Final answer:
The activity most appropriately recorded by an agency fund is c. Assets held for special assessment debt repayment, which involves a custodial relationship where the governmental entity holds assets on behalf of others.
Step-by-step explanation:
Assets held for special assessment debt repayment. An agency fund is used by governmental entities to record assets they hold on behalf of others, which usually involves a custodial relationship.
Agency funds are not used to record assets held for investment (as in option b). Deposits held for utility customers (option d) are also not typically held in an agency fund but instead might be recorded in an enterprise fund that operates more like a commercial business within the government. For college scholarships to be awarded (option a), these would typically be held in a private-purpose trust fund or other fiduciary funds, depending on the nature of the trust and the stipulations attached to it.
Agency funds are used specifically for resources held in temporarily or custodial capacities. They are not used to directly fund services provided; instead, they account for assets held by the government as an agent for individuals, private organizations, or other government units.