ÖгöÉÙ¸¾ÊÓƵ

Introduction

Last modified: July 1, 2019

In January 2017, the Government Accounting Standards Board (GASB) issued Statement No. 84, Fiduciary Activities, which identified four types of fiduciary funds: (1) pension trust funds; (2) investment trust funds; (3) private-purpose trust funds, and (4) custodial funds. This section provides guidance for ÖгöÉÙ¸¾ÊÓƵ System of Georgia (ÖгöÉÙ¸¾ÊÓƵ) institutions on the identification, accounting and reporting of custodial funds.

Custodial funds will be used to account for remaining fiduciary activities that are not structured as part of a trust (pension trust funds, investment trust funds, or private purpose trust funds).

14.1 Overview

Last modified: July 1, 2019

Fiduciary activity will be reported as custodial funds if all of the following criteria apply:

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

Custodial funds will be reported in the following funds:

1. Fund 60000 ÖгöÉÙ¸¾ÊÓƵ“ Contains funds received and administered for others, such as club accounts, student organization accounts and concessionaire accounts.
2. Fund 61000 ÖгöÉÙ¸¾ÊÓƵ“ Contains funds designated for scholarships. Note: Scholarships which do not meet criteria 2 above should be reported in restricted fund.

Fund 62000, which is for payroll operations and withholding activity, will be reported as balance sheet activity on the institutionÖгöÉÙ¸¾ÊÓƵ™s Statement of Net Position.

See Section 14.4 for additional discussion of fund groups.

14.2 Establishment of Custodial Fund

Last modified: July 1, 2019

The institution may agree to serve as fiscal custodian only after satisfactorily considering all of the following:

1. The purpose for 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 institution, taking into account all risk management implications.
3. The establishment of a custodial fund account 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 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 custodial fund under the institutionÖгöÉÙ¸¾ÊÓƵ™s tax-exempt umbrella. Expenditures from a custodial fund are not entitled to the institutionÖгöÉÙ¸¾ÊÓƵ™s state sales tax exemption.
• Make the institution liable for any of the organizationÖгöÉÙ¸¾ÊÓƵ™s debts, liabilities or actions.
• Continue indefinitely. Account status is contingent on adherence to all institution policies. The institution has the right to close any custodial account at its discretion consistent with agreements between the organization and the institution.

Additional terms and conditions are as follows:

1. Funds accepted for deposit in custodial fund accounts are not considered tax-deductible gifts the institution.
2. The custodial fund account 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 institution must withhold disbursements until sufficient funds are available for deficits outside of short term timing differences.
4. Institution checks will be issued against the custodial fund account using approved disbursement forms.
5. All institution policies and procedures, including State procurement policies, must be adhered to when administering custodial fund activity.

14.3 Custodial Fund Agreements

Last modified: 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 InstitutionÖгöÉÙ¸¾ÊÓƵ™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 InstitutionÖгöÉÙ¸¾ÊÓƵ™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 fundÖгöÉÙ¸¾ÊÓƵ™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 ÖгöÉÙ¸¾ÊÓƵ 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 InstitutionÖгöÉÙ¸¾ÊÓƵ™s management of the custodial fund at the Owner of the custodial fundÖгöÉÙ¸¾ÊÓƵ™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 institutionÖгöÉÙ¸¾ÊÓƵ™s primary mission, it is important that custodial fund treatment is not awarded to activities that are a normal and continuing part of the institutionÖгöÉÙ¸¾ÊÓƵ™s mission.

14.4 Oversight and Maintenance of Custodial Funds

Last modified: July 1, 2019

Financial stewardship of custodial funds is paramount, therefore, ongoing accountability and oversight must be maintained. Each custodial account should be reviewed periodically, at least once a year, for the purpose of ensuring that custodial funds are being properly maintained and reported correctly. Circumstances to consider which could lead to change, suspension or revocation of custodial account status would include:

• A failure to adhere to institution policies and procedures;
• A change in the nature of the activities and functions such that reporting as a custodial fund is no longer appropriate;
• Deficit balances which have not been remedied in a timely manner;
• If, in the institutionÖгöÉÙ¸¾ÊÓƵ™s judgment, continuing the custodial account relationship is no longer in the best interest of the institution.

After 24 consecutive months without activity, unused balances must be either disposed as outlined in the custodial agreement or refunded to the Owner of the custodial fund. Refunds that remain outstanding after one hundred eighty (180) days from the checkÖгöÉÙ¸¾ÊÓƵ™s issue date must follow procedures outlined in section 19.1, Unclaimed Property.

Individual custodial accounts should not carry a negative balance outside of short-term timing differences in processing. Under no circumstances should the custodial fund group have a deficit balance. At the end of the fiscal year, accounts receivable should be set-up and external providers should be billed for any applicable deficit balances.

14.5 Custodial Fund Groups

Last modified: July 1, 2019

14.5.1 Fund 60000 ÖгöÉÙ¸¾ÊÓƵ“ Funds Held for Individuals, Groups and Organizations

Last modified: July 1, 2019

Student Organizations and Activities

These accounts are established for student clubs, student organizations, or other student group or affiliated group activities that fit criteria listed in Section 14.1. Funds deposited in these accounts should represent funds earned or raised by the student organization or affiliates. Funds allocated to the student organization from institutional funds, such as student activities fees, shall not be placed in a custodial fund account.

Custodial fund accounts of these types should be provided only for bona fide student activities and institution-affiliated organizations, with approval of the appropriate institution administrative office such as the Vice President ÖгöÉÙ¸¾ÊÓƵ“ Student Affairs Office.

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14.5.2 Fund 61000 ÖгöÉÙ¸¾ÊÓƵ“ Designated Scholarships

Last modified: July 1, 2019

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 and loans to students matriculating in established degree programs. The individuals or entities providing the funds have the sole discretion in designating the recipient and the amount of aid to be provided. Pass through grants, for which the institution does not have any direct financial or administrative control, will be reported in this fund.

With the exception of pass through grants, individuals and organizations desiring a custodial account for scholarships should provide an award letter or similar documentation that specifies the following:

• Recipient(s) ;
• Purpose of the aid; and,
• Amounts of aid for each recipient.

Custodial scholarship funds shall not be treated as gifts to the institution.

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14.6 Accounting For Custodial Funds

Last modified: July 1, 2019

In accordance with the implementation of GASB Statement No. 84, Fiduciary Activities, custodial funds are replacing the activity traditionally reported as agency funds. In addition to the change in nomenclature, there is significant changes in accounting and reporting. Custodial Funds are to be reported as part of Fiduciary Activities financial statements, which will include the following:

• Statement of Fiduciary Net Position ÖгöÉÙ¸¾ÊÓƵ“ full accrual basis financial statements that show all of the assets and liabilities of the institutionÖгöÉÙ¸¾ÊÓƵ™s fiduciary activities;
• Statement of Changes in Fiduciary Net Position ÖгöÉÙ¸¾ÊÓƵ“ reports additions, deductions and reflects how fiduciary net position has changed during the year under review.

Unique department and/or project IDÖгöÉÙ¸¾ÊÓƵ™s will be required for each custodial fund in order to accurately track the transactions by fund. Department or project IDÖгöÉÙ¸¾ÊÓƵ™s will be required for all transactions.

Custodial fund additions will be reported in the general ledger using account range 4961xx to 4964xx. Custodial fund disbursements will be reported in the general ledger using account range 7961xx to 7964xx. Fiduciary net position will be reported in account 396000.

© 2024 Board of Regents of the ÖгöÉÙ¸¾ÊÓƵ System of Georgia
270 Washington Street, S.W.,
Atlanta, Georgia  30334
U.S.A.

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