UNCP Trust Fund Guidelines

University of North Carolina at Pembroke

Trust Fund Guidelines

 

Trust fund guidelines are being provided by the University Controller’s Office to assist faculty and staff in understanding what trust funds are and how they are accounted for, regulated and applied.  These guidelines provide answers to the following questions:  what is fund accounting, what are the types of funds the University receives, what office establishes what funds, what university sales activities are allowed by law (Umstead Act), what activities are legally allowed to be in trust funds, what are the UNC policies and procedures over trust funds, how do you request a trust fund, and what are the use and operational requirements over trust funds.

The following topics are covered in these guidelines:

  1. Fund Accounting
  2. Types of Funds
  3. Establishment of Funds
  4. Umstead Act
  5. Trust Fund Legislation
  6. UNC Policies and Procedures on Institutional Trust Funds and Special Funds
  7. UNC Policies and Procedures on Income from Patents
  8. UNC Policies and Procedures on Service Marks, Trademarks and Trade Secrets
  9. Official Memorandums on Trust Fund Policy and Law
  10. Requesting Trust Fund Authorities
  11. Trust Fund Authority Requirements
  12. Negative Trust Fund Cash Balances
  13. Reporting changes to Existing Trust Funds

FUND ACCOUNTING:

UNC Pembroke’s financial system is based on the Fund accounting concept.  Financial transactions are accounted for and reported in separate, self-balancing accounting units that have their own balance sheet and revenue expense accounts.  Separate accounting units ensure that the funds received are accounted for in a manner that will demonstrate compliance with legal requirements, the purposes for which the funds were established, and the authority provided by the State of North Carolina.

TYPES OF FUNDS:

Monies received by the University come from various funding sources including:  the State through appropriation or grants, the Federal government through appropriation or grants, customers through charges for materials and services, private sources through gifts and contracts and grants, foundations’ support through fund raising resources, endowment gifts and investment income, other investment income, interest income, rental of real property, royalties on intellectual properties and other licenses, and proceeds from indebtedness.

The various funding sources are accounted for differently depending on the funding source requirements.  For example, funds received from the State through appropriation for state operations are subject to reversion to the State if unexpended at the end of the fiscal year.

Trust funds must have specific legal authority.  (Legal authority discussed later under Trust Fund Legislation).  Following is a list of UNC Pembroke’s trust funds as categorized by their legal citation:

Endowment Receipts (G.S. 116-36):

  • Gifts, Devises, or Bequests

    • Endowment Principal Funds
    • Endowment Income Trust Funds

Proceeds From Indebtedness (G.S. 116-41.7):

  • Debt Funds

    • Unexpended Debt Proceeds
    • Debt Reserve and Service Trust Funds

Institutional Trust Fund Receipts (G.S. 116-36.1 and G.S. 116-36.5):

  • Gifts, Devises or Bequests

    • Restricted Gift Trust Funds
    • Foundation Trust Funds
    • Discretionary Trust Funds
    • Patent Royalty Trust Funds
    • Other Royalty Trust Funds

 

  • Federal Contracts, Grants, and Agreements

    • Contracts and Grant Trust Funds

 

  • Non-Federal Contracts, Grants, and Agreements

    • Contracts and Grant Trust Fund
    • Other Contract Operations Trust Funds
      • Analytical and Testing Agreements
      • Other Contracts / Agreements

 

  • Extracurricular Activities of Students

    • Student Activity Fee Trust Funds
    • Orientation Fee Trust Funds
    • Other Student Activities Trust Funds

 

  • Self-Supporting Auxiliary Enterprises and Activities Supporting Scholarships/Student Activity Programs

    • Auxiliary and Related Trust Funds

      • Auxiliaries
      • Service Center Operations
      • Self-Supporting Operations Supporting the Campus/Students
    • Vending Facilities Trust Funds

Special Fund Receipts (G.S. 116-36.2)

  • Agency Funds

    • For Students/Faculty/Staff
    • For Clubs/Organizations
    • For Student Sponsorships
    • For Events Sponsorships
    • For Refundable Deposits

 

  • Intercollegiate Athletics

Overhead Receipts (Session Law 1999-237):

  • Overhead Receipts Trust Funds

SALES AND SERVICE TYPE ACTIVITIES

Sales and Service type activities include receipts from the operation of auxiliary service enterprises which exist primarily to furnish goods and services to students, faculty and staff, and institutional programs, and may include sales and services to external parties.  Except for permissions provided within the State’s Umstead Act, the University is prohibited from entering into sales and service activities that compete with private enterprises.

Sales and Service activities may either be accounted for (1) as receipts in an appropriated receipt fund or (2) in a Trust Fund.  If approved by the University Controller, a sales and service activity can be considered a Trust Fund activity.  For the sales and service activity to be considered a Trust Fund, the following criteria must be present and maintained:

  • The activity must be self-supporting.  A self-supporting activity means that the activity (1) pays for all its direct operating cost, (2) is not supported by a state subsidy, and (3) is able to continuously maintain a positive cash balance.  Generally, the direct operating cost of an activity would include personal service costs, and depending on the activity, may include supplies and materials, service costs, and equipment costs.  Direct operating costs benefiting a self-supporting trust fund activity and paid for with state funds must be promptly reimbursed to the state funds incurring the expense.

 

  • External sales and service activities must be supported with properly executed University contracts with terms and conditions provided in writing and agreed to by both parties.  Contracts for research purposes should be treated as a Contract and Grant activity unless authorized by the Office of Sponsored Research Programs to be accounted for as a sales and service activity.  Other contracts for community service purposes could be treated as a sales and service activity if not in competition with a private enterprise.

 

  • Activities classified as a Trust Fund must have a positive cash balance at all times unless specifically authorized to carry negative balances by University policy (see section on Negative Trust Fund Cash Balances).

 

All sales and service activities are subject to State rules and regulations whether they are accounted for in a state-appropriated receipt fund or a Trust Fund.  Certain exclusions are provided for Sales and Service Trust Fund activities benefiting students and for the promotion of sales activities (see University Spending Guidelines for more discussion on these exclusions).

Sales and Service activities for rental of space that is maintained and supported by State funds must be accounted for in a State Appropriated Receipt Fund and may not be receipted in a trust fund or related foundation.

 

GIFT ACTIVITIES

Gifts include all unrestricted and restricted gifts received from individuals, in-governmental organizations or other organizations.  All gifts should be routed to the University’s Office of Advancement.

Gifts to the Endowment Fund of the University are first processed through the Office of Advancement and, if approved, are set up and sent to the University Controller’s Office for review and approval of the trust fund authority.  Endowment agreements with donors must use the University’s recommended language for standard endowment paragraphs and must meet the minimum endowment funding levels as established by the Board of Trustees.

The characteristics of a gift are that it (1) is given voluntarily, (2) does not impose on the University any responsibility, either written or verbal, to generate a tangible product or service, such as a report of research results, and (3) is not considered an exchange transaction or contract where something of like value is provided in return for the gift receipt.

Unless exempt, organizations doing fundraising are required to be licensed by the North Carolina Secretary of State.  Generally, UNC Pembroke and its foundations are exempt under G.S. 131F.  Other states have varying fundraising registration requirements.

Generally, gifts fall into two broad categories including (1) funds received to support the educational, research, and extension programs of the University and (2) funds received which may be used at the discretion of the account custodian, to support any legal activity in support of a specific department or the University.  In either case, the funds should not be used to personally benefit the account custodian or for non-university business purposes.

Gifts are subject to the donor’s requirements.  Expenses incurred from gift funds must be supported by the account custodian with adequate documentation to ensure compliance with the donor’s restrictions and/or conditions.

In addition to the gift component, occasionally fundraising activities may generate a sales income component and include activities such as alumni events, tailgating activities, galas, sales of food or t-shirts, or solicitations, etc.  The sales component should be accounted for as a miscellaneous sales.  The sales income component represents funds received for which something of like value was exchanged.  When a sales component is involved, the cost of the exchange must be paid from funds available from the fundraising activity.

The proceeds from all fundraising activities must be deposited into the legal entity from which they were marketed and/or solicited.  Examples of marketing or solicitation methods include flyers, brochures, websites, email communication, etc.  In order for such funds to be deposited into a foundation fund, the marketing materials must clearly and predominantly include mention that the activity is sponsored by the foundation.  Failure to properly market such activities as foundation sponsored, will require that the funds be deposited and accounted for in a University trust fund.

EXTERNAL CONFERENCES/WORKSHOPS

Generally revenues associated with external conferences and workshops should be receipted into an appropriated receipt fund established by the University’s Office of Financial Planning and Budgeting.  The authority for this comes from specific memorandums from the UNC Office of the President and the Office of State Budget and Management.

Fees or charges assessed to cover entertainment costs associated with external conferences/workshops and included as a part of the registration fee may be recorded together or be shown separately.  If shown separately, the collection for entertainment costs should be deposited into a “Special Activities, Extension, Instruction and Public Service” Trust Fund established by the University Controller for this cost objective.  If comingled, the total amount collected should be deposited into an appropriated receipt fund established by the Budget Office.  The amount needed to cover entertainment costs should be transferred to a “Special Activities, Extension, Instruction and Public Service” Trust Fund established by the University Controller for this cost objective.  Any remaining funds in a “Special Activities, Extension, Instruction and Public Service” Trust Fund, after all entertainment costs have been paid, should be transferred to the proper appropriated receipt project.

However, in certain cases, external conferences or workshops may be accounted for in a trust fund.  These cases included conferences or workshops conducted as a result of (1) an external grant or contract that meets the criteria for a Sales and Service Trust Fund. (2) activity sponsored or associated with program income related to gifts or contracts and grants, or (3) activity sponsored or accounted for through an agency fund.  Activity meeting these cost objectives should be accounted for in a trust fund.

AGENCY FUNDS

Agency fund activities include monies received by the University for the benefit of students, employees, or others where the University acts solely in a fiduciary or agent capacity to safeguard, account for and expend funds as directed or instructed by the owner.  These funds are considered to be held in trust for others.  These funds are not considered to belong to the University but belong to those for which the project was established and, if requested, would be returned to the owner.  Transactions are recorded as revenue and expenses are not actual revenue and expenses to the University but rather increases and decreases in the cash and liability accounts.

Due to their fiduciary nature, agency funds will always be a part of the University’s trust funds.  Expenditures would be based on the depositor’s requirements and, if provided for in the agreement with the owner, funds left over after the owner’s objective is met, could be retained by the University.  Unexpended funds remaining that are given to the University would be treated like a gift and moved to an appropriate gift trust fund.

Agency funds are subject to the owner’s requirements.  Disbursements from agency funds must be supported by the account custodian with adequate documentation to ensure compliance with owner’s restrictions and/or conditions.

ESTABLISHMENT OF FUNDS:

Funds are established through various University Offices depending on the type of funding and the authority for the university to engage in such business activities.

The Contracts and Grants Office establishes the Contract and Grant funds.  The Controller’s Office establishes all other funds.  To be established, the trust fund activities must meet the provisions of the Umstead Act.

UMSTEAD ACT:

The University is subject to legislation governing the authority of State agencies and institutions to engage in business activities that are considered in competition with private enterprises.  This legislation is called the Umstead Act – (G.S. 66-58) “Sale of Merchandise or Services by Governmental Units.”

https://www.ncleg.net/EnactedLegislation/Statutes/HTML/BySection/Chapter_66/GS_66-58.html

In accordance with this statute, the University has the authority to engage in the following business activities that may be applicable to UNC Pembroke:

  1. Utilities and other services operated by it
  2. Sale of articles produced incident to the operation of instructional departments
  3. Sale of articles incident to educational research
  4. Sale of articles of merchandise incident to classroom work, meals, books
  5. Sale of articles of merchandise not exceeding twenty-five cents in value when sold to members of the educational staff or staff auxiliary to education or to duly enrolled students or occasionally to immediate members of the families of members of the educational staff or of duly enrolled students
  6. Sale of meals or merchandise to persons attending meetings or conventions as invited guests
  7. Operation of the comprehensive student health services or the comprehensive student infirmaries maintained by the constituent institutions of the University of North Carolina
  8. Operation of gift shops, snack bars, and food service facilities physically connected to any of the University of North Carolina’s public exhibition spaces, including the North Carolina Arboretum, provided that the resulting profits are used to support the operation of the public exhibition space
  9. Sale of products of experiment stations or test farms
  10. Sale of learned journals, works of art, books or publications of the Department of Cultural Resources or other agencies
  11. Operation of endowment funds established for the purpose of producing income for educational purposes
  12. Operation by educational institutions of campus stores, the profits from which are exclusively for awarding scholarships to defray the expenses of students attending the institution; provided, that the operation of the stores must be approved by the board of trustees of the institution, and the merchandise sold is limited to educational materials and supplies, gift items and miscellaneous personal-use articles.  Provided further that sales at campus stores are limited to employees of the institution and members of their immediate families, to duly enrolled students of the campus at which a campus store is located and their immediate families, to duly enrolled students of other campuses of the University of North Carolina other than the campus at which the campus store is located, to other campus stores and to other persons who are on campus other than for the purpose of purchasing merchandise from campus stores.

TRUST FUND LEGISLATION:

The authority for the establishment of trust funds by the University is granted through the legislative process.

Chapter 116, Article 1 of the General Statutes provides the legal requirements, corporate powers, rights and duties of the University of North Carolina System.

https://www.ncleg.net/EnactedLegislation/Statutes/HTML/BySection/Chapter_116/GS_116-1.html

Following is a discussion of the legislation providing for the establishment of trust funds by the University.

General Statute 116-36 “Endowment Funds” provides the legal authority to the board of trustees of each constituent institution to establish and maintain, pursuant to such terms and conditions, uniformly applicable to all constituent institutions, as the Board of Governors of the University of North Carolina may from time to time prescribe, an endowment fund and shall establish an investment board known as “The Board of Trustees of the Endowment Fund of (name of University)”.  The board of trustees shall be responsible for the prudent investment of the fund.  Any gift, devise, or bequest of real or personal property to the University shall be presumed, nothing to the contrary appearing, a gift, devise, or bequest, as the case may be, to the endowment fund of the University.  Proceeds from any endowment fund shall not take the place of State appropriations or any part thereof but rather shall supplement the State appropriations to the end that the institution may improve and increase its functions, may enlarge its areas of service, and may become more useful to a greater number of people.

https://www.ncleg.net/EnactedLegislation/Statutes/HTML/BySection/Chapter_116/GS_116-36.html

General Statute 116-36.1 “Regulation of Institutional Trust Funds” provides the legal authority for the University to establish institutional trust funds.  This legislation was created by the 1977 General Assembly and places responsibility for the custody and management of university institutional trust funds with the University Of North Carolina Board Of Governors.  Subsection (a) of the statute directs the Board to adopt uniform policies and procedures over the administration of the institutional trust funds that would ensure the receipt and expenditure of such funds are properly authorized and that the funds are appropriately accounted for.  These uniform policies and procedures are discussed further under the caption “UNC POLICIES AND PROCEDURES ON INSTITUTIONAL TRUST FUNDS AND SPECIAL FUNDS”.

Subsection (b) of the statute requires that institutional trust funds be deposited with the State Treasurer and held in the name of each University.  Subsection (c) of the statute provides that the University’s State Treasurer Account and interest earned on its deposits are available for expenditure without further authorization from the General Assembly.  Subsection (h) allows the Board to designate an official depository for trust funds defined below in (g) (7) in one or more banks or trust companies in this State.  Provided, however, such deposits are fully secured by deposit insurance, surety bonds, or investment securities of such nature, in such amounts, and in such manner as prescribed by the State Treasurer for security of public deposits generally.  Subsection (d) of the statute provides that the institutional trust funds are subject to the oversight of the State Auditor but are not subject to the provisions of the Executive Budget Act except for capital improvement projects that are subject to G.S. 143-18.1.  Subsection (e) of the statute requires the submission of reports as directed by the Director of the Budget.  Subsection (f) of the statute provides that the trust funds or investment income there from shall not take the place of State Appropriations and shall be used to supplement State Appropriations to the end that the institution may improve and increase its functions, may enlarge its area of services and may become more useful to a greater number of people.  Subsection (g) defines trust funds as follows:

  1. Monies, or the proceeds of other forms of property, received by an institution as gifts, devises, or bequests that are neither presumed nor designated to be gifts, devises, or bequests to the endowment fund of the institution:
  2. Monies received by an institution pursuant to grants from, or contracts with, the United States government or any agency instrumentality thereof;
  3. Monies received by an institution pursuant to grants from, or contracts with, any State agencies, and political subdivisions of the State, any other states or nations or political subdivisions thereof, or any private entities whereby the institution undertakes, subject to terms and conditions specified by the entity providing the monies, to conduct research, training or public service programs, or to provide financial aid to students;
  4. Monies collected by an institution to support extracurricular activities of students of the institution;
  5. Monies received from or for the operation by an institution of activities established for the benefit of scholarship funds or student activity programs;
  6. Monies received from or for the operation by an institution of any of its self-supporting auxiliary enterprises, including institutional student auxiliary enterprise funds for the operation of housing, food, health, and laundry services;
  7. Monies received by an institution in respect to fees and other payments for services rendered by medical, dental, or other health care professionals under an organized practice plan approved by the institution or under a contractual agreement between the institution and a hospital or other health care provider;
  8. The net proceeds from the disposition effected pursuant to Chapter 146, Article 7, of any interest in real property owned by or under the supervision and control of an institution if the interest in the real property had first been acquired by a gift, devise, or bequest or through expenditure of monies defined in this subsection (g) as “trust funds,” except the net proceeds from the disposition of an interest in real property first acquired by the institution through expenditure of monies received as a grant from a state agency;
  9. Monies received from the operation and maintenance of institutional forests and forest farmlands, provided that such monies shall be used, by the institution for the support of forest-related research, teaching, and public service programs.

Subsection (i) of the statute provides that the cash balances and receipts of funds identified in the G.S. 116-36.1 are appropriated to the use of the University of North Carolina and its constituent institutions.

https://www.ncleg.net/EnactedLegislation/Statutes/HTML/BySection/Chapter_116/GS_116-36.1.html

General Statute 116-36.2 “Regulation of Special Funds of Individual Institutions” provides the legal authority for the chancellor of each institution to have custody and manage the institution’s special funds.  It provides the Board of Governors shall adopt uniform policies and procedures applicable to the administration of these funds, which shall assure that the receipt and expenditure of such funds is properly authorized and that the funds are appropriately accounted for.  Special funds of an institution include:

  • Monies received from or for the operation by an institution of its program of intercollegiate athletics;
  • Monies held by an institution as fiscal agent for individual students, faculty, staff members and organizations.

https://www.ncleg.net/EnactedLegislation/Statutes/HTML/BySection/Chapter_116/GS_116-36.2.html

General Statute 116-41.7 “Proceeds of Bonds, Revenues, Etc., Deemed Trust Funds” provides the legal authority for the proceeds of all bonds issued and all revenues and other monies received pursuant to the authority of this part shall be deemed to be trust funds, to be held and applied solely as provided in this part.  The resolution authorizing the issuance of bonds shall provide that any officer to whom, or bank, trust company or fiscal agent to which, such monies shall be paid shall act as trustee of such monies and shall hold and apply the same for the purposes hereof, subject to regulations as such resolution may provide.

https://www.ncleg.net/EnactedLegislation/Statutes/HTML/BySection/Chapter_116/GS_116-41.7.html

Session Law 1999-237, Appropriation Bill, Section 10.13 “UNC Overhead Receipts” provides the legal authority for overhead receipts earned by constituent institutions of The University of North Carolina to be retained at the campus earning the receipts.

Session Law 2001-424, Appropriation Bill, Section 15.1.(b) “State Agencies to Report on Intellectual Property/Study State Intellectual Property Assets and  Technology Transfers” provides that the provisions of this section do not apply to the University of North Carolina and its constituent institutions, or to the North Carolina Community College System, or to employees of these respective institutions who are subject to the intellectual property and inventor policies of the institutions employing them.

UNC-GA POLICES AND PROCEDURES ON INSTITUTIONAL TRUST FUNDS AND SPECIAL FUNDS:

As required by General Statute 116-36.1(a) and 116-36.2, the Board of Governors of the University of North Carolina has established uniform policies and procedures for the administration of institutional trust funds and special funds of individual institutions.  These policies and procedures are provided in The UNC Policy Manual, Chapter 600 "Financial Matters, Real Property, Endowment and Trust Funds", Section 2.4 "Custody and Management of Institutional Trust Funds and Special Funds of Individual Institutions.

Following is a summary and discussion of the UNC-GA policies and procedures on institutional trust funds:

  1.  General Provisions

    1. Trust Funds are  not to substitute for state appropriations (Neither the funds covered by these policies and procedures nor the investment income there from shall take the place of state appropriations or any part thereof, but any portion of these funds available for general institutional purposes shall be used to supplement state appropriations to the end that the institution may improve and increase its functions, may enlarge its areas of service, and may become more useful to a greater number of people)
    2. Presumption that receipts belong to the General Fund (state appropriated funds) unless shown otherwise (unless the chancellor can show that the monies fall within one or more of the items listed in Section II.a, or except as otherwise provided by or pursuant to law, all monies received by or accruing to the institution shall be deemed institutional receipts within the meaning of the Executive Budget Act and shall be deposited with the State Treasurer to the credit of the General Fund)
    3. Accounting (the chancellor establishes and maintains an accounting system for trust funds subject to the approval of the State Controller)
    4. Internal Control (the chancellor institutes control procedures with respect to handling funds as necessary to prevent misappropriation or mishandling)
    5. Pre-audit of disbursements (bills and claims must be approved by the officer or employee authorized to initiate disbursements from the account)
    6. Facsimile signatures (chancellor may use facsimile signature machines or signature stamps in signing checks, drafts and warrants)
  2. Institutional Trust Funds
    1. Applicability (items 1 to 8 are the same as G.S. 116-36.1(g))
    2. Delegation of authority (to the chancellor of each institution under the supervision of the UNC-GA president)
    3. Agency Fund Authorities (to the chancellor of each institution under the supervision of the UNC-GA president)
    4. Institutional Trust Fund Authorities (to the chancellor of each institution under the supervision of the UNC-GA president):
      1. Gifts, devises and bequests
      2. Federal contracts, grants and agreements
      3. Non-federal contracts and grants
      4. Student extracurricular activities
      5. Activities supporting scholarship funds and student activity programs
      6. Self-supporting auxiliary funds such as housing, food, health, and laundry services
      7. Dispositions of real property
      8. Institutional forests and forest farmlands

Each institutional trust fund authority shall contain the following information:

  1. The name of the institution
  2. The source(s) of the monies to be credited thereunto
  3. The purpose(s) for which the monies credited thereunto may be used
  4. The position or individual authorized to receive monies to be credited thereto and to disburse them

A copy of the institutional trust fund authority shall be filed among the University’s permanent records.  When established as provided therein, the institutional trust fund authority shall constitute authorization for the institution to receive and disburse the monies described therein in accordance with the purposes stated, subject to the provisions of G.S. 143-18.1 with respect to capital improvement projects.

    1. Subsidiary Account Authorities (for each account within one of the categories described in Section II.d, the chancellor is authorized to approve an account authority containing the following information:

      1. The institutional trust fund authority within the account is established
      2. The name of the account and its accounting designation
      3. The source of the monies to be credited thereto
      4. The purpose of the account, including any specific restrictions, terms or conditions on the use of the monies credited thereto
      5. The position or individual authorized to accept receipts and initiate disbursements from the account.

Each account authority for institutional trust funds authorized by the chancellor shall be filed among the permanent records of the office and it shall constitute authorization for establishment and operation of the account in accordance with the purposes stated therein.

    1. Deposit to and disbursement from institutional trust fund accounts (except as provided in Section II.i, all monies within the categories described Section II.a shall be deposited with the State Treasurer.  Disbursement of such monies shall be accomplished by warrant or direct deposit on the State Treasurer issued by the person designated in the institutional trust fund authority or the subsidiary account authority as appropriate.  No disbursement shall be made for a purpose not specified in the appropriate fund or account authority or contrary to any specific restrictions, terms or conditions on the use of the funds.)
    2. Allocation of investment income (investment income credited to an institution’s agency fund by the State Treasurer as provided in Section II.d. may be used for institutional support purposes in such a manner as the UNC-GA president shall approve.)
    3. Financial reports (financial reports on the institutional trust funds shall be submitted by the chancellors to the State Budget Officer, the president and local Board of Trustees of the institution.  The frequency, form and content of the reports shall be prescribed by the UNC-GA president, in accordance with the requirements of the Director of the Budget.)
    4. Fees for services of health care professionals (funds identified in Section II.a. (7) shall be deposited in an official depository of the institution or held by the State Treasurer).

UNC POLICIES AND PROCEDURES ON INCOME FROM PATENTS:

The Board of Governors of the University of North Carolina has established uniform policies and procedures for the administration of patent and licensing activity.  These policies and procedures are provided in The UNC Policy Manual, Chapter 500 “Sponsored Programs, Research, and Intellectual Property”, Section 2 “Patent and Copyright Policies, Part V “Income From Patents”.

The manual provides that income earned by each constituent institution from its patent and licensing activity shall be held in a separate trust fund by the institution to support research.  The particular unit of the institution employing the inventor or furnishing the research facilities will be given preferential consideration, though not necessarily exclusive consideration, in the allocation of such royalty income by the institution.  Allocations from such trust funds shall be made by the chancellor of each institution after receiving recommendations from the institutional patent committee. 

UNC POLICIES AND PROCEDURES ON SERVICE MARKS, TRADEMARKS AND TRADE SECRETS:

The Board of Governors of the University of North Carolina has established uniform policies and procedures for the administration of service marks, trademarks, and trade secrets.  These policies and procedures are provided in The UNC Policy Manual, Chapter 500 “Sponsored Programs, Research, and Intellectual Property”, Section 2 “Patent and Copyright Policies, Part XIII “Service Marks, Trademarks and Trade Secrets”.

The manual provides that service marks and trademarks are the property of the constituent institutions, and without express authorization from the chancellor or designee , no steps shall be taken for securing trademarks or service marks by usage or registration with respect to products resulting from or arising out of research or other activities carried out at a constituent institution or developed with the aid of its facilities or staff, or produced through funds administered by the constituent institution.  The institutions are authorized to register such marks as are deemed by the institution to be appropriate and to license the use of such marks, provided that the income from such licensing shall be used to support the research and educational programs of the institution and not accrue to the personal benefit of the university personnel.

OFFICIAL MEMORANDUMS ON TRUST FUND POLICY AND LAW:

BY THE UNC OFFICE OF THE PRESIDENT:

  • Administrative Memorandum #113 (January 25, 1979):

“Resolution of the Board of Governors and Administrative Procedures Relative to Trust Fund Legislation” provides for the administrative policies and procedures governing the establishment of Institutional Trust Funds.

  • Administrative Memorandum #131 (January 11, 1980):

“Administrative Procedures Relative to Trust Fund Legislation – Receipts-Supported Extension Instruction and Public Service Activities” provides definitions on Extension Instruction and Public Service activities and accounting and budgeting procedures applicable to receipts-supported Extension Instruction and Public Service activities.  This memorandum requires that all receipts and balances related to budget purposes of Extension Instruction (103), Educational Television (141), and Community Services (142) be deposited directly into the appropriate General Fund academic budget code of each institution.  These activities are considered part of the institution’s continuation budget.  This memo indicates that the Office of State Budget and Management acknowledges the need to carry forward receipts related to these programs from one fiscal year to the next in order to provide sufficient working capital and program development funds, to help meet the costs of courses or activities where revenues and corresponding expenditures do not occur within the same fiscal year, and to meet other justified needs.  In this regard, the Office of State Budget and Management have indicated that all justified institutional requests for such purposes at the end of the fiscal year will be honored.

(Important – Carry-forwards must go through the proper channels at the University – Provost/Chancellor – before a request is made to the OSBM.  If carry-forward request is authorized by the Provost/Chancellor, OSBM has the ultimate approval to approve or deny the request.  Carry-forwards are not automatic or guaranteed.)

BY THE OFFICE OF STATE BUDGET AND MANAGEMENT:

  • Memorandum (October 17, 1980):

“Entertainment Expenses” Connected With Receipts – Supported Extension Instruction and Public Service Funds” provides that institutions may continue to provide for entertainment expenses connected with extension and public service activities provided that a separate and identifiable special activity charge is assessed of participants to fully cover such expenses.  Entertainment expenses include costs associated with luncheons, banquets, social hours, coffee breaks, etc.  Funds collected for entertainment purposes will be deposited into an institutional trust fund account entitled “Special Activities, Extension Instruction and Public Service.”  All entertainment expenses for extension instruction and public service activities will be paid from this trust fund account.  The trust fund account will be considered under the definition of Institutional Trust Funds covered by Memorandum #113 and all other rules and regulations applicable to such funds.  The trust fund will be identified as a component of the Institutional Trust Fund category entitled “Institutional Auxiliary Enterprises and Activities Supporting Scholarship Funds and Student Activity Programs”.

  • Memorandum (December 4, 1980):

“Revision to Policies and Procedures Outlined in Memorandum of October 17, 1980 concerning “Entertainment Expenses” connected with Receipts – Supported Extension Instruction and Public Service Funds” provides amendments to the memorandum of October 17, 1980 to remove requirement to have a separate and identifiable special activity charge to cover the costs of “entertainment expenses” but is encouraged.  Fees or charges assessed to cover entertainment costs may be included as a part of the registration fee or extension fee.  If a separate and identifiable charge is made to cover entertainment cost, such receipts should be collected and deposited directly to the “Special Activities, Extension Instruction and Public Service” trust fund account.  If charges for entertainment costs are commingled with the registration fee or course fee, the total amount of such receipts should be collected and deposited to the appropriate revenue line in the general fund operating budget.  In this case, the amount of such receipts collected that are necessary to cover entertainment costs should be transferred to the trust fund account.  Only the exact amount required to cover entertainment expenses should be transferred.

REQUESTING TRUST FUND AUTHORITIES:

To request a trust fund you must complete a Request for New Banner Fund form located on the UNC Pembroke website.  The Controller’s Office is responsible for the University’s Trust Fund Authorities except for Contracts and Grants activities administered by the Contracts and Grants Office.You must be sure that the information provided on the form provides a detailed description of the activities, programs, or operations to be supported by the account.  Indicate any specific restrictions, terms, or conditions for the use of funds to be deposited to the account.  You must complete all items on the form and attach copies of pertinent information such as correspondence, donor letters, or other documentation that will assist in the review and approval of the request.  The requestor and the Vice Chancellor of their department must properly sign the form and send to the Controller’s Office.  After review and consideration of the request, the Controller’s Office will notify the requestor of the decision and reasons for the decision.

Endowment scholarship funds require a base amount of $25,000.  Donors have up to five years to donate to the endowment base before any scholarships can be awarded.  The amount and number of scholarships awarded annually will be based on the accrued interest and the approved endowment spending plan for that fiscal year.

TRUST FUND AUTHORITY REQUIREMENTS:

Departments must adhere to certain terms and conditions over the operation and use of trust funds.  These terms and conditions provide that:

  • Trust funds must at all times maintain a positive cash balance unless prior approval has been obtained from the Vice Chancellor for Finance and Administration or his designee.
  • Trust funds must be used specifically for the purposes approved and may not accrue personal benefit to University employees or their relatives.  All expenditures of the trust fund must be for the business purposes established.
  • Sales and Service Trust Funds must follow the same spending guidelines as those for state appropriated funds except for “spending guideline” exceptions given to certain student auxiliary trust funds.  Sales and Service Trust Funds include Auxiliary and Related Trust Funds and Other Contract Operations Trust Funds.
  • Expenditures for alcoholic beverages should be strictly limited and can only be paid from gift funds that allow for such expenditure, special funds that allow for such expenditure, and discretionary funds.  Such expenditure requires specific written approval from the appropriate Director, Dean or Vice Chancellor.
  • Payment requests for food, supplies, or refreshments for departmental receptions, office functions (e.g., a retirement or commencement party), student orientation functions, “coffee breaks” at employee workshops or seminars, and like events must include appropriate documentation and the approval (signature) of the appropriate Director, Dean, or Vice Chancellor.  Expenditures of this type must be for business purposes and follow established University “spending guidelines”.
  • Expenditures for member dues in civic or political organizations, clubs, or like organizations are not permitted from any University funding source.  Memberships in professional organizations are permitted when the membership is for a business reason and in the name of the University or at the convenience of the University and not the individual.
  • The principle person responsible for a trust fund account is responsible for ensuring that the Controller’s Office is provided in writing information which may change the status of the account including when responsibility for the account is reassigned, when the account becomes inactive, or when modifications need to be considered to the original purpose.
  • State travel policies and procedures regarding meal expenses must be followed on all trust funds.
  • Expenditure for food at external conferences/workshops/seminars for coffee breaks/meals related to extension activity receipts accounted for in appropriated receipt funds can be paid if such expense is part of the event’s planned functions, state budget requirements are met for sponsoring the event, a registration fee is charged inclusive of meals and other related costs of the event, and the meal payment is processed through a Special Activities – Extension Instruction and Public Service Food Trust Fund.
  • Auxiliary Enterprises and Sales and Service Trust Funds must be self-supporting.  All costs associated with the trust fund activity that is paid by other funds/budget codes must be reimbursed to the fund/budget code charged for these expenditures.
  • The principle person responsible for the trust fund and the individual designated as the account custodian has the responsibility to ensure that proper documentation procedures are followed and to ensure that only authorized expenditures are made from the trust fund.  Unauthorized expenditures must be resolved timely.  Items needing the Controller’s Office attention for correction or investigation should be reported immediately.  If fraud is suspected, you must report this to the University’s Legal Office and to the Internal Audit Office.
  • The principle person responsible for a trust fund is responsible for ensuring good business practices (internal control) over the authorizing, processing, and recording of transactions and safeguarding of assets and records.  Good business practices include:
    • Proper Segregation of Duties – more than one person should be involved in the accounting functions (authorizing, processing and recording).
    • Monthly reconciliations – the trust fund monthly activities as recorded in financials should be agreed to the underlying supporting documentation and reviewed by a person having authority over the trust fund.
    • Proper Supervision – activities should be supervised especially when segregation of duties is not possible because of staff limitations.  Supervision provides for the direction, oversight, and assurance that control activities are met and for the management and mitigation of staff limitations/weaknesses.
    • Training – persons involved with the activities should be properly trained and knowledgeable as to the use of the financials system, the university’s policies and procedures, expenditure guidelines, and good business practices.
    • Proper Supporting Documentation – transactions should be supported with adequate supporting documentations including invoices, purchase orders, requisitions, receiving reports.  A date stamp should be applied to all invoices to document received dates.
    • Annual reviews – trust fund balances should be reviewed annually to determine that unexpended balances are not excessive.  Unexpended balances determined to be excessive should be used to expand services or to reduce subsequent billing rates.

NEGATIVE TRUST FUND CASH BALANCES:

The University Controller’s Office has implemented administrative procedures over the monitoring of deficit Trust Fund cash balances.  As noted in the previous section on Trust Fund Authority Requirements, “Trust Funds must at all times maintain a positive cash balance unless prior approval has been obtained from the Vice Chancellor for Finance and Administration or his designee.”

It is important for all Trust Fund owners and their administrative support personnel to establish procedures to (1) timely review their cash balances and (2) take appropriate action to ensure that their Trust Funds have positive cash balances, especially by the end of each monthly reporting cycle.  The University Controller’s Office along with the Office of Financial Planning and Budgeting will monitor the Trust Fund cash balances at the end of each monthly reporting cycle and will take the following steps to ensure that positive cash balances are maintained:

  1. First month – the Controller’s Office will work with the Office of Financial Planning and Budgeting to determine negative balances.  The Controller’s Office will report all negative fund cash balances to the Budget Office.  The Office of Financial Planning and Budgeting will review the funds and note if the negative balance is due to a timing difference or prior approval by the Vice Chancellor for Finance and Administration or his designee.
  2. Second month –If the negative fund balance that was identified in the previous month is still negative and not caused from a timing difference, the Controller’s Office will send out a Negative Fund Balance Notice to the Fund Manager.  The Fund manager will have 30 days to identify and correct any errors causing the deficit, provide a FOAP to cover the deficit in the fund, or provide a plan of action on how the deficit will be resolved.  If no response is received within 30 days a final notice will be sent to the Fund Manager and their Vice Chancellor.
  3. Third month – If no response is received from the Fund Manager and the fund is still negative the Controller’s Office will send out a final Negative Fund Balance Notice to the Fund Manager and their Vice Chancellor.  This notice will state that if no response is received or no action is taken to correct the deficit within 30 days, funds will be automatically be transferred from the department’s parent organization overhead account or any positive unrestricted department funds to cover the deficit and if a deficit should happen again and is not corrected within a timely manner the fund may be inactivated.
  4. Fourth month – If no response is received for the final notice and the fund is still negative, the Controller’s Office will transfer funds from the department’s parent organization overhead account or any positive unrestricted department funds to cover the deficit.  The Controller’s Office will send out a Resolved Notice to the Fund Manager and the Vice Chancellor stating the FOAP used to resolve the deficit and if a deficit should happen again and is not corrected within a timely manner the fund may be inactivated.
  5. If the trust fund is inactivated, it may be reactivated by written approval of the Vice Chancellor for Finance and Administration or by providing the following to the Controller’s office:
    1. Evidence that appropriate cash transfers or movement of expenditures to another appropriate fund to bring the trust fund cash balance back to a positive position have been made, and
    2. A signed certification from the Fund Manager stating procedures have been established to ensure the trust fund cash balance will be monitored and that appropriate adjustments, if any, will be made timely to correct any future negative cash balance.
  6. Trust funds that are inactive must be cleared up before the end of the fiscal year.  This action may be avoided if written approval has been obtained from the Vice Chancellor for Finance and Administration to extend the time for correction or written approval to maintain a negative trust fund balance for that particular trust fund.  This written approval should be provided to the Controller’s Office prior to the end of the fiscal year.

The following trust funds are exempt from the administrative procedure:

  • Administrative Clearing/Processing Funds
  • Contract and Grant Funds
  • Debt or Construction Funds
  • Other Funds Specifically Approved to Carry a Cash Deficit by the Vice Chancellor for Finance and Administration.

 

REPORTING CHANGES TO EXISTING TRUST FUNDS:

Trust Fund Managers should review their operations annually and compare its activities to the Request for New Banner Fund form submitted for the establishment of the trust fund.  If variances or changes are noted to the origination information, the University’s Director of Financial Reporting should be advised by e-mail as to the changes that are noted.  Such changes that should be reported to the University Controller’s Office include:

  • For all trust funds:

    • Change in Fund manager (a change form: Financial Manager must be completed and turned in to the Controller’s Office)
    • Change in persons authorized for budget inquiry, complete requisitions, or approve requisitions
    • Change in department
    • Change in revenue sources
    • Change in expenditure purpose or cost objective
    • Change in activity status

All contracts and grants changes should be reported to the Contracts and Grants Department.

Fund managers should request termination of trust funds which are no longer required.  The University Controller’s Office will periodically review funds with no activity and work with the fund manager to determine proper action related to a trust fund’s inactivity.

Fund managers have the responsibility to ensure that proper documentation procedures are followed fur funds which they control, and to ensure that only authorized expenditures are made from their funds.  Any unauthorized expenditures which appear on a monthly accounting report should be promptly corrected and, if necessary, reported to the appropriate department for resolution.  Further, fund managers are responsible for exercising appropriate care in reviewing and approving transactions that result in expenditure from any of their funds.