What is the primary difference in management involvement between trust funds and agency funds?

The primary difference in management involvement between trust funds and agency funds lies in the nature and structure of trust funds, which are governed by a trust agreement. This agreement outlines specific terms, conditions, and purposes for which the funds are to be used, requiring active management and oversight to ensure compliance with the trust’s stipulations. Trust funds often involve a fiduciary responsibility, meaning that the managing entity must act in the best interests of the beneficiaries and adhere to any legal or regulatory requirements associated with the trust.

In contrast, agency funds do not typically involve the same level of management oversight. They are designed to hold and distribute money on behalf of another entity, such as an individual, organization, or another governmental unit, without any fiduciary duties or influence over how the funds are utilized beyond mere custody and distribution. This significant distinction is what differentiates trust funds as requiring more proactive management compared to agency funds.