments, Government-Sponsored Enterprises, and other private corporations. Investments are normally reported at acquisition cost or amortized acquisition cost (less an allowance for losses, if any). The components of investments, including the market value of market-based and marketable Treasury securities, will be disclosed (Note 5). (See SFFAS No. 1 for further information on investments in par value Treasury securities and in marketable and market-based Treasury securities expected to be held to maturity.) Reporting entities with material investments in Treasury securities attributable to Funds from Dedicated Collections must include in the required Note (Note 5) on Investments as described in SFFAS No. 27, as amended by SFFAS No. 43. Agencies with non-fiduciary deposit funds with investment authority that report intragovernmental FBWT should also report investments in Treasury securities as intragovernmental.

TFM Volume 1, Part 2-4700 Appendix 10 5.3 – Business Rules for Investments (currently in draft status to be published May 2016) 

**Government Account Series (GAS) Securities:** Fiscal Service accounts for GAS security Investments as follows, and the investing agency must post the calculated balances as provided by Fiscal Service.

· **Amortization method on market-based notes, bonds, zero coupon bonds, Treasury Inflation Protected Securities (TIPS), and Floating Rate Notes (FRN):**Uses the effective interest method calculated by Invest One. Amortization begins on the day of purchase. Market-based notes, bonds, and TIPS purchased at premium will be amortized to the call date. Please contact the Federal Investments Program at FedInvestor@fiscal.treasury.gov for more information on FRNs.

· **Amortization method on market-based bills:**Uses the straight-line method for amortization on market-based bills. Amortization begins the day after purchase.

· **Carrying value:**Fiscal Service reports all fixed-value Treasury securities at amortized cost value per SFFAS No. 5. Therefore, trading partners that are required to report Treasury securities at fair market value per Financial Accounting Standards Board (FASB) standards must not report these market adjustments and unrealized gains or losses using Fiscal Service as their trading partner. 

· **Interest accruals:**Interest accruals begin the day after purchase and are calculated using actual calendar days.  Inflation compensation earned on non-business days should be included in the interest accruals until the next business day when it is converted to principal.

· **Early redemption:**Early redemptions may be transacted using the specific id method or the first-in/first-out method if the accounts own multiple taxlots. If not specified, the FIFO method will be used. 

· **Required reporting:**Fiscal Service must report GAS security investment transactions on behalf of its trading partner to via IPAC and CTA. Fiscal Service's trading partners are responsible for reporting all non-investment receipts and disbursements to Fiscal Service. Fiscal Service provides its trading partners with a Monthly Statement of Account report in FedInvest for the agency to reconcile with their CARS Account Statement Expenditure Activity report. Fiscal Service also provides its trading partners with a Monthly Accrual Confirmation Report in FedInvest to reconcile to their USSGL account balances.

## References: Clearing Accounts

Clearing accounts are amounts that are known to belong to the Federal government but held temporarily until additional information is collected to correctly identify the collections into appropriate receipt or expenditure accounts.

OMB Circular A11,*Preparation, Submission and Execution of the Budget*

**20.12 What do I need to know about accounts and fund types?**

(e) ***Clearing accounts.***

You use clearing accounts to temporarily account for transactions that you know belong to the Government while you wait for information that will allow you to match the transaction to a specific receipt or expenditure account. For example: 

· To temporarily credit unclassified transactions from the public when there is a reasonable presumption that the amounts belong to a Federal Government account other than miscellaneous receipts in the Treasury.

· To temporarily credit unclassified transactions between Federal agencies, including Intragovernmental Payment and Collection (IPAC) transactions. 

You should not use clearing accounts to mask an over obligation or over expenditure of an expenditure account.

TFM, Volume 1, Part 2 – Chapter 1500 DESCRIPTION OF ACCOUNTS RELATING TO FINANCIAL OPERATIONS**1520.25—Clearing Accounts**

Fiscal Service establishes clearing accounts to temporarily hold unidentifiable general, special, or trust funds collections that belong to the Federal Government until they are classified to the proper receipt or expenditure account by the Federal entity. An “F” preceding the last four digits of the fund account symbol identifies these accounts. Clearing accounts consist of the “3800” series fund group preceded by the two-digit department regular code. Agencies should use the following:

· Budget clearing account (suspense), __F3875, to temporarily credit unclassified transactions from the public when there is a reasonable presumption that the amounts belong to their agencies. 

· Undistributed intergovernmental payments account, __F3885, to temporarily credit unclassified transactions between Federal agencies, including Intra-governmental Payment and Collection (IPAC) transactions.

Clearing accounts listed in the Federal Account Symbols and Titles (FAST) Book

## Changes to Existing USSGL Account (Effective FY 2012)

**Account Number**: 240000**Old Account Title**: Liability for Nonfiduciary Deposit Funds, ~~Clearing Accounts~~, and Undeposited Collections**New Account Title**: Liability for Nonfiduciary Deposit Funds and Undeposited Collections

**Normal Balance**: Credit**Old****Definition**: Amounts offsetting undeposited collections and collections deposited in nonfiduciary deposit funds ~~and clearing accounts, including suspense accounts~~, awaiting disposition ~~or reclassification~~. This account does not close at yearend. 

**New Definition**: Amounts offsetting undeposited collections and collections deposited in nonfiduciary deposit funds awaiting disposition. This account does not close at yearend. 

***Justification: Funds deposited into a clearing account belongs to the Federal Government therefore, a separate accounts was needed to separately identify clearing account transactions from a nonfiduciary deposit fund.***

## New USSGL Account (Effective FY 2012)

**Account Title**:Liability for Clearing Accounts  

Ac**count Number**:241000

**Normal Balance**:Credit

**Definition**:  The amount that offsets collections deposited in clearing accounts awaiting disposition or reclassification.  This account does not close at year-end.

***Justification: To separately identify clearing account transactions from nonfiduciary deposit fund transactions.***

**Listing of USSGL Accounts Used in This Scenario**

**Section I.  Case Study:Nonfiduciary Deposit Funds with Investment Authority**

## Section I.  Case Study: Nonfiduciary Deposit Funds with Investment Authority

### Year 1

A beginning trial balance is not applicable in Year 1. 

1. To record cash collections into nonfiduciary deposit fund.

2. To record investment of Treasury securities by a nonfiduciary deposit fund that has investment authority. 

3. To record amortization of the discount on the Fiscal Service securities.  (Interest revenue is not recorded in a deposit fund.  See SFFAS No.7, paragraph 239.). Because a deposit fund must always have a net position of zero, the increase in total assets held by the deposit fund created by the amortization of the discount is offset by an increase in the corresponding liability for the deposit fund assets.  

4. To record appropriation received for payment of interest.  

5. To record accrual of interest due from Fiscal Service for interest on U.S. Treasury securities.  (Interest revenue is not recognized in a deposit fund.  See SFFAS No.7, paragraph 239)

6. To record GAS securities interest payment from Fiscal Service to the deposit fund.

**NOTE: NEW SECTION III PRO FORMA TRANSACTIONS ARE NEEDED FOR TRANSACTIONS 7 AND 8 FOR INTRAGOVERNMENTAL NON-BUDGETARY COLLECTIONS.  (SAME TCs NEEDED FOR TRANSACTIONS 4 AND 5 IN YEAR 2.)**

7. To record administrative fees earned for administering the deposit fund.  The nonfiduciary deposit fund should only record assets and liabilities. (See SFFAS 7, paragraph 239.) The intragovernmental payable and receivable would be eliminated on the government-wide financial report if the administrative fees were unpaid as of the financial statement date.  However, the receivable from the nonfiduciary deposit fund is not a budgetary resource until collected. (Deposit funds are not in the budget, and receivables from deposit funds are not budgetary resources, regardless of whether the deposit funds are fiduciary or nonfiduciary.)

8. To record payment of administrative fees to Agency 40’s operating fund.  

**Closing Entries (For Agency Operating Fund)**

**Closing Entries – Agency 40 Operating Fund**

C1. To record the consolidation of actual collections.

C2**.**To record the closing of revenue, expense, and other financing source accounts to cumulative results of operations.

**Year 1 Post Closing Trial Balance**

**Year 1 Financial Statements**

**Reclassified Financial Statements:**

### Year 2  

**Note: Only Transactions and Trial Balances for Agency 40 are shown for Year 2**

**Year 2 Opening Trial Balance**

1. To record amortization of the discount on the Fiscal Service securities for six months.  (See SFFAS No.7, paragraph 239.). 

2. To record accrual of six months of interest due from Fiscal Service for interest on U.S. Treasury securities.  (See SFFAS No.7, paragraph 239)

3. To record interest payment from Fiscal Service received by the deposit fund.

**NOTE: NEW SECTION III PRO FORMA TRANSACTIONS ARE NEEDED FOR YEAR 1 TRANSACTIONS 7 AND 8 AND YEAR 2 TRANSACTIONS 4 AND 5****FOR INTRAGOVERNMENTAL NON-BUDGETARY COLLECTIONS.**

4. To record administrative fees earned for administering the deposit fund.  The nonfiduciary deposit fund should only record assets and liabilities. (See SFFAS 7, paragraph 239.) The intragovernmental payable and receivable would be eliminated on the government-wide financial report if the administrative fees were unpaid as of the financial statement date.  However, the receivable from the nonfiduciary deposit fund is not a budgetary resource until collected. (Deposit funds are not in the budget, and receivables from deposit funds are not budgetary resources, regardless of whether the deposit funds are fiduciary or nonfiduciary.)

5. To record payment of administrative fees to Agency 40’s operating fund.  

6. U.S. Treasury Investments are sold to a non-federal buyer for a gain of $300.

7. To disburse part of the deposit fund’s assets to non-federal parties in accordance with legislation and/or judicial orders.

8. To transfer the remainder of the deposit fund’s assets to the General Fund of the U.S. Government in accordance with legislation and/or judicial orders.

**Year 2 Pre-Closing Trial Balance**

**Year 2 Closing Entries – Agency 40 Operating Fund**

C1. To record the consolidation of actual collections.

C2. To record the closing of revenue, expense, and other financing source accounts to cumulative results of operations**.**

**Year 2 Post-Closing Trial Balance**

**Section II. Case Study: Clearing Accounts**

## Section II. Case Study: Clearing Accounts

## I. Unidentified Collection from Nonfederal Sources

### Year 1

1) To record revenue earned from nonfederal entity

2) To record nonfederal collection deposited into a clearing account.  The collection belongs to the Federal government but appropriate agency operating fund is not yet identified.

**PRE-CLOSING ADJUSTING TRIAL BALANCE**

**YEAR 1**

**Closing entries for Year 1**

      C1. To record the closing of revenue to cumulative results of operations.

# POST-CLOSING TRIAL BALANCE

# YEAR 1

### Year 2

**Beginning Trial Balance**

1) To record anticipated collections from nonfederal entity.

2. To record reclassification of collection from a clearing account once amounts are identified to appropriate agency account (reverse the original entry recorded in the clearing account).

**Agency 40**

# PRE-CLOSING TRIAL BALANCE

# YEAR 2

**CLOSING ENTRIES FOR END OF YEAR 2**

      C1. To record the consolidation of actual net funded resources.

**POST-CLOSING TRIAL BALANCE**

# YEAR 2

## II. Unidentified Collection from Federal Sources

### Year 1

1) Agency 30 - To record appropriation received, apportioned and allotted; Agency 40- To record anticipated reimbursement for services provided 

2) To record reimbursable agreement without advance that was previously anticipated

2a) To record revenue earned for services provided to agency 30 by agency 40.  **The cost incurred by agency 40 to provide service is not shown in this scenario.**

3) To record Federal collection that are deposited into a clearing account but not yet identified to appropriate agency 40’s operating account.

Note: TFM, 2-4700, section 4706.30 – “ . . . Trading partner code “00” is limited to the House of Representatives, Senate, classified transactions, or any truly

unidentifiable activity/balances.” 

# PRE-CLOSING TRIAL BALANCE

# YEAR 1

**CLOSING ENTRIES FOR END OF YEAR 1**

C1. To record the consolidation of actual net funded resources. 

C2.****To record the closing of paid delivered orders to total actual resources.

C3. To record the closing of revenue, expense and other financing sources to cumulative results of operations. 

C4. To record the closing Unexpended Appr Used  and Received to Unexpended Approp-Cumulative.

# POST-CLOSING TRIAL BALANCE

# YEAR 1

**II. Unidentified Federal Collections**

**Year 2 – Only illustrates Agency 40 activities**

**Beginning Trial Balance**

1) To record a classification of money from the clearing account to appropriate operating fund (reverse the original entry recorded in the clearing account).

# PRE-CLOSING TRIAL BALANCE

# YEAR 2

**CLOSING ENTRIES FOR END OF YEAR 2**

       C1. To record the consolidation of actual net funded resources..

# POST-CLOSING TRIAL BALANCE

# YEAR 2

� OMB Circular A11, Section 20.12, What do I need to know about accounts and fund types? 

Characteristics of Fund Types and Their Accounts: Clearing accounts: What is the Purpose of the account? “Temporarily hold general, special, or trust fund Federal Government collections or disbursements to the applicable receipt or expenditure accounts.  (Amounts in clearing accounts should not be used to make outlays or payments)”

� TFM Volume I, Bulletin No. 2007-07,  “Reporting agencies that have justifiable business needs for keeping a suspense account may submit a waiver to OMB and Fiscal Service to request the continued use of the F3875 and/or F3885 suspense accounts for specific business purposes. Agencies must submit a written waiver request to OMB and Fiscal Service (see paragraph 9) by January 31, 2008. . . .”

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