A custodial fund is a type of fiduciary fund used by state and local governments to report assets held temporarily in a purely custodial capacity—for example, taxes collected by one government on behalf of another. These funds do not involve administrative or financial control over the assets; the government is merely acting as an intermediary.
As per GASB Statement No. 84, custodial funds replace agency funds and are used to report fiduciary activities that are not held in a trust agreement and where the government does not have discretion over how the resources are spent.
Relevant Standards and References:
GASB Statement No. 84, Fiduciary Activities
GASB Codification Section 1300: Fiduciary Funds
GFOA Best Practices – Accounting and Financial Reporting for Fiduciary Activities
Therefore, Option A is correct.
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