# Scenario IV

# Trust Fund Investments

Federal trust funds are managed by either a Federal program agency or by Fiscal Service on behalf of an agency. The managing entities make the investment decisions.  The Secretary of the Treasury administers the investment programs for Federal accounts authorized by law to invest in U.S. Government interest-bearing obligations.  Treasury’s role is twofold:  1) to act as executor of investment decisions directed by Federal program agencies (for agency-managed trust funds) and  2) to maintain the role of managing trustee (for Treasury-managed trust funds), wherein Treasury makes and executes investment decisions for certain funds.  Fiscal Service administers these two mission-critical functions.  Scenario IV applies to both agency-managed and Treasury-managed trust funds.  The entity that manages the fund, which would be either the agency or Fiscal Service acting on behalf of the agency, records the transactions outlined herein.

Federal trust fund receipts can be invested in various types of securities, but appropriate authorization is required.  Trust fund investments are primarily in public debt securities, issued by Fiscal Service, with maturities suitable to meet the needs of the fund.  Investments in public debt securities are treated as an exchange of an asset.  Scenario IV addresses these types of investments.  A small number of trust funds are authorized to invest in non-Federal securities (securities held outside of the Government).  Investments in non-Federal securities are treated as a purchase of an asset, rather than as an exchange of an asset.  An obligation and an outlay must be recorded for the purchase.  Investments in non-Federal securities are less common, and therefore are not covered in this scenario.  Even fewer trust funds are authorized to invest in agency securities, whereby one agency purchases securities issued by another agency.  This type of investment, which is also uncommon in the Federal Government, requires specific authorization and is not covered in this scenario.  Refer to OMB Circular A-34 for additional reporting guidance, and to the USSGL Web site for guidance on accounting for agency securities.

For trust funds managed by Federal program agencies****(e.g., Civil Service Retirement and Disability Trust Fund), program agencies are responsible for determining****the amounts to be invested and the terms of the investments.  Agencies also are responsible for calling Fiscal Service with specific investment/redemption orders and reporting investment activity via the SF 224: Statement of Transactions,  (SF 133, USSGL 2108, P&F), and on the agency financial statements.

For trust funds managed by Fiscal Service****(e.g., Federal Old-Age and Survivors Insurance Trust Fund, Unemployment Trust Fund),****Fiscal Service is responsible for administering and monitoring the daily activities of the managed trust funds for receipts, investments, redemptions, and interest calculations.  Unlike agency-managed trust funds, Fiscal Service reports the investment activity via the SF 224 for the trust funds it manages.  Fiscal Service also reports the appropriate investment figures through FACTS II and provides the same information to the agency responsible for FACTS I reporting and the agency financial statements.

This scenario is specific to trust funds, and illustrates basic investment transactions.  For additional transactions and reporting requirements, refer to OMB Circulars A-34 and A-11; TFM Volume I 

Part 2 - Chapter 4300: Intragovernmental Fiduciary Transactions Accounting Guide; TFM Volume I Part 2 - Chapter 4300, T/L 587: Reporting Instructions for Accounts Invested in Department of the Treasury Securities; and additional individualized scenarios developed by the USSGL staff (located on the USSGL Web site).

#### Scenario Assumptions

The following assumptions apply to Scenario IV:

· Receipts of this trust fund consist of predominantly non-exchange revenue.  Therefore, the interest earned on investments is classified as non-exchange.  For guidance on interest classified as exchange, refer to SFFAS #7, Accounting for Revenue and Other Financing Sources, paragraphs 306-308.

· The programs of the investing entity are not subject to apportionment.  Refer to Section III, Accounting Transactions, of TFM S2-01-02 (as updated) for comprehensive transactions that include accounting for programs that are subject to apportionment.

1. **To record the collection of tax receipts that are deposited into a trust fund**

**receipt account.  The receipts are automatically credited to the corresponding expenditure account, whereby they can be invested.   (TC A186)**

***Budgetary***

4114Appropriated Trust or Special Fund Receipts1,000,000

4620Unobligated Funds Not Subject to Apportionment1,000,000

***Proprietary***

1010Fund Balance With Treasury1,000,000

5800Tax Revenue Collected1,000,000

**2.To record the immediate investment of the receipts in U.S. Treasury Security A issued by the Bureau of the Fiscal Service.  The security has a par value of $1,000,000 and was purchased at a *discount* of $200,000.  (TC B128)**

***Budgetary***

None

***Proprietary***

1610Investments in U.S. Treasury Securities Issued

by Fiscal Service1,000,000

1611Discount on U.S. Treasury Securities Issued

by Fiscal Service200,000

1010Fund Balance With Treasury800,000

**3.To record the collection of additional receipts that are deposited into the trust fund receipt account.  The receipts are automatically credited to the corresponding expenditure account, whereby they can be invested.  (TC A186)**

***Budgetary***

4114Appropriated Trust or Special Fund Receipts5,000,000

4620Unobligated Funds Not Subject to Apportionment5,000,000

***Proprietary***

1010Fund Balance With Treasury5,000,000

5800Tax Revenue Collected 5,000,000

**4.To record the immediate investment of the receipts in U.S. Treasury Security B issued by the Bureau of the Fiscal Service.  The security has a par value of $5,000,000 and was purchased for a *premium* of $10,000.  (TC B126)**

***Budgetary***

4620Unobligated Funds Not Subject to Apportionment    10,000

4114Appropriated Trust or Special Fund Receipts    10,000

***Proprietary***

1610Investments in U.S. Treasury Securities Issued

by Fiscal Service5,000,000

1612Premium on U.S. Treasury Securities Issued

by Fiscal Service          10,000

1010Fund Balance With Treasury5,010,000

**5.To record accrued interest receivable for Securities A and B.  Budgetary resources are not recorded until interest is collected.  (TC C215)**

***Budgetary***

None

***Proprietary***

1340Interest Receivable101,000

5310Interest Revenue101,000

**6.To record the maturity of Security A.**

**A.  To record the amortization of the discount.  (TC D510)**

***Budgetary***

None

***Proprietary***

1613Amortization of Discount and Premium on U.S. Treasury

Securities Issued by Fiscal Service200,000

5310Interest Revenue200,000

**B.  To record the redemption.  (TC C124)**

***Budgetary***

4114Appropriated Trust or Special Fund Receipts200,000

4620Unobligated Funds Not Subject to Apportionment200,000

***Proprietary***

1010Fund Balance With Treasury1,000,000

1610Investments in U.S. Treasury Securities Issued

by Fiscal Service1,000,000

1611Discount on U.S. Treasury Securities Issued

by Fiscal Service   200,000

1613Amortization of Discount and Premium on U.S. Treasury

Securities Issued by Fiscal Service 200,000

**7.To record the obligation and disbursement of funds to non-Federal recipients.  Investments redeemed in the previous transaction are enough to cover disbursement needs.  (TC B107)**

***Budgetary***

4620Unobligated Funds Not Subject to Apportionment12,000

4902Delivered Orders - Obligations, Paid12,000

***Proprietary***

6100Operating Expenses/Program Costs12,000

1010Fund Balance With Treasury12,000****

**8.To record the maturity of Security B.**

**A.  To record the collection of interest deposited into the trust fund receipt account.  (TC A196)**

***Budgetary***

4114Appropriated Trust or Special Fund Receipts100,000

4620Unobligated Funds Not Subject to Apportionment100,000

***Proprietary***

1010Fund Balance With Treasury100,000

1340Interest Receivable100,000

**B.  To record the amortization of the premium.  (TC D510)**

***Budgetary***

None

***Proprietary***

5310Interest Revenue10,000

1613Amortization of Discount and Premium on U.S. Treasury

Securities Issued by Fiscal Service10,000

**C.  To record the redemption.  Budgetary resources were previously reduced for premium at the time of purchase.  (TC C122)**

***Budgetary***

None

***Proprietary***

1010Fund Balance With Treasury5,000,000

1610Investments in U.S. Treasury Securities Issued

by Fiscal Service5,000,000

1613Amortization of Discount and Premium on U.S. Treasury

Securities Issued by Fiscal Service     10,000

1612Premium on U.S. Treasury Securities Issued

by Fiscal Service     10,000

**9.To record the collection of additional receipts that are deposited into the trust fund receipt account.  The receipts are automatically credited to the corresponding expenditure account, whereby they can be invested.  (TC A186)**

***Budgetary***

4114Appropriated Trust or Special Fund Receipts500,000

4620Unobligated Funds Not Subject to Apportionment500,000

***Proprietary***

1010Fund Balance With Treasury500,000

5800Tax Revenue Collected 500,000

**10.To record the immediate investment of the receipts in U.S. Treasury Security C issued by the Bureau of the Fiscal Service.  The security has a par value of $500,000 and was purchased at a *discount* of $40,000.  (TC B128)**

***Budgetary***

None

***Proprietary***

1610Investments in U.S. Treasury Securities Issued

by Fiscal Service500,000

1611Discount on U.S. Treasury Securities Issued

by Fiscal Service  40,000

1010Fund Balance With Treasury460,000

**11.To record the amortization of the discount for Security C.  (TC D510)**

***Budgetary***

None

***Proprietary***

1613Amortization of Discount and Premium on U.S. Treasury

Securities Issued by Fiscal Service10,000

5310Interest Revenue10,000

*Note:  For those trust funds with  receipts that are limited to the year=s obligations, an adjusting entry is required.  Follow the guidance in Scenario II: Trust Fund Balances Precluded from Obligation for treatment of unobligated balances.*

**Budgetary Pre-Closing Adjusted Trial Balance (FACTS II ATB):**

**Budgetary Closing Entries:**

**C1.To record the consolidation of actual net-funded resources.  (TC F204)**

4201Total Actual Resources - Collected  6,790,000

4114Appropriated Trust or Special Fund Receipts6,790,000

**C2.To record the closing of Expended Authority - Paid.  (TC F214)**

4902Delivered Orders - Obligations, Paid    12,000

4201Total Actual Resources - Collected    12,000

**Budgetary Post-Closing Trial Balance:**

**Proprietary Pre-Closing Trial Balance (FACTS I Trial Balance):**

**Proprietary Closing Entries:**

**C1.To record the closing of revenues and expenses to cumulative results of operations.  (TC F228)**

5310Interest Revenue   301,000

5800Tax Revenue Collected6,500,000

**3310Cumulative Results of Operations6,789,000**

6100Operating Expenses/Program Costs     12,000

**Proprietary Post-Closing Trial Balance:**

**SF 133: Report on Budget Execution and Budgetary Resources (Quarter 4):**

1AAppropriations  (4114E)  6,790,000

2AUnobligated Balance Brought Forward

3Spending Authority from Offsetting Collections 

5 Temporarily Not Available Pursuant to Public Law 

**7Total Budgetary Resources  6,790,000**

8A1Obligations Incurred, Direct 

8A3Obligations Incurred, Direct, Not Subject to Apportionment  (4902E)      12,000

9Unobligated Balances Available (4620E) 6,778,000

11 **Total Status of Budgetary Resources 6,790,000**

12.Obligated Balance, Net as of October 1

13.Obligated Balance Transferred, Net

14.Obligated Balance, Net, End of Period

15A.Disbursements   (4902E)     12,000

**USSGL 2108: Year-end Closing Statement:**

Column 5Post-Closing Unexpended Balance (1010E)6,318,000

Column 6Other Authorizations (1610E, 1611E)   460,000

Column 11Unobligated Balance (4620E)6,778,000

**Program and Financing Schedule (P&F):**

**Obligations by Program Activity**

1000Total new obligations (4902E)     12,000

**Budgetary Resources Available for Obligation**

2140Unobligated balance available, start of year              0

2200New budget authority(gross) (sum 4000 to 6990)6,790,000

2395Total new obligations (-) (from line 1000)   (12,000)

2499Unobligated balance carried forward, end of year (4620E)6,778,000

**New Budgetary Authority (Gross), Detail**

4026Appropriation (trust fund, definite) (4114E)6,790,000

7000Total new budget authority (gross)  (4114E)6,790,000

**Memorandum Entries**

9201Total investments, start of year (par) (1610B)             0

9202Total investments, end of year (par) (1610E)  500,000

**OMB Form and Content Statements**

**OMB Form and Content Statements (continued)**

� The transactions in this scenario combine the activity of the receipt and expenditure accounts into one.  The receipt-expenditure account relationship is described in more detail in the Introduction of the Guide.

� For most trust funds, invested balances are derived predominantly from earmarked taxes and other non-exchange revenue.  Accordingly, the interest earned is classified as non-exchange, thus not deducted from the gross cost of operations.  For those trust funds, however, where the main source of balances consist of exchange revenue (e.g. Civil Service Retirement and Disability fund), the interest shall be classified as exchange, and thus deducted from the gross cost of operations. (See SFFAS #7, &306-308).

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June 2001