Final answer:
Trust funds are not included in government-wide financial statements because they are held by the government in a fiduciary capacity and represent specific resources that cannot be used for general government purposes.
Step-by-step explanation:
Because governments have custody, not ownership, of the resources, trust funds are not included in government-wide financial statements. Governments hold resources in a fiduciary capacity for individuals, organizations, or other governments. Trust funds include resources that are required to be used for specific purposes based on the trust agreement or law, and as such, they do not represent disposable resources for general government use.
Government trust funds, such as Social Security and Medicare funds, represent intragovernmental debts, where one part of the government owes money to these trust funds. However, in government-wide financial statements, only the net position of the government is presented, excluding any internal debts between government entities. Therefore, the financial activities of trust funds are reported separately from general government financial statements.