In which situation is a fiduciary fund used?

A fiduciary fund is utilized specifically to account for assets that are held in trust or on behalf of outside parties. This means that the government or an entity does not own these assets but is managing them for the benefit of another party, such as individuals, organizations, or other governmental entities.

The fundamental characteristic of a fiduciary fund is its role in safeguarding assets that are not for the government's use but are held in a position of trust. This could include funds for pensions, scholarships, or other trust arrangements where the principal must be preserved, and returns are to be passed on to beneficiaries.

In contrast, the other scenarios do not align with the nature of fiduciary funds. Assets for government programs are managed differently, generally under governmental or proprietary funds. Assets held temporarily for the government usually pertain to agency funds, which do not constitute a fiduciary relationship. Lastly, assets that are restricted by legislation may apply to various fund types, including special revenue or capital projects funds, but do not inherently indicate a fiduciary condition. Understanding these distinctions clarifies the unique purpose of fiduciary funds in public accounting.