Which of the following should NOT be included in an agency fund?

An agency fund is used to account for resources held by a government in a custodial capacity for individuals, private organizations, or other governments. The key characteristic of agency funds is that they do not involve any financial commitment by the agency itself; rather, they serve as a passive custodian of funds.

Pell Grants, which are federal financial aid awards given to eligible students to help cover college expenses, should not be included in an agency fund because they are direct grants that the government disburses to individuals for educational purposes. The government retains responsibility over these funds, and they do not represent a custodial arrangement. Instead, Pell Grants are typically reported in the context of federal assistance programs rather than through agency funds, which are intended for resources that the government merely manages on behalf of others.

The other options listed—debt service transactions related to no-commitment special assessment debt and other post-employment benefit plans that do not qualify as trusts—are more aligned with the concept of agency funds, as they involve funds that the agency holds without assumption of ownership or related liabilities. Thus, option regarding Pell Grants is the correct choice for items that should NOT be included in an agency fund.