Business Procedures Manual

Fiscal Affairs Division

14.2 Establishment of Custodial Fund

(Last Modified on 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.
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