This policy provides guidance and an operating framework for the University to serve as fiscal agent for an associated organization (an "AO"), and certain other entities that are external to the University as defined under Board of Regents Policy: Associated Organizations.
The process of evaluating an AO or other entity for agency fund treatment must be in place to ensure the accuracy of the University's accounting for agency funds, and to facilitate effective stewardship of funds for which the University has a fiduciary responsibility. At the same time, the University must establish ongoing accountability and oversight for agency funds to minimize the University's financial exposure resulting from a third party's inability or unwillingness to pay.
The University may serve as a fiscal agent through departments, colleges, or administrative units for an AO or external entity if the following requirements are met:
- the purpose for the agency agreement is related to activities dedicated to the mutual achievement of educational, research and public service goals that are consistent with and supportive of the mission of the University;
- the AO is recognized by the University in Board of Regents Policy: Associated Organizations, and is in compliance with such policies;
- the agreement is in the best interest of the University, taking into consideration its fiscal, human resource, risk management, facilities management, budget, tax, legal, and treasury implications; and
- the approval of a chartstring operating out of an agency fund is appropriate, according to the accounting principles.
Fiscal agents must consider agency fund treatment only for entities whose activities relate to the mission of the University, but whose separate legal status requires that the operating results not be blended with the University.
Depending on the nature and extent of the services provided, the Office of the General Counsel may require a legal agreement governing the agency relationship. Accounting Services will make the final decision on the agency relationship in accordance with Generally Accepted Accounting Principles (GAAP) and the Government Accounting Standards Board (GASB).
Each unit acting as a fiscal agent is required to:
- hold resources provided by an AO or outside entity in an agency fund on the University's books and in the name of the AO or outside entity (the AO or outside entity will retain all its rights, titles and interests in and to such funds);
- purchase goods and services on behalf of the AO or outside entity under agreements between the University and the supplier or provider of such goods and services, consistent with University policy and as permitted by law and contract;
- and disburse funds to the AO or outside entity according to the University policy and procedures, Accounts Payable: Paying Non-Payroll Expenses Generally, the University will not disburse funds or make payments directly to a vendor, supplier, or other third party at the AO's or outside entity's direction or on its behalf.
AOs and outside entities are not entitled to:
- automatic use of any University services;
- use of the University's tax-exempt umbrella;
- make the University liable for any of the AO or outside entity’s debts, liabilities, or actions;
- automatic use of the University's payroll system;
- use of the University's name, logo or trade and service marks; or
- continue indefinitely.
Agency fund status is contingent on adherence to all University policies and contractual agreements, as well as applicable laws.
Accounting Services may, at its discretion, revoke a department’s ability to operate in an agency fund consistent with contractual agreements between the AO or outside entity and the University. Accounting Services will provide reasonable notice to the AO or outside entity prior to revocation.
Depending on the level of services provided to the AO or outside entity, the University Budget Office may charge organizations that have chartstrings operating in an agency fund an administrative fee for the cost of services (purchasing, payment of invoices, etc.) provided as a part of the agency agreement. Additionally, AOs or outside entities may be charged for the University's cost of funds, in the event that their agency fund’s chartstrings incur a deficit.
Prohibited Use of Agency Funds
No department is allowed to record transactions into agency funds to support the University’s own programs, or record resources typically held for the University itself (typically cash) into agency funds. Agency funds can only be used by departments that are fiscal agents and have been approved as specified above.
Reason for Policy
Agency funds in the University's general ledger are accorded special treatment because they represent amounts held on behalf of parties external to the University, and should only be used to report resources held by the University in a purely custodial capacity. Chartstrings operating in an agency fund typically involve only the receipt, temporary investment, and remittance of funds to individuals, AOs and outside entities. Agency funds are not trust accounts or banking accounts.
Each chartstring operating in an agency fund represents activity that is not part of the University, thus its revenues, expenses, gains and losses are not included in the University's financial statements; only assets and liabilities are reported. Notwithstanding this limited interpretation and use, all agency fund activity must use the accrual basis of accounting to recognize receivables and payables when revenues are earned and expenses are incurred, respectively.