3 Accounting
3.2 Assets
3.2.4 Money Held For and By Others (formally Money Held in Trust)
Deposits Held for Customers
3.2.4.10 Governments may require deposits from customers. For example:
- A county or city may require deposits in relation to water, sewer, or garbage utilities.
- A housing authority may require deposits in relation to public housing activities.
- A public utility may require deposits from its customers for either initial or restoration services, provided the deposits are reasonable and not discriminatory.
- A parks and recreation district may require deposits in relation to facility rentals.
These deposits should not be reported in fiduciary funds, they should be reported in the fund where the operational activity is reported in using BARS codes 382.10 and 582.10.
3.2.4.20 Governments should enact policies addressing investment and disposition of interest on deposits by considering legal and contractual requirements and public policy. Governments are encouraged to disclose such policies in applications and official documents related to deposits to ensure a clear mutual understanding of such policies with depositors.
Deposits Held for the Government
3.2.4.30 When a government deposits money into an escrow account, the amount should continue to be recorded as cash on the financial statements, specifically cash held with a fiscal agent. The movement of the money does not represent a financial statement transaction, so should not be reported as an expenditure.
For example, if a government utilizes separate cash accounts in their general ledger, when the government places $50,000 into an escrow account for a down payment towards land the following transactions would be recorded to recognize the movement of the cash. Note: if a government does not utilize separate cash accounts in their general ledger, the following transaction would not be recorded.
|
Cash held with fiscal agent |
$50,000 |
|
|
Cash |
|
$50,000 |
At the time the escrow money is paid out to the owner of the land, the expenditure is recorded.
For example, when the government finalizes the land purchase and uses the $50,000 escrow cash towards the purchase of land, the following transaction would be recorded.
|
Capital expenditure |
$50,000 |
|
|
Cash held with fiscal agent |
|
$50,000 |
Investment of superior court trust funds
3.2.4.50 Pursuant to RCW 36.48.090, whenever the clerk of the superior court has money held in trust for any litigant or for any purpose, they should be deposited in a separate fund designated Clerk Trust Fund. This money should not be commingled with any public funds. The clerk is subject to the same investment limitations as the county treasurer (RCW 36.29.020).
Note: Clerk Trust Funds do not meet the definition of an accounting trust and should not be reported in the fiduciary trusts or any other fiduciary fund. These funds are different from money collected for the Administrative Office of the Courts and the money held awaiting judgement which should be reported as custodial funds (see BARS 3.1.11, Determining Fiduciary Activities to be Reported in Custodial Funds).
Superior court trust funds interest income
3.2.4.60 If the Clerk Trust Fund principal is $2,000 or more, and a litigant in the matter has filed a written request that the Clerk invest the funds held in trust, the interest income accrued from the date of filing should be held in trust and paid to the beneficiary upon termination of the trust.
All litigants not represented by an attorney and who have $2,000 dollars or more being held by a superior court clerk should receive written notice of the provision for receiving interest income on the funds.
The clerk should assess a five percent investment service fee on income earned on behalf of beneficiaries. This service fee should be placed in the county current expense fund to be used by the county for general county purposes.
Unless provided otherwise, interest earned on trust investments should be forwarded to the county treasurer as current expense fund revenue. See BARS 3.2.3, Sweeping Interest and Investment Returns into General Fund.
Investment interest earnings (BARS code 361.10.00) and investment service fees (BARS code 341.42.00) remitted to the county current expense fund should be coded to the revenue account. Moneys to be paid to the county treasurer should be remitted each month together with other remittances.
Superior court accounting requirements
3.2.4.100 Interest paid to litigants may need to be reported to the Internal Revenue Service. Governments should contact the IRS Federal, State and Local Government Division if tax advice is needed.
3.2.4.110 Guidelines for tracking deposits and investments are located at BARS 3.2.1, Deposits and Investments.
3.2.4.120 All money reported under this section will be reported on the government’s financial statements and included in the bank reconciliations following the guidance located at BARS 3.1.9, Bank Reconciliations.