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This policy provides guidance and an operating framework for the University of Minnesota to serve as fiscal agent for an associated organization (an "AO"), as defined under the Board of Regents Policy: Associated Organizations, and certain other entities that are external to the University.

The University may agree to serve as a fiscal agent for an AO or external entities, but only after satisfactorily considering all of the following:

• The purpose for the agency agreement must relate to activities dedicated to the mutual achievement of educational, research and public service goals;
• For AOs seeking an agency account, the AOs must be recognized by the University as provided in University policies and be in compliance with such policies;
• The goals are consistent with and supportive of the mission of the University;
• The agreement is in the best interest of the University, taking into consideration its fiscal, human resource, risk management, facilities management, budget, tax, legal, and treasury implications;
• The establishment of an agency fund account is appropriate, according to the accounting principles involved; and
• Depending on the nature and extent of the services provided, the University may require a legal agreement governing the agency relationship.

By acting as fiscal agent, the University will:

• Hold funds provided by an AO or outside entity in a separate account on the University's books and in the name of the AO or outside entity (the AO or outside entity shall retain all its rights, titles and interests in and to such funds);
• Consistent with University policy and as permitted by law and contract, purchase goods and services on behalf of the AO or outside entity under agreements between the University and the supplier or provider of such goods and services;
• Disburse funds to the AO or outside entity according to University policies and procedures but generally the University will not disburse funds or make payments to a vendor, supplier or other third party at the AO's or outside entity's direction or on its behalf;

The approval and establishment of an agency account does not:

• Automatically entitle the AO or outside entity to the use of any University of Minnesota services.
• Place the AO or outside entity under the University's tax-exempt umbrella.
• Make the University liable for any of the AO or outside entity debts, liabilities or actions.
• Grant the AO or outside entity the right to use the University's payroll system.
• Grant the AO or outside entity the right to use the University's name, logo or trade and service marks.
• Continue indefinitely. Agency status is contingent on adherence to all University policies and contractual agreements, as well as applicable laws; the University, furthermore, has the right to close an agency account at its discretion consistent with contractual agreements between the AO or outside entity and the University, and after providing reasonable notice to the AO or outside entity.

Depending on the level of services provided to the AO or outside entity, the University may charge organizations that use agency accounts for the cost of any and all fiscal services (purchasing, payment of invoices, etc) provided as a part of the agency agreement. Additionally, AOs or outside entities that use agency accounts may be charged for the University's cost of funds, in the event that their agency account runs a deficit.

Agency accounts in the University's general ledger are accorded special treatment because they represent amounts held on behalf of parties external to the University, and should only be used to report resources held by the University in a purely custodial capacity. Agency accounts typically involve only the receipt, temporary investment, and remittance of funds to individuals, AOs and outside entitys. Agency accounts are not trust accounts, nor are they banking accounts.

An agency account represents activity that is not part of the University, thus revenues, expenses, gains and losses in agency accounts are not included in the University's financial statements; only assets and liabilities are reported. Notwithstanding this limited interpretation and use, agency accounts use the accrual basis of accounting to recognize receivables and payables when revenues are earned and expenses are incurred, respectively.

Because of these accounting implications, it is important that:

• Agency fund treatment is not awarded to activities that are part of the University's business. Agency accounts are purely custodial, and are limited to assets held in an agency capacity for others; agency accounts cannot be used to support the University's own programs. GASB 34, ¶ 69
.
• Agency fund treatment is not awarded for resources [cash] held for the University itself; these resources should be reported in the University's non-agency accounts.
• Agency fund treatment is considered only for entities whose activities are related to the mission of the University, but whose separate legal status requires that the operating results not be blended with the University's.

The process of evaluating an activity for agency treatment must be in place to ensure the accuracy of the University's accounting for agency funds, and to facilitate effective stewardship of funds for which the University has a fiduciary responsibility. At the same time, ongoing accountability and oversight for these agency funds must be established to minimize the University's financial exposure resulting from a third party's inability or unwillingness to pay.

University personnel must comply with the requirements of this policy to ensure that an effective internal control environment is maintained.

• Establishment and Use of Agency Funds

• UM 1652 - Agency Questionaire

Subject	Contact	Phone	Email

Subject	Contact	Phone	Fax/Email
Primary Contact	Danielle Behling	612-624-5748	behl0037@umn.edu
Assignment of agency account numbers	Danielle Behling	612-624-5748	behl0037@umn.edu
Contracts	Office of General Counsel	612-624-4100

Administrative Fee

The monthly fee charged to an agency account or, alternatively to a department that has recommended a waiver of the agency account's administrative fee. This fee is designed to reimburse the University for the use, by the agency account, of various services including one or more of the following: payroll, purchasing, accounting, legal, tax, facilities, insurance, human resources, financial systems support, and treasury.

Agency

A term used within this policy to mean an external entity that the University has established an agency relationship with and has agreed to serve as its fiscal agent.

Agency Account/Fund

An agency account/fund is a kind of fiduciary fund held by the University of Minnesota, with the University acting as custodian or fiscal agent for an external party or organization. Money is deposited with the University for safekeeping, to be used or withdrawn by the depositor at will. These funds may be held on behalf of students, faculty, staff organizations, or some other third party. Examples include scholarship funds where the "donor" selects the recipient, and public financial aid funds held until student accounts receivable are established.

Agency Questionnaire

A document that must be completed before a new agency fund will be evaluated for setup within the University of Minnesota's general ledger. Completion of an agency questionnaire is required if a new org request is processed for an existing agency fund. This questionnaire is used to evaluate compliance with generally accepted accounting principles and consistency with the mission of the University of Minnesota. The questionnaire is the initial determinant as to whether agency fund treatment is appropriate.

Fiduciary Fund

A fiduciary fund is used to report resources held in a trust or custodial capacity for individuals, private organizations, or other third parties. A fiduciary fund may be either a trust fund or an agency fund, distinguishable from each other in that a trust fund generally has a trust agreement that affects the degree of management involvement and the length of time that resources are held.

Generally Accepted Accounting Principles (GAAP)

The body of accounting literature that governs the appropriateness of the University's accounting policies and procedures. Conformity with generally accepted accounting principles (GAAP) is a criterion that must be met before agency fund treatment will be considered. GAAP dictates that agency fund treatment is only appropriate when the University is acting as custodian or fiscal agent for another party; and when the University has no administrative or direct financial involvement in an activity, but is merely acting as a fiscal agent.

Pass-Through Grants

Pass-through grants are grants that are received by the University to transfer to or spend on behalf of a secondary recipient. If the University has no administrative or direct financial involvement in the program, but is merely acting as a fiscal agent, pass-through grants should be considered agency (non-University) activity and accounted for in an agency account. If, on the other hand, the University monitors recipients for compliance with the grant, determines eligible recipients, or exercises discretion in how funds are allocated, the grant program should be considered a University activity and accounted for in a non-agency account.

Pell Grants

The Pell grant program is an entitlement program funded by the federal government that is a major source of aid to college and university students. The University has administrative and direct financial involvement with Pell grants because it determines eligible secondary recipients, and is liable for disallowed costs. For this reason, the Pell grant program is a good example of a pass-through grant that should not be handled in an agency fund.

Accounting Services

Review requests for new agency funds based on an accounting evaluation of a completed Agency Questionnaire.

Send copy of approved Agency Questionnaire to Office of General Council for determination of contract requirements. Notify Agency of approval by Controller's Office, and return a copy of the approved application form to the Agency.

Review and approve requests for new orgs within existing agency funds to ensure that the description of the activity matches the purpose of the agency fund in which the account will reside.

Determine when agency fund treatment is appropriate, from an accounting perspective.

Determine appropriate treatment for a newly established agency fund.

Monitor agency accounts to ensure that the settling of balances is completed regularly, timely and in accordance with contracts, where they exist.

Charge a monthly administrative fee to orgs within agency funds.

Agency

A request for an agency account can originate from a University department acting on behalf of an external entity, or an outside third party. In either situation, the Agency must seek a University department to sponsor its request for agency fund treatment.

Prepare an operating budget that identifies projected sources of funding and planned expenditures.

If the Office of General Counsel has recommended a contract, the Agency must sign the agreement and agree to be bound by the terms and conditions of the contract.

Initiate and submit financial transactions, in accordance with University policies, procedures and business forms. Review monthly financial transactions and balances recorded in the general ledger, the payroll system, or other financial systems for integrity, accuracy and completeness of the activity. Investigate and correct inaccuracies, discrepancies or errors timely.

Pay monthly administrative fee within 3 days of month-end.

Forfeit any abandoned monies to general University funds. Funds will be deemed abandoned if, for a period of 18 months or more, no accounting transactions have been made (other than monthly administrative fees) and there has been no official notification by the agency fund owner of intent to renew the agreement.

Budget Office

As part of the periodic deficit review process, sponsors of agency accounts are required to explain sizable and/or continuing deficits, and to identify the means by which the deficits will be cleared.

Charge interest on accounts that operate in a deficit for longer than a specified period of time.

Approve agency account usage that may result in financial liability, including cost of funds, to the University.

Department

Agree to act in the capacity of sponsor for an agency account requested by an entity. As a sponsor, the department is the liaison between the Agency and the University.

Either complete an Agency Questionnaire on behalf of an Agency, or review an Agency Questionnaire completed by an Agency for adequacy and completeness. Solicit approval from the appropriate RRC manager, and submit the completed request to Accounting Services for handling.

The sponsoring department will ensure that the Agency will receive regularly issued University financial reports so that it is aware of the balance receivable from or payable to the University, and is afforded the opportunity to review transactional detail for correctness.

Pay the administrative fee if the department has waived any assessed fees for the agency account.

Monitor and oversee activities within the agency account. Advise the Office of General Counsel if the Agency is not adhering to University policies and procedures, or the terms and conditions in its contract.

Director of Accounting Services

Make determinations as to the appropriateness of accounting procedures to be applied to new or existing agency funds.

Office of General Counsel

Determine whether a contract is appropriate, when Accounting Services advises OGC that a new agency fund or new org within an existing agency fund has been requested.

Develop a contract that governs the relationship between the University of Minnesota and the Agency account.

Consult with Accounting Services for an accounting opinion before agency fund treatment is negotiated or becomes part of a contract.

Because agency fund treatment has an impact on the University's financial reporting, the decision about appropriate use of an agency fund should reside with the Accounting Services department.

Recommend appropriate action if the terms of the agreement are not being followed.

Verify compliance with the financial terms of the contract via an annual review of the status of the contract.

Resource Responsibility Center (RRC) Manager

Review and approve the Agency Questionnaire before submission to Accounting Services. Respond to follow-up requests for information that could originate from either Accounting Services or the Office of General Counsel.

Advise to whom monthly general ledger reports should be routed.

Review the proposed operating budget and confirm that the sources of funding are appropriate and consistent with University policies.

Monitor the agency account for deficits and appropriate usage.

There are no appendices for this policy.

There is no FAQ for this policy.

• Board of Regents Policy: Associated Organizations
• The Framing Principles on the University's Relationship with and Oversight of Associated Organizations
• Administrative Policy: Reconciling & Verifying General Ledger Accounts & Other Financial Information
• The University's Chart of Accounts Manual
• GASB 39, Determining Whether Certain Organizations are Component Units

Effective:

January 2008

Supercedes:

Agency

To obtain a copy of a historical policy, e-mail the U Policy Librarian at policy@umn.edu or call 612-624-4372.