The purpose for establishing a custodial fund is to

A custodial fund is a type of fiduciary fund used by state and local governments to report assets held

temporarily in a purely custodial capacity—for example, taxes collected by one government on

behalf of another. These funds do not involve administrative or financial control over the assets; the

government is merely acting as an intermediary.

As per GASB Statement No. 84, custodial funds replace agency funds and are used to report fiduciary

activities that are not held in a trust agreement and where the government does not have discretion

over how the resources are spent.

Relevant Standards and Reference:

GASB Statement No. 84, Fiduciary Activities

GASB Codification Section 1300: Fiduciary Funds

GFOA Best Practices – Accounting and Financial Reporting for Fiduciary Activities

Therefore, Option A is correct.