Book Agency Fund Liability

In the system, you have the ability to book Agency Liability on behalf of your community foundation.

Initial Setup

The system has two options for the frequency to book the liability, monthly or yearly. 

• Monthly Frequency - Each time the books are closed monthly in the General Ledger, the system will complete a transaction booking the liability to the system fund.
• Yearly Frequency - Each time the books are closed for the fiscal year in the General Ledger, the system will complete a transaction booking the liability to the system fund.

If you are still training in the system, your trainer will give you the option to set the frequency. If you have completed your training, contact the Client Success Team to have this option set.

The agency liability automatic posting works by calculating the total increase or decrease to the value of the agency funds and then adjusting the amount of the liability accrual by that sum. For this reason, a beginning balance for the liability must first be established. If funds are added or removed from the agency list that either already have a balance or are not fully brought to zero, a manual adjustment may be needed to the agency liability accrual.

Liability and Net Asset Accounts Setup

1. Navigate to the Accounts page.
2. Click Defaults in the left-side menu and navigate to the Optional section.
3. In the Agency Fund Liability field, click the drop-down menu and select the account.
   
   
4. In the Agency Fund Equity field, click the drop-down menu and select the account.
   
   
5. Click Update.
   
   

The system's agency functionality will not work if the default accounts listed above are not set. They have to be set in order for the system to book the appropriate journal entries. 

Flag All Agency Funds

This can also be done using bulk edit which also makes verification easier. On the fund level, ensure all funds that are agency have been selected as agency.

1. Navigate to the Funds page.
2. Enter the fund name in the Search Fund field and select the fund from the drop-down list.
   • Alternatively, click List All or one of the specific fund list options in the left-side menu to view a list of funds. Click the ID of the fund.
     
     
3. Click Edit in the left-side menu.
4. Check the box next to Agency Fund if it is not already checked.
   
   
5. Click Save.
   
   
6. Navigate to the Funds page and click List Agency in the left-side menu.
7. Verify that all agency funds are listed.
8. Complete one of the three scenarios below and follow the steps depending on how the past system was booking liability.

Scenario Number 1: Past System Booked Liability to Individual Agency Funds

If the fund balance is zero dollars or if the balance sheet for the fund has an agency liability balance, follow this section.

1. A journal entry will be needed to move the liability off the fund and record it on the Z_Agency Fund with one of the options listed below using the Optional Accounts you established.
   • Complete a journal entry per each fund or complete a Journal Entry Import on each agency fund reversing the liability impact.
     • The journal entry will need to reverse the liability by debiting the account and crediting your default equity/net assets account.
   • Complete a journal entry to add the total liability and equity to Fund: Z_Agency Contra Fund.
     • The journal entry will need to credit the agency liability account that was selected in Account Defaults and debit the agency equity account that was selected in the Account Defaults. The fund used for the entry will be the Z_Agency Fund.
     • It is recommended to talk to your accountant or your fund accounting trainer about the post date for these transactions.

Scenario Number 2: Past System Booked Liability to a Separate Fund

If you were using just one fund to capture the liability of all agency funds follow this section.

1. Create and post a journal entry reversing the liability impact on the old agency fund.
   • The journal entry will need to reverse the liability by debiting the account and crediting your default equity/net assets account.
2. Create and post a journal entry to add the total liability and equity to Fund: Z_Agency Contra Fund.

   • The journal entry will need to credit the agency liability account that was selected in Account Defaults and debit the agency equity account that was selected in the Account Defaults. The fund used for the entry will be the Z_Agency Fund.

   • Consider talking to your accountant or your fund accounting trainer about the post date to use for these transactions.

Scenario Number 3: Past System Never Booked Liability

There are a couple of reasons why the liability may not appear on the books for previous periods. This is usually because an outside accountant added it to the financials outside of the system or perhaps the entry was made at year end but then reversed at the start of the new year. In either case, the process to establish the liability into Z_Agency is the same.

1. After ensuring that the proper funds are all marked as agency, run a balance sheet for the last fiscal year closing date and then filter by Agency>Yes. This will give the exact value of all of the agency funds in your system.
2. Create a journal entry in the Z_Agency fund that credits the liability account and debits the fund balance account that you designated when you set the default accounts.
3. This entry should be posted on either the last day of the previous fiscal year or the first day of new year if editing the previous year is not desired.

Closing the Books

Each time you close the books for that selection frequency, the system will book the entry to the system fund. If the books are opened after the system has booked the agency entries, the system will automatically unpost and delete the agency entries creating new agency entries each time the books are closed. When the system books the agency entries, it is only booking the current net income or change in activity. It is not booking full balances which is why the establishing entry was necessary.