Custodial Fund - Tax Collection on Behalf of Other Governments (Pass-Through)
Recording property tax collections by a county on behalf of multiple taxing districts (cities, schools, special districts), maintaining the funds as a custodial (fiduciary) fund until remittance.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Cash - Custodial Fund (Taxes Collected for Others) | Asset (+) Custodial | 12,500,000.00 | - |
| Custodial Liability - Taxes Held for Other Governments | Liability (+) Custodial | - | 12,500,000.00 |
💡 Accountant's Note
County treasurers typically collect property taxes for ALL taxing bodies within the county (city, county, school districts, fire districts, library districts, etc.) in a single billing. The taxes collected for other taxing bodies are NOT the county's revenues — they are held in a Custodial Fund (formerly Agency Fund) and remitted to the appropriate taxing body on a periodic basis (monthly, quarterly). The county never recognizes these taxes as revenue or expenditure — only as an asset and corresponding liability until remitted.
Practitioner & Systems Framework
💻 ERP Architecture
Maintain separate custodial fund accounting for each taxing body. The remittance schedule must match the tax collection cycle and state law requirements. Delays in remittance to school districts or other taxing bodies can cause significant cash flow problems for those entities and may violate state statutes.
⚠️ Audit Flags
Auditors reconcile custodial fund balances to amounts owed to each taxing body. Unexplained discrepancies may indicate improper commingling with county operating funds or delayed remittances. The custodial fund balance sheet should show zero net position (assets = liabilities) since all collected funds belong to others.
📄 Required Documentation
Tax collection and remittance schedule by taxing body, custodial fund bank statement, remittance records by taxing body and by month, reconciliation of tax roll to collections and remittances, written remittance schedule.
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