January 2001: Accounting & Reporting of Expendable and Non-expendable Trusts

Issued To: County, City, Town and Village Chief Fiscal Officers, School District and BOCES Business Officials

An expendable trust is a trust whose resources, both principal and earnings, may be expended for authorized purposes. A nonexpendable trust is a trust that stipulates that earnings and not the principal may be spent. Currently, in the Uniform System of Accounts (USA), these trusts are accounted for and reported in the fiduciary funds, TE Fund (Expendable) and TN Fund (Non Expendable).

GASB Statement No. 34 makes significant changes to the accounting and reporting requirements for expendable and nonexpendable trusts. The statement eliminates the designation of expendable and nonexpendable trust funds and creates new funds based on the ability to use these resources for governmental purposes. Trusts, to be used for purposes that support your government's regular programs, that is, to benefit your municipality or school district (for example library or cemetery trusts), will be reported as either a miscellaneous special revenue fund or a permanent fund. Both of these funds will use the modified accrual basis of accounting. Trusts which exist to benefit individuals, private organizations, or other governments (for example, to fund an annual award or scholarship), will be reported as private purpose trust funds and use the full accrual basis of accounting.

As described in our June 2000 bulletin, OSC "will make the necessary adjustments to the fund level statements to permit compliance with GASB Statement No. 34." This will allow those units that implement the provisions of the Statement to do so. Therefore, the following changes will be made to the USA effective for fiscal years starting on or after July 1, 2001:

Trusts that benefit your municipality or school district:

  • Expendable Trust Fund TE changes to Miscellaneous Special Revenue Fund CM.
  • Nonexpendable Trust Fund TN changes to Permanent Fund PN.

Trusts that benefit individuals, private organizations or other governments:

  • Expendable Trust Fund TE changes to Private Purpose Trust Fund TE.
  • Nonexpendable Trust Fund TN changes to Private Purpose Trust Fund TE.

These changes should be reported in your annual financial report as an addition or deduction from beginning fund balance using residual equity transfer code 8019 in the Analysis of Fund Balance Statement of the affected funds. For example if the change were from a nonexpendable trust fund to a permanent fund the Analysis of Fund Balance Statements would be affected as follows:

  Nonexpendable Trust Fund (TN) Permanent Fund (PN)
8021 Fund Balance Beginning of Year: $100 $000
8019 Residual Equity transfer: ($100) $100
Adjusted Fund Balance Beginning of Year: $000 $100

The changes affect only the basis of accounting and reporting of trust funds. Account codes, accounting records, budgeting, bank accounts, etc. are not affected.