Business Procedures Manual

Essential business procedural components for University System of Georgia institutions.

14.4 Terms and Conditions of Agency Accounts

(Last Modified on November 2, 2010)

Agency funds are used to account for resources held by an institution as custodian or fiscal agent for individual students, faculty, staff members, or other organizations.

This section provides guidance for University System of Georgia (USG) institutions to serve as fiscal agents for agency funds.

(Last Modified on November 2, 2010)

The institution may agree to serve as a fiscal agent for an agency fund only after satisfactorily considering all the following:

  1. The purpose for the agency 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 agency fund is in the best interests of the institution, taking into account all risk management implications.

  3. The establishment of an agency fund account is appropriate, according to the circumstances and reporting principles involved.

  4. An agreement governing the agency relationship is established.

The approval and establishment of an agency account does not:

  • Automatically entitle the organization to the use of any institution services, other than the normal administration of funds as it relates to cash receipt and disbursement services.
  • Place the agency fund under the institution’s tax-exempt umbrella. Monies accepted for deposit in an agency fund are not considered tax-deductible gifts to the institution. Expenditures from an agency fund are not entitled to the institution’s state sales tax exemption.
  • Make the institution liable for any of the organization’s debts, liabilities or actions.
  • Continue indefinitely. Agency status is contingent on adherence to all institution policies. The institution has the right to close an agency account at its discretion consistent with agreements between the organization and the institution.

(Last Modified on February 9, 2015)

Before establishing an agency account, each institution should ensure that its relationship with the organization or third party is that of custodian or fiscal agent. A request for an agency account can originate from a department acting on behalf of an external organization or an outside third party.

Agency agreements should be completed by the institution and signed by representatives of both the institution and the external organization. Each agreement should contain complete information on the terms and conditions of the agency relationship, including:

  • The business reason for the agency account; that is, the reason why the organization does not open its own bank 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.
  • 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 agency agreement.
  • The disposition of any remaining funds at the end of the agreement.

Because an agency account represents activity that is related, but not fundamental, to the institution’s primary missions, it is important that agency fund treatment is not awarded to activities that are a normal and continuing part of the institution’s mission. For example, Student Housing Fees should not be accounted for as an agency account because Student Housing is fundamental to an institution’s education mission.

The process of evaluating an activity for agency treatment must be in place to ensure the accuracy of the institution’s accounting for agency funds, and to facilitate effective stewardship of funds for which the institution has a fiduciary responsibility. At the same time, ongoing accountability and oversight for agency funds must be established to minimize the institution’s financial exposure.

The status of each agency fund should be reviewed periodically, at least once a year, for the purpose of ensuring whether the agency status should be suspended or revoked. Circumstances to consider include:

  • Failure to adhere to institution policies and procedures.
  • The nature of the activities and functions has changed such that agency account status is no longer appropriate.
  • Deficit balances that are not remedied on a timely basis.
  • In the judgment of the president or designee, suspension or revocation is in the best interest of the institution.
  • Inactive balances should not be carried forward indefinitely from year to year, but should be disposed of in accordance with the agency agreement.

After five (5) years without activity, unused balances must be forwarded to the state as mandated by escheatment laws, unless the disposition of unused balances is covered in the agency agreement. In instances involving federal funds, those funds should be returned to the appropriate federal agency. Complete files should be maintained for all agreements, letters, or other documents, for guidance in the proper handling of the funds. Please refer to BPM Section 19.1, Unclaimed Property, for additional information.

Individual agency funds should not carry a negative balance outside of short-term timing differences in processing, but under no circumstances should the agency fund groups as a whole have a deficit balance. At the end of the fiscal year, accounts receivables should be set up and donors should be billed for any applicable deficit balances.

(Last Modified on February 9, 2015)

The following services may be available to agency account principals such as individuals, faculty/staff/student organizations, and other entities as described in Section 14.5, at the discretion of individual institutions, with proper prior written approvals:

  • Cash receipting and disbursing services.
  • Using campus service departments, where the amounts charged for such use are based on the standard recharge rates for the services of the department involved.
  • Purchasing goods and services through the campus Purchasing department, with adherence to all state purchasing laws, rules, and regulations.
  • Using an institution-issued Purchasing Card for Study Abroad program expenses as described in BPM Section 21.4.

Note: While an institution may permit use of agency fund account services as outlined above, agency fund account expenditures are subject to sales tax unless the agency account principal can provide documentation proving a sales tax exemption.

14.5.1 Fund 60000 – Funds Held on Deposit

(Last Modified on February 9, 2015)

Student Organizations and Activities

These accounts are established for student clubs, student organizations, or workshops sponsored by student groups. Funds deposited in these accounts should represent funds earned or raised by the student organization. Funds allocated to the student organization from institutional funds shall not be placed in an agency account.

Agency fund accounts of these types should be provided only for bona fide student activities and institution-affiliated student organizations, with approval of the appropriate institution administrative office such as the Vice President – Student Affairs Office.

Faculty/Staff Organizations and Activities

These accounts are established for faculty and/or staff organizations and activities such as professional organizations in which faculty and/or staff are members and conferences and workshops sponsored by faculty or staff groups. Agency fund accounts should not be established for grants or contracts awarded to faculty members as individuals where the research would normally be handled as a departmental research grant or contract.

Establishing agency fund accounts for faculty/staff organizations and activities should be made only with approval from an institution administrative office, such as Vice President – Academic Affairs for faculty activities or the appropriate Vice President for staff organizations.

Activities between USG Institutions and Other Entities

These funds are:

  • Paid from one USG institution to another USG institution; and,
  • Paid by other state agencies to the Board of Regents for activities limited to meetings, seminars, training sessions, and workshops.

The funds include registration fees and incidental costs such as meals, use of facilities, training materials, and refreshments. Fee rates must be established to cover only the costs of the particular event. The account balance should be kept to a minimum and current balances should be considered when establishing fees for future events. Any balance on hand at June 30th, considered by audit judgment to be inordinately large, may be transferred to general funds. An agency agreement, as discussed in Section 14.2, should be made for each activity agency fund account.

(Last Modified on February 9, 2015)

Agency accounts are used under the following terms and conditions.

  1. Funds accepted for deposit in agency fund accounts are not considered tax-deductible gifts to the institution.

  2. The agency fund account should have a positive cash balance at all times. Should a deficit occur, the agency principal is responsible for remedying the deficit balance promptly upon notification. The institution may disapprove disbursements due to insufficient funds.

  3. Institution checks will be issued against the agency account using approved disbursement forms.

  4. With the exception of Study Abroad program expenses as described in BPM Section 21.4, Purchasing Cards may not be used for any agency account activity.

  5. All institution policies and procedures must be adhered to as well as applicable U.S. and State of Georgia laws.

    • Note: Agency fund expenditures are subject to all of the purchasing laws, rules, and regulations normally governing state funds. The applicability of these laws, rules, and regulations is currently under review by the Attorney General of the State of Georgia. Additional guidance shall be provided once available from the Attorney General.

(Last Modified on November 2, 2010)

Based on the purposes intended for the funds received, agency accounts may be established as follows.

14.5.2 Fund 61000 – Agency - Designated Scholarships

(Last Modified on November 2, 2010)

These are funds provided by individuals, companies, civic organizations, church groups, other groups, state government, and the federal government for the purpose of awarding scholarships to students matriculating in established degree programs. The entities providing the funds have the sole discretion in designating the recipient and the amount of aid to be provided.

Individuals and organizations desiring an agency account for scholarships should establish a Memorandum of Understanding that specifies:

  • Recipient eligibility requirements;
  • Purpose of the aid; and,
  • Amounts of aid for each recipient.

Agency scholarships shall not be treated as gifts to the institution.

(Last Modified on December 22, 2010)

The assets of the agency fund group include cash, temporary investments, and amounts due from other fund groups. Balances for this fund group will be carried as a liability on the Statement of Net Assets. Receipts and disbursements of these funds are accordingly classified as additions to, and deductions from, the fund balances rather than as revenue and expenditures.

Unique accounts should be established in each agency fund in order that transactions related to a specific fund balance may be recorded in one account*. Each fund can then be properly analyzed for purposes of accounting control and for the preparation of necessary reports.

* Note: Institutions using the GeorgiaFIRST Financials software use a separate department number in fund 60000, Funds Held on Deposit, to differentiate between agency fund balances. Such department numbers should begin with the letter A to distinguish these departments from others not classified as agency funds.

For fund 60000, the account number used will always be 241XXX - Funds Held for Others. For fund 61000, the account number used should be 251XXX - Designated Scholarships (separate numbers). For fund 62000 - Payroll Operations, the account numbers used should be the appropriate Liabilities - Payroll accounts.

The accounting for agency funds must conform to the standards required of a fiscal agent. Funds should be disbursed only for properly designated and approved purposes.

14.5.3 Fund 62000 – Payroll Operations

(Last Modified on November 2, 2010)

These are funds consisting of state and federal income taxes, social security taxes, retirement deductions, annuity premiums, and various other amounts withheld from the payroll checks of employees, from which a legal or contractual obligation exists to remit monies to a third party. These payroll deductions are transferred to the appropriate agency accounts when the payroll is recorded and are held in trust by the institution until routine remittances are made to the appropriate agencies.

Accruals of employer liabilities are also accumulated in this fund group.

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