How should the premiums to a public-entity risk pool be treated if the pool does not transfer or pool the risk?

In the context of public-entity risk pools, if the premiums are not used to transfer or pool the risk, they are best treated as deposits. This classification stems from the nature of premiums being paid in anticipation of future benefits or services related to risk management. Since the risk is not being transferred to the pool, the premiums do not function as expenses or liabilities; rather, they represent funds held by the entity until a specific event or requirement triggers their use.

When premiums are treated as deposits, it emphasizes the relationship of these funds with the intended future benefits and acknowledges that they are not current expenditures but may be retained or returned, depending on the circumstances surrounding the need for risk coverage or the contractual terms of the pool. This approach aligns with principles of accountability and transparency in financial reporting, where entities accurately reflect their financial obligations and the nature of their transactions.