In the context of agency funds, what does GAAP require regarding cash collections?

In the context of agency funds under GAAP, it's important to recognize that these funds are used to account for resources held by a governmental entity in a fiduciary capacity for others. This typically involves custodial responsibilities where the government manages funds that belong to other parties.

The correct approach requires reporting only cash collected and delinquent receivables balances. This focus on actual cash collections provides a clear and accurate representation of the funds held in agency accounts, which includes both the amounts received and any outstanding balances that are still owed to those funds. This practice ensures accountability and transparency, allowing stakeholders to understand the government's management of other people's resources.

Reports generated in this context must reflect the actual financial position without speculation about future revenues or estimated cash collections. This ensures that users of the financial statements are not misled by projected amounts, which may not materialize. The emphasis on the current status of collections allows for a more reliable presentation of the agency’s financial condition.