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Federal Accounting Corner              

Decoding the Statement of Custodial Activity

The Statement of Custodial Activity (SCA) is pretty straightforward until you try and map it to Standard General Ledger (SGL) accounts. Most agencies don't need to prepare it, since it must be material to the agency's operations (although a footnote is required if they are not material). Custodial activity can be defined functionally as Treasury General Fund (GF) Receipts that are not reported on the Statement of Net Cost or Statement of Changes in Net Position. Common examples include taxes and interest revenue from delinquent accounts receivable.

Purpose

Sometimes federal agencies act as agents of the U.S. Treasury. Agencies make a number of special types of deposits that they are not allowed to keep, which instead go into Treasury's General Fund (GF). Since the agency knows how and why these were collected, Treasury relies on the agency to report the revenue on the SCA. Agencies also declare to Treasury the type of deposit being made by assigning it the proper Treasury Account Fund Symbol.

Revenue Activity

The top section (lines 1-10) of the SCA list the types of revenue. The first 7 lines list types of collections (line 8 is the total). Line 1 through 6 are six different types of taxes, so they are all mapped to account 5800 Tax Revenue Collected. If an agency collects more than one of these types of taxes (Individual Income and FICA/SECA Taxes, Corporate Income Taxes, Excise Taxes, Estate and Gift Taxes, Federal Unemployment Taxes, and Custom Duties), they need to use a subaccount, fund, or some other data element to distinguish them.

All other collections go into line 7. This is tricky because revenue accruals and write-offs can get mixed in, and we only want cash collected. The revenue accounts include Interest (5310, 5311, 5312), Penalties, Fines, and Administrative Fees (5320), Donations (5600), Taxes (5800 not listed above), and Miscellaneous (5900). If an agency does not accrue revenue, then they can simply use those revenue accounts. If the agency uses subaccounts to distinguish collected versus accrued (for example, 5320.01 for Penalties collected and 5320.02 for Penalties receivable, just as the SGL uses 5800 for tax collections and 5801 for taxes accrued), then they can just use the collected subaccounts. Otherwise, the agency must net against the revenue account any change in the associated receivable account (1310, 1340 and 1360). Note that account 1325 Taxes Receivable is not used since that account is associated with 5801 and we are only looking at account 5800. This is further complicated if the agency writes bad debts off, since this will decrease the receivable when funds are not collected. To calculate collections where there are write-offs, take the net credit balance of the associated revenue, contra-revenue, receivable and contra-receivable (for example, for penalties, net the change in balances of accounts 5320, 5329, 1360 and 1369, where credits show up as positive and debits as negative). Alternatively, an agency could set up special subaccounts for 1010 Fund Balance with Treasury to facilitate reporting custodial revenue collections. Line 8 is simply the sum of lines 1-7.

The accrued revenue net of contra-revenue appears on line 9. For taxes, this is the accrued tax account 5801 net of tax contra-revenue 5809. For other types of revenue, it is the change in net receivables (the receivable and contra- receivable accounts), and also any refunds still payable. If an agency does not accrue revenue, then this line should be zero. If the agency separates out accruals with a subaccount, then they could use that plus contra-revenue here instead of net receivables. The accounts payable (2110) should only be associated with custodial revenue, so the agency must limit the entries picked up based on fund, subaccount or some other data element. Since line 10 is equal to the sum of lines 8 and 9, and also is supposed to equal the net of all revenue and contra-revenue accounts, one could back into the value of line 9 by taking the net of all revenue and contra-revenue accounts and subtracting the balance of line 8.

Disposition

In the next section, the agency declares what has been done with the custodial revenue: line 11 shows what has been transferred to others, such as the General Fund, line 12 shows what is yet to be transferred, including what has only been accrued, and line 13 shows refunds and amounts scheduled for payment but not yet disbursed. The accounting models published by Treasury show that account 2980 Custodial Liability is credited when custodial revenue is accrued or collected, and this amount is reduced only when the funds are withdrawn by Treasury. Only if the agency transfers the collection to another fund or agency on their SF224 is account 2980 bypassed, and account 5998 Custodial Collections Transferred Out to a Treasury Account Symbol Other Than the General Fund of the Treasury is debited instead. When 2980 is posted for an accrual, account 5991 Accrued Collections for Others is debited, and when 2980 is posted for a collection, account 5990 Collections for Others is debited.

The only way to directly calculate line 11 Transferred to Others is to use a special cash subaccount for the transfer, or use account 5998, which is only posted when the transfer takes place (if it is not going to the GF). Otherwise, if Treasury has withdrawn all of the agency’s collections the agency can calculate that amount as the balance of account 5990. If the withdrawal is not equal to collections for any reason, then the agency must calculate the withdrawal as total accrued and collected (balances of accounts 5990 and 5991) less what hasn’t been given to Treasury (account 2980 Custodial Liability). This means that 2980 should show what has yet to be transferred, which is line 12. However, if all collections have been transferred, then the 2980 balance would equal what has only been accrued, which is account 5991 (except that a receivable recorded in a prior fiscal year would have its balance sitting in 3310 Cumulative Results and not 5991). Tracking refunds in line 13 may also be difficult, except for taxes, which have their own refund account 5890 (not to mention, tax refunds generally use a different Treasury Symbol so that is another way to distinguish them).

Line 14 Retained by the Reporting Entity is calculated as line 10 less lines 11, 12 and 13. However, the only amounts that should be retained are those transferred to another fund of the agency, which would be shown in account 5998. If the agency does not transfer all that was collected, the amount reported has to be backed into, or shown as the cash balance of those funds that are only used for such collections. Line 15 is just a proof of the formula that sources = uses, and should always be zero.

Conclusion

The SCA is a short statement that only some agencies must prepare, but its preparation does require some planning and mapping out of data elements such as fund, revenue source or subaccount. — Simcha Kuritzky, CGFM, CPA

This column is provided as part of a free exchange of ideas in federal accounting, and is not reviewed substantively before publication. Please send all comments, queries or corrections to Simcha.Kuritzky@CGIFederal.com.