What distinguishes agency funds from other fiduciary funds?

Agency funds are unique among fiduciary funds primarily because they do not report net assets. This characteristic is significant because agency funds act as custodians or intermediaries that hold assets on behalf of others, without any equitable interest in those assets. Essentially, they are meant to facilitate the flow of resources from one party to another, and therefore, there is no accumulation of net assets; the funds are strictly for the benefit of the individuals or entities they serve.

This lack of net asset reporting distinguishes agency funds from other fiduciary funds, such as trust funds, which do report net assets as they involve the management of resources benefiting specific individuals or purposes over time. Since agency funds do not reflect any ownership or retained earnings, they simply track the inflows and outflows of funds.

The other options focus on aspects that pertain to different kinds of fiduciary funds. While all fiduciary funds have distinct roles and reporting requirements, the absence of net asset reporting is a defining feature of agency funds that sets them apart in the spectrum of fiduciary accounting.