Agency Fund Policy
Purpose of this policy
From time to time campus community members have fiscal responsibility (often as Treasurer) for professional organizations that they are involved in. These organizations are legally separate from the university and are funded from sources independent of the university (e.g. membership dues). The campus community member serving as president or treasurer may request that the university act as custodian and in so doing may request Accounting & Budget Services to establish a separate fund (an agency fund) in the university's accounting system to assist the organization in safekeeping their cash and keeping a running total of their cash balance. The purpose of this policy is to clarify when an agency fund can be offered and when another sort of arrangement is necessary due to the complexity of the organization's needs.
This policy should be read by: Student, faculty, staff, and other campus community leaders of professional clubs or organizations who have or wish to request agency funds; student organization advisors; and accounting & budget services staff.
The Financial Accounting and Reporting Manual for Higher Education (FARM), published by the National Association of College and University Business Officers (NACUBO), provides authoritative accounting guidance to colleges and universities. According to the FARM, section 431.6, "agency funds are resources held by an institution as a custodian or fiscal agent for others, such as student organizations, individual students, faculty organizations, or individual faculty members. The resources are deposited with the institution for safekeeping, to be used or withdrawn by the depositor at will." Agency funds are also referred to in the FARM, section 420.4, as "Amounts Held on Behalf of Others." Agency funds are reflected in the university's financial records as pooled cash with a corresponding liability to the depositing organization.
Agency funds may be established for the convenience of Puget Sound campus community members when the following conditions exist:
1. the funds belong to an outside organization (the university has no financial interest) for which a Puget Sound campus community member is the president or treasurer;
2. the organization is a separate legal entity that accepts all responsibility and liability for its activities;
3. the outside organization is a club, professional organization or fraternal organization;
4. the financial activities of the organization are limited to occasional deposits and occasional withdrawals; and
5. withdrawals are limited to on-campus recharges for printing, copies and bookstore purchases and to accounts payable disbursements (withdrawals).
Reporting for agency funds is limited to a running balance of the cash and a listing of deposits and withdrawals, not unlike a bank statement. Fund activity is viewable via the Web to individuals authorized by the outside organization. Withdrawals may be made by individuals authorized by the outside organization. Aside from the routine Washington state use tax reporting and IRS 1099 reporting associated with vendor payments made by the university on behalf of the outside organization, the outside organization is entirely responsible for its tax and regulatory compliance and filings.
An agency fund may NOT be used:
1. for organizations that are profit seeking ventures;
2. when the deposit or withdrawal activity is unusually complex and/or voluminous; or
3. to process payroll on behalf of the outside organization.
Please contact Bobby Goucher for any questions regarding fund policies.
Process and Responsibilities
Requests for agency funds shall be submitted to the Accounting Operations Coordinator. The Accounting Operations Coordinator will gather the necessary information from the requestor and working with the requestor will apply the criteria of this policy to determine if the arrangement needed can be satisfied with an agency fund.
If an agency fund is deemed appropriate, the requestor will need to provide the Accounting Operations Coordinator with a list of the persons (include titles or positions, as applicable) with disbursement authority and Budget Administration Web system viewing privileges for the agency fund, including any faculty or staff advisors for the organization. When positions within the organization change, an officer or faculty or staff advisor will provide the Accounting Operations Coordinator with updated disbursement authority and Budget Admin Web viewing information.
If the arrangement needed is more complex than allowed with an agency fund, the Accounting Operations Coordinator will consult with the Director of Financial Reporting and Tax, the Director of Financial Systems and Disbursements, or the Associate VP for Accounting and Budget Services and then will recommend an alternative approach to the requestor. Depending on the facts and circumstances, alternatives could include establishing a restricted fund if "sponsored" by the university and approved by the area VP, or advising the group to establish an outside bank account and seek outside accounting support.
Please contact the Accounting Operations Coordinator for questions regarding this agency fund policy.
Proposed by: Initially proposed by the Associate VP for Finance in 2003, this policy was handed off for maintenance to Director of Accounting & Budget Services (now the Associate VP for Accounting and Budget Services).
Approved by: Initially approved by the Associate VP for Finance. Subsequently reviewed and approved by the Associate VP for Accounting and Budget Services/Controller.
Date approved or last reviewed: Initially approved February 2003. Last reviewed and approved April 22, 2009.
Frequency of review: Every two years or as changes are needed
See additional discussion in sections 431.6 and 420.4 of the online version of NACUBO's Financial Accounting and Reporting Manual (FARM) for Higher Education, as of April 22, 2009.
The IRS Instructions for Form 1099-MISC give guidance on 1099 requirements for escrow agent type arrangements.