Agency Funds
An Agency fund is established when a nonprofit organization transfers assets to a community foundation, but specifies itself or one of its affiliates as the beneficiary of the assets.
If that same nonprofit will receive donations from the public, you will want to set up two funds. One to report on the Agency fund (funds contributed for its own benefit) and a separate fund that is a Designated fund (funded by public) for the nonprofit’s benefit.
- Gifts from the Agency are received into the Agency fund.
- Gifts from individual donors are received into the Designated fund.
- All earnings are kept for the individual funds in the correct place.
- Makes recording the liability for the nonprofit agencies’ portion of assets simple.
Step 1 - create liability accounts
Create liability accounts for all of your net asset accounts (we recommend creating these in akoyaGO CRM in the Fund Management workplace). They should be Balance Sheet Accounts, with Credit balances, and Non-Closing Accounts.
Step 2 - Create and agency liability clearning fund
Add an agency liability clearing fund in the Fund Management workplace in akoyaGO CRM.
- The Fund Type should be set to Agency Fund
- The Fund should be not be endowed
- Set the Department to that of your other agency funds. If your agency funds span multiple departments, you may need multiple agency liability clearing funds.
- You must assign a DT Account to the fund, however you should never post assets to this fund, only liabilities/net assets, so the DT Account should not be utilized.
Step 3 - Periodically record the liability
Typically, Foundations record the organizational liability on a yearly basis. However, your organization can record the liability as frequently or infrequently as you prefer.
To begin, run a balance sheet report (akoyaGO Balance Sheet by Account) for all agency funds (You can filter by fund type(s) or by fund numbers). Use the Consolidated option.
Create a general journal transaction based on the balance sheet that clears the lump sum Net Asset accounts (3000 – 3020) to the mirror Liability accounts set up for Agency Funds. ALL transaction lines will use your Liability Clearing Fund (99999 in the example above).
Once posted, running a balance sheet again for just the Agency Funds will show that total Net Assets are now zero and liabilities equal the previous balance for net assets.
If you run a consolidated balance sheet for all funds (without a filter) you will see the overall Foundation balance sheet has Agency Liabilities.