Appropriate Use of University Funds

University Policy: 
Executive Summary: 

The University has a variety of sources of funds including but not limited to state appropriations, tuition, fees and other receipts, gifts, and capital funds.  Each of the fund sources are integral to carrying out the University’s mission.  This Policy defines the hierarchical authoritative level of guidance on the management and use of all operating funds.  In addition, this Policy defines the overarching principles for expending University operating funds.  

I. Policy Statement

First, the University will manage and use the variety of fund sources in accordance with North Carolina General Statutes and Session Laws. 

Second, the University will comply with the Office of State Budget and Management Budget Manual for applicability on various types of funds (as noted below).

Third, the University will comply with all UNC General Administration policies regarding the management and use of all funds.

For all potential expenditures from any source of operating funds, no set of guidelines can be written that addresses every possible expenditure decision that may arise.  The overarching principles for expenditures are (1) the expenditure must have a University business purpose, (2) the expenditure must be proper and must appear to be proper by external constituents (“appearance test”), and (3) the expenditure must be reasonable (“reasonableness test”).  For all expenditures from any source of funds, there must be a verifiable business purpose.  In addition, the “appearance test” requires review and judgment regarding how the purchase would look to external constituents if placed on the front page of the paper.  The reasonableness test requires a verifiable affirmative response to the question: “Is this expenditure amount reasonable for the goods and/or services provided?”

In addition, expenditures must also adhere to any spending restrictions specific to individual funds (e.g., donor or grantor restrictions) that are more restrictive than what is set forth in these policies and standards.

II. Purpose and Scope

The purpose of this policy is to establish standards for the use and management of University operating funds.  All sources of operating funds are included in this Policy and are defined as follows:

A. The General Fund

The General Fund includes all appropriations allocated by the General Assembly of North Carolina and all moneys collected by the University that cannot be deposited as Institutional Trust Funds or Special Funds as defined in North Carolina General Statutes and The University of North Carolina Policy Manual.  Moneys collected by the University that must be deposited into the General Fund include, but are not limited to, regular term tuition, distance education tuition, summer tuition, extension instruction fees, student charges that do not qualify as Institutional Trust Funds (e.g., miscellaneous service charges), revenues generated with General Fund resources, and utility service reimbursements from auxiliaries.  With the exception of a small percentage of appropriation that is statutorily allowed to be “carried forward” to the subsequent fiscal year, General Fund budgets must be expended by the end of the fiscal year.  The General Fund is subject to the State Budget Act.

B. Institutional Trust Funds

Institutional Trust Funds are on deposit with the North Carolina Department of State Treasurer, and although outside of the General Fund and Special Funds, are another type of State funds.  They are not subject to the budget process of the State Budget Act, but are subject to other applicable Statutes and Session Laws such as Capital projects, travel, and personnel.  Categories of Institutional Trust Funds are as follows:

  1. Student Auxiliary and Student Fee Funds are generated by those fees and activities that support student attendance at the University (excluding intercollegiate athletics; see Special Funds).  Examples of these funds include revenues from housing, dining, student centers (e.g., student unions), educational and technology fee, majors’ fees, application fees, student activities fees, health services fees, and other fees approved by the UNC Board of Governors.
  2. Unrestricted Trust Funds are not restricted by a donor, but are generally designated by the University in support of a particular unit or activity.  Sources of these funds may include but are not limited to unrestricted gifts, non-academic fees, revenues from departmental recharge and institutional auxiliary operations, revenues generated from the rental or licensing of non-state equipment and facilities, fixed fee contracts, event receipts, and related investment income.   
  3. Specifically Designated Unrestricted Trust Funds have been designated by a University action to be used for a specific purpose or identified in the fund establishment process as funds for a particular purpose, such as relocation costs.  The name of the fund provides guidance on its purpose.  Within these funds, there are certain undesignated funds that are specifically held for reserves and contingencies.
  4. Overhead Receipts (F&A) are generated through charging a predetermined percentage, known as the Facilities and Administrative Rate, to externally sponsored projects.  The use of these funds is limited to scholarly development of faculty, staff and students to sustain academic programs, support of campus infrastructure, and encouragement and expansion of research. 
  5. Restricted Funds – Grants and Contracts are funds received by federal, state, municipal, non-profit, and industrial entities restricted to support a specific use or purpose defined in the award document or agreement. 
  6. Restricted Trust Funds are gift funds for which the use and/or purpose have been restricted by the donor. 
  7. Millennial Campus Trust Funds are generated through activities described in the Millennial Campuses Financing Act[1]

C. Special Funds

Special Funds are on deposit with the North Carolina Department of State Treasurer, and although outside of the General Fund and Institutional Trust Funds, are another type of State funds.  They are not subject to the budget process of the State Budget Act, but are subject to other applicable Statutes and Session Laws such as Capital projects, travel, and personnel.  Categories of Special Funds are as follows:

  1. Intercollegiate Athletic Funds are generated by the student athletic fee, gate receipts, and other related revenues.
  2. Agency Funds are funds held by the University where the University acts as a custodian or agent with a fiduciary responsibility for the designated organization, club, etc.  These funds are associated with campus activities.

D. Discretionary Funds

“Discretionary” is an internal designation for a category of funds that consist of (1) unrestricted, undesignated donations initially made to a University Foundation; (2) donor-restricted gifts initially made to a University foundation or endowment earnings allowing discretionary spending; and (3) University-level income earned on certain non-General Fund sources.   

Discretionary funds must be used for a valid business purpose that directly benefits the program or objective for which they are received and require prudent and reasonable judgments by those responsible for the funds.  With these guiding principles, the use of discretionary funds is flexible in nature but must comply with University policies, standards, and documentation requirements.    

III. Roles and Responsibilities / Compliance

The Associate Vice Chancellor for Finance will issue standards, guidelines and procedures to assist departments in implementing this and other related policies. This Policy is the governing foundation for future standards, guidelines and procedures related to the management and use of operating funds.

The responsible party assigned to each fund must ensure the use of funds complies with the overarching principles, UNC General Administrative policies and the State Budget Manual, where applicable, and are supported by original, verifiable documentation.

[1] Refer to the Millennial Campuses Financing Act.