3.57 Agency-Custodial Funds

Agency funds are resources held by the University as a custodian or fiscal agent for others, such as student organizations or faculty organizations. Deposits recorded as agency funds should not be included in the wealth of the University. 

The University serves as a fiscal agent for a custodial fund if all of the following apply:

1. Assets are held by the University.
2. Assets are for the benefit of individuals or organizations, and the University does not have administrative or direct financial involvement with the assets.
   1. Does not monitor compliance with any requirements of the resource provider;
   2. Does not determine appropriateness of expenditures;
   3. Does not have the ability to exercise discretion over how assets are allocated.
3. Assets are for the benefit of the organizations or other governments that are not part of the financial reporting entity.

Establishment of an Agency Fund

The University may agree to serve as a fiscal custodial only after satisfactorily considering the following:

1. The purpose of the custodial fund must relate to, but not be a fundamental aspect of activities dedicated to the achievement of educational, research, and public service goals.
2. The custodial fund is in the best interests of the University, considering all risk management implications.
3. The establishment of a custodial fund is appropriate, according to the circumstances and reporting principles involved.
4. A written agreement governing the custodial relationship is established.

The approval and establishment of a custodial fund does not:

1. Automatically entitle the organization to the use of any University services other than the normal administration of funds as it relates to cash receipt and disbursement services.
2. Place the custodial fund under the University’s tax-exempt umbrella. Expenditures from a custodial fund are not entitled to the University’s State sales tax exemption.
3. Make the University liable for any of the organization’s debts, liabilities, or actions.
4. Continue indefinitely. Fund status is contingent on adherence to all University policies. The University has the right to close any custodial fund at its discretion, consistent with agreements between the organization and the University. 

Additional terms and conditions are as follows:

1. Funds accepted for a deposit in custodial fund are not considered tax-deductible gifts to the University.
2. The custodial fund should have a positive cash balance at all times other than short term timing differences (60 days or less). Should a deficit occur, the external provider (owner of the custodial fund) is responsible for remedying the deficit balance promptly upon notification.
3. The University must withhold disbursements until sufficient funds are available for deficits outside of short-term timing differences.
4. University checks will be issued against the custodial fund using approved disbursement forms.
5. All University policies and procedures, including procurement policies, must be adhered to when administering custodial fund activity.

Custodial fund treatment is not awarded to activities that are a normal and continuing part of the University’s mission.

Custodial Fund Agreements 

1. Custodial agreements should be completed by the University and signed by representatives of both the University and the external organization (owner of the custodial fund). 
2. Each agreement should contain complete information on the terms and conditions of the custodial relationship, including: 
   1. The business purpose for the custodial fund and a description of the nature of activity that will be processed through the fund.
   2. The legal/corporate status of the organization. For example, 501(c) (3), Corporation, etc.
   3. The Federal tax ID number of the organization, if applicable.
   4. The name of any other organization on whose behalf the organization is functioning as an agent or intermediary.
   5. The affiliation of the organization with the University.
   6. The person or persons authorized to request expenditures from the fund.
   7. The term of the custodial agreement. Note: The term should not carry forward indefinitely. The agreement should establish a clear and reasonable beginning and ending date.
   8. The disposition of any remaining funds at the end of the agreement.
   9. Acknowledgement that the University cannot accept responsibility for financial shortfalls for the custodial fund. Disbursements will not be made unless adequate funds are available in the custodial fund.
   10. Acknowledgement that direct costs expended by the University on behalf of the custodial fund must be reimbursed by the custodial fund.
   11. Acknowledgement that the University cannot process disbursements that are not handled in accordance with the University’s prescribed practices.
   12. Acknowledgement that, by establishing a custodial fund, the owner of the custodial fund is not a unit of the University and does not obtain University privileges, including but not limited to: entitlement to use University services or facilities; inclusion under University income or sales tax exempt status; use of the University Federal Employer Identification Number (FEIN); use of the University payroll system; use of University staffing; use of University name, logos, trademarks; use of University property recordkeeping or tracking systems.
   13. Acknowledgement that the custodial fund does not enjoy tax-exempt status under the University’s charitable tax status. Donations to the custodial fund or Owner of the custodial fund are not tax deductible unless the Owner of the custodial fund obtains its own charitable status under the Internal Revenue Code. The Owner of the custodial fund is responsible for all aspects of compliance with its charitable status, such as issuing written gift acknowledgements to donors.
   14. Acknowledgement that the University is not responsible for the Owner of the custodial fund’s actions, including but not limited to the following: appropriateness of disbursements; indebtedness or other liabilities incurred by the Owner of the custodial funds. The owner of the custodial fund agrees to hold the University, including its trustees, employees, and agents, harmless from and to indemnify each of them against all claims, demands, losses and liabilities relating to the University’s management of the custodial fund at the Owner of the custodial fund’s direction.
   15. Acknowledgement that the University has the right to close a custodial fund at its discretion.
   16. Acknowledgement that the records of all custodial funds shall be subject to review or audit by appropriate University or external auditors as necessary.