The UNC Policy Manual
Adopted
11/16/05
Amended
06/25/14
Amended
06/08/15
Amended
05/11/21
Amended 04/11/22
Amended
03/25/24
I. Purpose
A. Associated Entities. The University of
North Carolina (UNC) System encourages the establishment of private
organizations, known for purposes of this regulation as Associated Entities, to
support the constituent institutions and other units of the University,
consistent with G.S. 116-30.20.
Associated Entities engage in activities that are critical to and aligned
with the mission, goals, and objectives of the constituent institutions and
institutional units with which they are associated. Activities undertaken by Associated Entities
include fundraising, provision of services to students and campus
organizations, research support, and collaborating with organizations outside
the UNC System to promote and support initiatives and activities that are
related to the University’s mission of teaching, research, and service. Associated Entities and the constituent
institutions and units of the University with which they are associated rely on
the dedicated guidance, support, and leadership of Associated Entity directors,
officers, donors, and volunteers to pursue shared goals and objectives.
B. Associated
Entity Affiliation. Each Associated Entity becomes affiliated with either a
constituent institution or the UNC System Office pursuant to the written
approval of the chancellor and board of trustees (in the case of an entity
associated with a constituent institution) or the president and Board of
Governors (in the case of an entity associated with the UNC System Office). Associated Entities are in turn, subject to
the direction of the applicable Associated Entity’s governing body and provide
funding and other support to the Approving Institution. In recognition of and to facilitate such
support, Associated Entities are permitted, in accordance with this regulation
and pursuant to written agreements with Approving Institution, to represent
that they are affiliated with the UNC System Office or a constituent
institution. In addition, many
Associated Entities benefit from resources of the constituent institution in
carrying out their activities.
C. Framework.
This regulation establishes a framework of cooperation and coordination within
which the head of the Approving Institution is expected to structure the
Approving Institution’s engagement with its Associated Entities. The authority and responsibility for
establishing and maintaining cooperative and mutually beneficial relationships
between the Approving Institution and its Associated Entities rests with the
head of the Approving Institution. This
regulation recognizes the independence of each Associated Entity as an
organization that is separate from the Approving Institution, while ensuring
the Approving Institution maintains essential oversight and control over the
Approving Institution’s name, marks, resources, and activities that could
impact accreditation standards, and compliance responsibilities applicable to
the Approving Institution. Further,
these regulations recognize that funds raised by Associated Entities are to be
used to support the Approving Institution consistent with donor intent and applicable
law. Accordingly, this regulation
articulates standards for governance and operations of Associated Entities in
their support of and interaction with their Approving Institutions,
and create pathways of communication to ensure that the University and
its constituent institutions are informed about the activities of their
Associated Entities so that those activities remain aligned with the mission,
goals, and objectives of the Approving Institution. The president adopts these regulations to
apply to any University Associated Entity.
II. Definitions. As used in this regulation:
A. An
“Associated Entity” means any foundation, association, corporation, limited
liability company (LLC), partnership, or other nonprofit entity: (1) that was
established by officers of the University; or (2) that is controlled by the
University; or (3) that raises funds in the name of the University; or (4) that
has a primary purpose of providing services or conducting activities in
furtherance of the University’s mission pursuant to an agreement with the
University; or (5) that has a tax-exempt status that is based on being a
support organization for the University.
B. An
“Athletically Related Associated Entity” means an Associated Entity that
supports or conducts activities in furtherance of an Approving Institution’s
intercollegiate athletics program, as determined by the chancellor of the
Approving Institution.
C. “Approving
Institution” means (1) a constituent institution of the University of North
Carolina System that approves an Associated Entity, or (2) the UNC System
Office for an Associated Entity approved by the president.
D. “UNC
System Office” means the Office of the President and the affiliated programs of
the University associated with the UNC System Office that are not centers or
institutes of a constituent institution.
E. “Special
Purpose Entity” means an Associated Entity (including any approved subsidiary
or affiliate of an Associated Entity) that: (1) is established by an Approving
Institution or is controlled by an Approving Institution; (2) undertakes a
specified activity for the Approving Institution as its sole purpose (e.g.,
constructing or managing facilities, research development, or intellectual
property management); and (3) does not engage in fundraising activities.
F. “State”
means the State of North Carolina.
G. “University”
means the University of North Carolina System (UNC System), including its
constituent institutions.
H. When “head
of the Approving Institution” is used in these regulations, it means the
chancellor if the Approving Institution is a constituent institution, and it
means the president if the Approving Institution is the UNC System Office.
I. When
“Board of Governors or board of trustees” is used in this regulation, it means
the Board of Governors if the Approving Institution is the UNC System Office,
and it means the board of trustees if the Approving Institution is a
constituent institution.
III. Creation and Approved
Status of Associated Entities
A. Associated
Entity Must be Approved. An Associated
Entity (including any subsidiary or affiliate of an existing Associated Entity),
seeking to be associated with a constituent institution must be approved in
writing by the chancellor and the board of trustees of the constituent
institution. An Associated Entity (including any subsidiary or affiliate of an
existing Associated Entity), seeking to be associated with the UNC System
Office must be approved in writing by the president and the Board of Governors. An Associated Entity must be approved in order to receive University-provided services or to be
able to use any University names, logos, or marks.
B. Abide by
Relevant University Policies; Alignment with Mission
and Goals. In order to obtain and maintain
approved status, the Associated Entity must agree, pursuant to a written
agreement also described in subpart VII.A., to abide by the policies or
regulations established by the University and by the Approving Institution,
including the requirements of this regulation, and to assure that the
activities of the Associated Entity align with the mission, goals, and
standards of or applicable to the Approving Institution, including accreditation
standards applicable to institution-related entities, and athletics conference
standards applicable to intercollegiate athletics programs. Approving Institutions should make reasonable
efforts to notify Associated Entities of the accreditation standards, athletic
conference standards, and/or the institutional policies that may affect
Associated Entities’ operations.
C. Removal
of Approved Status. The Approving
Institution must adopt policies or provide in written agreements with any
Associated Entity that an Associated Entity’s approved status shall be removed
only upon advance written notice specifying material
noncompliance with or breach of: (1) these regulations; (2) the applicable
policies of the University and the Approving Institution; or (3) the written
agreement required by section III.B., or VII.A.
The advance written-notice period shall not exceed ninety (90) days,
during which time the Approving Institution may consider and accept or reject a
corrective action plan submitted by the Associated Entity. The head of the Approving Institution
may neither remove the approved status of an Associated Entity of that
Approving Institution, nor decline to extend such
approved status beyond the expiration of the Associated Entity’s then-current
term, without advance written approval of the Board of Governors and the
president, or board of trustees of the Approving Institution and the president,
depending on whether the Approving Institution is the UNC System Office or a
constituent institution. When any request for permission to remove or
discontinue an Associated Entity’s approved status is submitted to the Board of
Governors or board of trustees of the Approving Institution and the president,
notice of the request and the grounds for such request shall be simultaneously
submitted in writing to the Associated Entity. If an Associated Entity desires to remove its status as
an Associated Entity, for whatever reason, it shall provide the Approving
Institution with at least 60 days prior written notice. If an Associated Entity
loses its status as an approved Associated Entity for whatever reason it shall
immediately dissolve and distribute its assets in accordance with Section IV.D
of this Regulation.
D. Recusal
of Board Members. When the Board of Governors or a board of trustees considers
or votes whether to approve an Associated Entity, to remove an Associated
Entity’s approved status, or to allow an Associated Entity’s approved status to
expire, any member of the Board of Governors or board of trustees who also
serves as a member of the governing body of the relevant Associated Entity
shall recuse himself or herself from any such consideration or vote.
E. Compliance
with Policies, Regulations, and Agreements.
The head of the Approving Institution shall be responsible for taking
reasonable steps to ensure that the Approving Institution and its Associated
Entities operate in accordance with all requirements of this regulation, the
applicable policies of the University and the Approving Institution, and the
written approvals and agreements between the Approving Institution and each
Associated Entity.
IV. Organizational
Requirements of an Associated Entity
A. Purpose
to Benefit University. The Associated
Entity must be organized for the primary purpose of (1) supporting the
University or one or more of its constituent institutions or programs, and/or (2)
conducting activities that are in furtherance of the mission of the University
or of one or more of its constituent institutions or programs.
B. State
Nonprofit Entity. The Associated Entity
must be organized on a nonprofit basis as a separate legal entity recognized
under and in compliance with North Carolina law. If a constituent institution proposes to
establish or approve an Associated Entity on a for-profit basis, it must
receive prior approval from the Board of Governors.
C. Tax-Exempt
Status. Except as provided in paragraph
IV.B. (concerning Associated Entities established on a for-profit basis), an
Associated Entity must either (1) apply for, receive, and maintain both federal
and state tax-exempt status; or (2) be eligible to utilize the tax-exempt
status of one or more constituent institutions or tax-exempt Associated
Entities.
D. Dissolution
of Associated Entity. The Associated
Entity’s governing documents, including but not limited to the articles of
incorporation or by-laws if a corporation and the articles of organization or
operating agreement if a limited liability company, must address termination,
dissolution, or winding up the affairs of the Associated Entity and provide
that, upon such termination, dissolution, or winding up of the Associated
Entity, unless otherwise designated by the donor of an asset, all of its assets
will revert to (1) the Associated Entity’s Approving Institution, (2) another
Associated Entity named in the governing documents of the dissolving Associated
Entity, which Associated Entity shall be approved by the same Approving
Institution as the dissolving Associated Entity, and/or (3) some combination of
the above.
E. Requirements
for Members of Associated Entity Governing Body; Board Members for Athletically
Related Associated Entities
1. All
Associated Entities (including Athletically Related Associated Entities)[1]. Unless otherwise
required by applicable law, or waived by the president, at least one third
(1/3) of the voting shares of an Associated Entity’s governing board must be
allocated to members who are appointed by the head of the Approving Institution
or are senior academic or administrative officers (SAAO) of the Approving
Institution. The head of the Approving Institution may delegate this
appointment power.
2. Athletically
Related Associated Entities. Prior to
appointing members to serve on the governing body of an Athletically Related
Associated Entity, the president or chair of the Athletically Related
Associated Entity’s governing body shall consult with the chancellor of the
Approving Institution concerning such appointment.
F. Audit
Committee Required
1. An
Associated Entity’s by-laws must provide for a standing audit committee or
other committee with an audit function.
The audit committee must receive the report of the individual or firm
that conducts the Associated Entity’s annual audit and relevant tax forms to be
submitted by the Associated Entity.
2. No
employee of the Associated Entity may serve on an audit committee or a
committee with an audit function. If
practical, each audit committee or committee with an audit function should have
a financial expert as a member.
3. A Special
Purpose Entity is not required to have an audit committee provided
that it is subject to independent audit at the request of one or more
designated trustees, sureties, insurers, certificate holders or bondholders, or
is audited during the Approving Institution’s audit.
4. A single-member
LLC is not required to have an audit committee provided its operations are
audited in connection with the audit of the member.
V. Financial and Accounting
Controls
A. Sound
Accounting and Business Principles. An
Associated Entity must use sound fiscal and business principles, ensure that a
sound internal control structure is in place, and follow generally accepted
accounting procedures.
B. Annual
CPA Audit. Associated Entities and their
single-member subsidiaries (LLCs or corporations) must be audited on an annual
basis by an independent CPA firm in good standing with the North Carolina Board
of CPA Examiners that is pre-approved by the UNC System Office through a
competitive solicitation conducted by the System Office, or where an Associated
Entity wishes to engage a CPA firm not on the pre-approved list, it provides a
justification and requests a waiver from the head of the Approving Institution
(or designee). . An Associated Entity with annual expenditures
of less than $100,000 may elect to have its annual audit conducted by the
Approving Institution’s internal auditor, another UNC System internal auditor,
or by an independent CPA firm selected as described above. A CPA firm providing an audit for an
Associated Entity may not provide nonauditing
services to the Associated Entity other than tax preparation services that are
preapproved by the audit committee.
1. An
Associated Entity of a constituent institution must provide copies of the audit
report, management letters, and responses to management letters to the
chancellor of the Approving Institution, through the chancellor to the
governing board of the Approving Institution and the president, and through the
president to the Board of Governors.
2. An
Associated Entity of the UNC System Office must provide copies of the audit
report, management letters, and responses to management letters to the
president, and through the president to the Board of Governors.
C. Annual
Budgets. Each Associated Entity must
create an annual operations and capital budget. If requested to do so, an Associated Entity
shall meet with the head of the Approving Institution (or designee) to review
the Associated Entity’s proposed annual operations and capital budget, and any
subsequent proposed material changes to such annual operations and capital
budget. Each Associated Entity in
setting its budget shall consider in good faith all suggestions offered by the
head of the Approving Institution (or designee) regarding the proposed budget
of the Associated Entity and how the budget might be better aligned with the
mission, goals, and objectives of the Approving Institution. The approved
budget shall be made available to the head of the Approving Institution (or
designee), upon request.
D. Officer
and Employee Compensation. All salary
and nonsalary compensation provided by the Associated
Entity to its officers or employees must be approved by the Associated Entity’s
governing board. All Associated Entity positions established to support the
Approving Institution must be established pursuant to a plan (including the
Associated Entity’s written agreement with the Approving Institution), or be
individually approved, by the head of the Approving Institution (or designee). The
Associated Entity must comply with Section 300.1.1 of the UNC Policy Manual,
concerning the prohibition of payments to specified University employees. Further, salary and nonsalary
compensation provided by the Associated Entity to individuals who are also at
the same time employees of the University must be made in accordance with an
approved plan, or be individually approved, by the head of the Approving Entity
(or designee). This requirement does not prohibit the Associated Entity from
reimbursing its officers or employees for expenditures made on behalf of the
Associated Entity. All Associated Entities
shall, if requested, make available for inspection information detailing the
salary and nonsalary compensation and reimbursements
provided to each officer and each employee of the Associated Entity and each
employee of the University assigned to the Associated Entity for the prior
year. Notwithstanding the foregoing, an Associated Entity may seek an exemption
from the requirement that positions be approved, by making such a request to
the president through the head of the Approving Institution (or designee).
E. Indemnification
of University. The Approving Institution
shall require an Associated Entity to indemnify and hold the Approving
Institution and the University harmless from any damages or liabilities that
the Approving Institution or the University incurs as a
result of the Associated Entity’s actions.
F. University-Associated
Entity Monetary Transfers. All transfers
of funds of any kind from the Associated Entity to the University or to the
Approving Institution, including reimbursements, must be documented in writing
or electronically in a form that has a retrievable transaction trail. All
Associated Entities shall, if requested by the head of the Approving
Institution, submit an annual report summarizing transfers of funds from the
Associated Entity to the Approving Institution or to third parties for the
benefit of the Approving Institution for the prior year.
G. Whistleblower
Protection. An Associated Entity must
have a confidential and anonymous mechanism to encourage individuals to report any
inappropriateness within the entity’s financial management and must prohibit
punishment of or retaliation against any employee for reporting problems. An
Associated Entity may utilize the Approving Institution’s mechanisms for
reporting, including use of the Approving Institution’s hotline.
H. Chief
Executive Officer. The chief financial
officer of the Approving Institution may not be the chief executive officer of
an Associated Entity.
I. Acquisition
of Debt. An Associated Entity may not
acquire debt in excess of $500,000 without first
notifying the head of the Approving Institution and consulting with the vice
president for finance of the UNC System Office.
In determining the level of scrutiny to give to the proposed
transaction, the vice president shall take into account
the amount of the debt in relationship to the Associated Entity’s assets and
income and the extent of experience of the Associated Entity in entering into
similar debt transactions. A Special
Purpose Entity that issues debt to construct facilities for the University must
provide a financial or construction audit to the vice president for finance of
the UNC System at the vice president’s request or to the governing board of the
Approving Institution at the request of the chair of the Approving
Institution’s governing board.
J. Property
Transactions and Capital Projects.
Unless approved by the Board of Governors, any acquisition, disposition,
or capital project undertaken by an Associated Entity shall not materially
alter the value or functionality of any State property. Further, any real
property transaction or capital project that will require an increase of state
funds, tuition revenue, or student fees must be approved in advance by the
Board of Governors. Requests for Board of Governors’ approval shall be made in
a manner as prescribed by the president, or designee, and may include the
redaction of trade secret or other confidential or proprietary information not
considered a public record within the meaning of Chapter 132 of the General
Statutes and may be considered in closed session, as permitted by applicable
law.
K. Audit
Findings. Within 90 days of the issuance
of an audit report with audit findings, the Associated Entity must demonstrate
to the head of the Approving Institution and to the UNC System vice president
for finance that satisfactory progress has been made to implement a corrective
action plan. Failure of an Associated
Entity to receive an unqualified audit opinion, to comply with the reporting
requirements of this regulation, or to satisfactorily implement a corrective
action plan in response to an audit finding may result in the Associated
Entity’s losing its approved status.
L. Investments
of Assets. Associated Entities exist to support their Approving Institution by
definition and often hold or manage significant assets for the Approving
Institution’s benefit. Approving Institutions have a clear interest in ensuring
those assets are held appropriately. Associated Entities are required to seek
approval from the head of the Approving Institution (or designee) prior to investing,
or maintaining the investment of, material assets in any entity that is not
itself an Associated Entity, the Approving Institution, or the State. An
Approving Institution must establish rules governing its approval, including
materiality thresholds, approval limits, optional risk assessments, and/or
designations that account for an appropriate management of risk to the
approving institution, and at all times subject to
applicable law. When giving approval to invest in these other entities, the
Approving Institution shall determine that the investment is in the best
interest of the Approving Institution. Notwithstanding the foregoing, an
Associated Entity may seek an exemption from this requirement from the
president, by making such a request through the head of the Approving
Institution (or designee).
VI. Insurance and Bonding
A. Bonding
Required. Officers and employees of an
Associated Entity who have check-signing authority or who handle cash or
negotiable instruments must be bonded in an amount determined to be reasonable
by the Associated Entity’s governing body, in collaboration with the Approving
Institution.
B. Insurance. The governing body of an Associated Entity,
working in collaboration with the Approving Institution’s insurance and risk
management personnel, UNC System risk management personnel, or approved vendors,
should evaluate the potential risks arising from the operation of the
Associated Entity and obtain commercially reasonable amounts of general
liability and directors’/officers’ insurance.
VII. Provision of
Administrative and Other Services by University for Associated Entity
A. Written
Agreement Required. The Associated
Entity must enter into a written agreement with the Approving Institution in
which the Associated Entity agrees to abide by the policies and regulations
established by the University and by the Approving Institution. An Associated Entity may only use University
or constituent institution assets, facilities, and personnel pursuant to the
terms of the written agreement. The term for such written agreements shall not
exceed three (3) years, where it may be renewed by the parties in writing.
B. Reimbursement
of Costs. Any reimbursement to the
Approving Institution or the University for services the Approving Institution
or the University provides to the Associated Entity must be made pursuant to a
written agreement between the University or the Approving Institution and the
Associated Entity entered into before the service is
provided.
C. Control
of University Personnel. When University
personnel provide services for the Associated Entity and there arises a
conflict between the University and the Associated Entity, the University’s
employee must comply with the policies, regulations, and directives of the
University.
VIII. Acceptance of Gifts by
Associated Entity
A. Direction
and Control of Fundraising and Development Activities. The fundraising and development activities of
the Associated Entity shall be conducted subject to the policies and
regulations of the Approving Institution and the University and coordinated
with the Approving Institution’s development office. Absent prior approval from the Approving
Institution, the Associated Entity may not engage in fundraising or development
activities that impose obligations on the Approving Institution,
or receive gifts that impose obligations on the Approving Institution.
B. Restricted
or Conditional Gifts that Require University Approval. An Associated Entity may not accept any
restricted or conditional gifts that impose an obligation on the University or
the Approving Institution or the state to expend resources in addition to the
gift or that impose an obligation on the University’s or the Approving
Institution’s operations without the Approving Institution’s prior
approval. In addition, an Associated
Entity may not accept a gift which has any restriction that is unlawful.
C. Notification
to Donors of Restricted Gift Policies.
An Associated Entity must advise prospective donors of all restricted or
conditional gifts to the Associated Entity if acceptance of the gift is
conditioned upon the Approving Institution’s approval.
IX. Conflict of Interest and
Ethics Policies
A. Policies
Required. The Associated Entity must
have in place conflict of interest and ethics policies, as approved by the
Approving Institution, pertaining to relationships between the Approving
Institution, the Associated Entity, members of the governing body of the
Associated Entity and persons doing business with the Associated Entity, and
establishing required ethical standards for the members of the governing body
and employees of the Associated Entity.
B. Transactions
Between Associated Entity and its Employees.
All transactions (other than reimbursements as provided in section V.D.),
between the Associated Entity and an individual member, manager, officer,
director, or employee of the Associated Entity must be approved by the
Associated Entity’s governing body. For
the avoidance of doubt, only an individual designated as a member pursuant to
state law shall be considered a “member” for purposes of this section.
C. Recusal
from Business Decisions. No Associated
Entity individual member, manager, officer, director, or employee having a
private business interest in an Associated Entity business transaction may be
involved in the decision with respect to whether the Associated Entity should enter into such transaction.
D. Associated
Entity Scholarships. No Associated
Entity scholarship or fellowship award may be made to an individual member,
manager, officer, director, or employee of the Associated Entity or to a family
member of such person unless the recipient of the award is determined by an
independent awards committee or is overseen by the Approving Institution’s
Financial Aid and Scholarship Office. For the avoidance of doubt, only an
individual designated as a member pursuant to state law shall be considered a
“member” for purposes of this section.
X. Reports Required to be
Submitted by Associated Entity to University
A. The
Associated Entity must file annual reports with the head of Approving
Institution, which shall be submitted to the Board of Governors through the
president, covering the following items:
1. A list of
all members of the Associated Entity’s governing body;
2. A copy of
the publicly disclosed portion of the Associated Entity’s Form 990, or other
series 990 form or other similar information return;
3. A copy of
the Associated Entity’s CPA audit report and related management letters and
responses to management letters;
4. A list of
current real estate holdings and current funding commitments for capital
projects; and
5. A report
of all real property activity and completed and ongoing capital projects since
the last reporting period.
B. At the
request of the head of the Approving Institution, the president, or the chair
of the Approving Institution’s governing board, the Associated Entity must meet
with the head of the Approving Institution, the president, their designees, or
member of the Approving Institution’s governing board and allow that person to
inspect any information requested, subject to appropriate confidentiality
protections.
XI. Miscellaneous
Requirements
A. Associated
Entity Communications. An Associated
Entity must conduct business in its own name, and all correspondence,
advertisements, and other communications by the Associated Entity must clearly
indicate that the communication is from the Associated Entity and not from the
Approving Institution or the University.
B. Lobbying
and Political Activities. An Associated
Entity must comply with all provisions of the Internal Revenue Code and all state
laws regarding lobbying and political activity.
C. Associated
Entity Courses and Seminars. An
Associated Entity may not offer any course or seminar in which the University’s
name is used without first obtaining the permission of the institution(s) whose
name(s) will be used.
D. Record
Retention Schedule. An Associated Entity
must have a policy governing retention and destruction of documents, including
electronic files, and which prohibits destruction of documents if an audit
other than in the ordinary course, investigation into wrongdoing, or litigation
is anticipated or underway.
XII. Waiver.
If the application of any of the requirements of these regulations to a
particular Associated Entity in specific circumstances is of limited benefit
and is unduly burdensome, the president may waive that requirement as to that
specific Associated Entity under circumstances that are set out in writing and
supported by the Approving Institution.
XIII. Other Matters
A. Effective Date. The requirements of this regulation shall be
effective upon the date of adoption of this regulation by the president.
B. Relation
to Federal and State Laws and Policies.
The foregoing regulation as adopted by the president is meant to
supplement, and does not purport to supplant or modify, those statutory
enactments, regulations, and policies which may govern or relate to the subject
matter of this regulation.
[1] Approving Institutions and Associated Entities have
until December 31, 2027, to comply with this requirement.