Agency (Custodian) Fund. Agency funds of not-for-profit organizations account for assets that do not belong to the organization holding them. They are often established for payroll withholding.
Custodian funds are established to account for assets received by an organization to be held or disbursed only on instructions of the person or organization from whom they were received.
Flow-through government grants are examples of this latter use of agency funds. Assets are recorded when received, along with a related liability.
Only when the assets are released by the contributor will they be recognized as revenue in the appropriate fund.