Business Procedures Manual

Essential business procedural components for University System of Georgia institutions.

14.3 Custodial Fund Agreements

(Last Modified on July 1, 2019)

Custodial agreements should be completed by the institution and signed by representatives of both the institution and the external organization (owner of the custodial fund). Each agreement should contain complete information on the terms and conditions of the custodial relationship, including:

  • The business purpose for the custodial account. The nature of activity that will be processed through the account.
  • The legal/corporate status of the organization. For example, 501(c) (3), Corporation, etc.
  • The Federal tax ID number of the organization, if applicable.
  • The name of any other organization on whose behalf the organization is functioning as an agent or intermediary.
  • The affiliation of the organization with the institution.
  • The person or persons authorized to request expenditures from the fund.
  • 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.
  • The disposition of any remaining funds at the end of the agreement.
  • Acknowledgement that the Institution cannot accept responsibility for financial shortfalls for the custodial fund. Disbursements will not be made unless adequate funds are available in the custodial fund.
  • Acknowledgement that direct costs expended by the Institution on behalf of the custodial fund must be reimbursed by the custodial fund.
  • Acknowledgement that the Institution cannot process disbursements that are not handled in accordance with the Institution’s prescribed practices, including applicable State procurement policies and guidelines for allowable expenditures.
  • Acknowledgement that by establishing a custodial fund, the Owner of the custodial funds is not a unit of the Institution and does not obtain Institution privileges, including but not limited to: entitlement to use Institution services or facilities; inclusion under Institution income or sales tax exempt status; use of the Institution Federal Employer Identification Number (FEIN); use of the Institution payroll system; use of Institution staffing; use of Institution name, logos, trademarks; use of Institution property recordkeeping or tracking systems.
  • Acknowledgement that the custodial fund does not enjoy tax-exempt status under the Institution’s charitable tax status. Donations to the custodial fund or Owner of the custodial fund are not tax deductible unless 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.
  • Acknowledgement that the Institution is not responsible for the Owner of the custodial fund’s actions, including but not limited to: appropriateness of disbursements; indebtedness or other liabilities incurred by the Owner of the custodial funds. Owner of the custodial fund agrees to hold the University System of Georgia, including its trustees, employees, and agents, harmless from and to indemnify each of them against all claims, demands, losses and liabilities relating to the Institution’s management of the custodial fund at the Owner of the custodial fund’s direction.
  • Acknowledgement that the Institution has the right to close a custodial fund account at its discretion.
  • Acknowledgement that the records of all custodial funds shall be subject to review or audit by appropriate Institution, State, or external auditors as necessary.

Institutions may also assess administration fees to custodial funds, including funds with inactive balances. If administrative cost are assessed, acknowledgement of the potential for administrative cost assessment should be included in the custodial agreement. (Example: With prior written notification, the Institution may assess administration fees to custodial funds, including funds with inactive balances.)

Because a custodial account represents activity that is related, but not fundamental, to the institution’s primary mission, it is important that custodial fund treatment is not awarded to activities that are a normal and continuing part of the institution’s mission.

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