The UNC
Policy Manual
600.2.5.2[R]
Adopted
11/16/05
Amended
06/25/14
Amended
06/08/15
The University of North Carolina encourages the establishment of
private organizations, known for purposes of these regulations 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 University 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.
Each Associated Entity becomes affiliated with either a
constituent institution or General Administration pursuant to the written
approval of the chancellor (in the case of an entity associated with a constituent
institution) or the president (in the case of an entity associated with General
Administration). 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
these regulations and pursuant to written agreements with Approving
institutions, to represent that they are affiliated with the University or a
constituent institution. In addition,
many Associated Entities benefit from resources of the constituent institution
in carrying out their activities.
These
regulations establish a framework of cooperation and coordination within which
the chancellor or the president of the Approving Institution are 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
chancellor or, as the case may be, the president, of the applicable Approving
Institution. These regulations recognize
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, these regulations articulate
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 its 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.
A. Definitions. As used in these regulations:
1. An
“Associated Entity” means any foundation, association, corporation, limited
liability company (LLC), partnership, or other nonprofit entity that was: (a)
established by officers of the University; or (b) that is controlled by the
University; or (c) that raises funds in the name of the University; or (d) 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 (e) that has a tax-exempt status that is based on being a
support organization for the University.
2. 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.
3. “Approving
Institution” means (a) a constituent institution of the University of North
Carolina that approves an Associated Entity, or (b) the General Administration
for an Associated Entity approved by the president.
4. “General
Administration” means the Office of the President and the affiliated programs
of the University associated with General Administration that are not centers
or institutes of a constituent institution.
5. “Major
Associated Entity” means an Associated Entity which has annual expenditures of
$100,000 or more.
6. “Minor
Associated Entity” means an Associated Entity which has annual expenditures of
less than $100,000.
7.
“Special Purpose Entity” means an Associated Entity (including any approved
subsidiary or affiliate of an Associated Entity) that is: (a) established by an
Approving Institution or is controlled by an Approving Institution; (b)
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 (c) does not engage in fundraising
activities.
8. “State” means
the State of North Carolina.
9. “University”
means the University of North Carolina, including its constituent institutions.
10. When “president or chancellor” 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
General Administration.
B. Creation
and Approved Status of Associated Entities
1. Associated
Entity Must be Approved. An Associated
Entity (including any subsidiary or affiliate of an existing Associated Entity)
must be approved in writing by the president, the chancellor, or the president’s
or chancellor’s designee. 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.
2. Abide
by Relevant University Policies; Alignment with Mission and Goals. In order to obtain approved status, the
Associated Entity must agree, pursuant to a written agreement also described in
subpart F.1., to abide by the policies or regulations established by the
University and by the Approving Institution, including the requirements of
these regulations, 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.
3. Removal of Approved Status. The head of the Approving Institution may
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: (a) these
regulations; (b) the applicable policies of the University and the Approving
Institution; or (c) the written agreement required by sections B.2., or
F.1. The advance written-notice period,
if any, required by a written agreement or policy shall not exceed sixty (60)
days, during which time the Approving Institution may consider and accept or
reject a corrective action plan submitted by the Associated Entity. In the absence of any such authorized provision
in the Approving Institution’s written agreement with the Associated Entity
and/or the Approving Institution’s policies, the head of the Approving
Institution may remove the approved status of an Associated Entity of that
Approving Institution.
4. Compliance
with Policies, Regulations, and Agreements.
The head of the Approving Institution (chancellor or president) shall be
responsible for taking reasonable steps to ensure that the Approving
Institution and its Associated Entities operate in accordance with all
requirements of these regulations, the applicable policies of the University
and the Approving Institution, and the written approvals and agreements between
the Approving Institution and each Associated Entity.
C. Organizational
Requirements of an Associated Entity
1. Purpose
to Benefit University. The Associated
Entity must be organized for the primary purpose of (a) supporting the
University or one or more of its constituent institutions or programs, and/or
(b) conducting activities that are in furtherance of the mission of the
University or of one or more of its constituent institutions or programs.
2. 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.
3. Tax-Exempt
Status. Except as provided in paragraph
C.2. (concerning Associated Entities established on a for-profit basis), an
Associated Entity must either (a) apply for, receive, and maintain both federal
and State tax-exempt status, or (b) be
eligible to utilize the tax-exempt status of one or more constituent
institutions or tax-exempt Associated Entities.
4. 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 dissolution
and provide that upon dissolution of the Associated Entity, unless otherwise
designated by the donor of an asset, all of its assets will revert to (a) the
Associated Entity’s Approving Institution, (b) 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 (c) some combination of the above.
5. Requirements
for Members of Associated Entity Governing Body; Board Members for Athletically
Related Associated Entities
a. All
Associated Entities. At least one senior
academic or administrative officer (SAAO) of the Approving Institution or a
designee of the president or the chancellor of the Approving Institution must
sit as an ex-officio (either voting or nonvoting) or regular member of the
Associated Entity’s governing body.
b. 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.
6. Audit Committee
Required
a. A
Major 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.
b. A Minor Associated Entity’s by-laws
must provide for a committee which has these audit functions.
c. 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.
d. 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.
e. 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.
D. Financial
and Accounting Controls
1. 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.
2.
Annual CPA Audit. A Major Associated
Entity and its single member subsidiaries (LLC 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 and with substantial experience in performing
audits for organizations of similar scope and complexity to the Major
Associated Entity. A Minor Associated
Entity must have an annual audit conducted either by the Approving
Institution’s internal auditor, another University internal auditor, or an
independent CPA firm. A Special Purpose
Entity must be audited every two years.
A Special Purpose Entity which has annual expenditures of $100,000 or
more must be audited by an independent CPA firm. A CPA firm providing an audit for a Major
Associated Entity may not provide nonauditing services to the Associated Entity
other than tax preparation services that are preapproved by the audit
committee.
a. 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.
b. An
Associated Entity of the General Administration 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.
3. 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.
4. 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. The Associated Entity must comply with Board
of Governors Policy Section 300.1.1 concerning the prohibition of payments to
specified University employees. This
requirement does not prohibit the Associated Entity from reimbursing its
officers or employees for expenditures made on behalf of the Associated
Entity. Each Athletically Related
Associated Entity 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.
5. Indemnification
of University. The Approving Institution
may 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.
6. University-Associated Entity Monetary Transfers. All transfers of funds from the Associated
Entity to the University or to the Approving Institution must be documented in
writing or electronically in a form that has a retrievable transaction trail.
Each Athletically Related Associated Entity shall, if requested by the
chancellor 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.
7. 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.
8. Chief
Executive Officer. The chief financial
officer of the Approving Institution may not be the chief executive officer of
an Associated Entity.
9. Acquisition
of Debt. A Minor Associated Entity may not acquire debt in excess of $100,000
that is not to be publicly traded without first notifying the president or the
chancellor or designee of the Approving Institution and consulting with the
vice president for finance of the University.
A Major Associated Entity may not acquire debt in excess of $500,000
that is not to be publicly traded without first notifying the president or the
chancellor or designee of the Approving Institution and consulting with the
vice president for finance of the University. 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
University at the vice president’s request or to the governing board of the
Approving Institution at the request of the chair of the governing board.
10. Audit Findings.
Within 90 days of the issuance of an audit report with audit findings,
the Associated Entity must demonstrate to the president or the chancellor of the
Approving Institution and to the 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.
E. Insurance
and Bonding
1. Bonding
Required. Officers and employees of
Major Associated Entities 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. The governing
body of a Minor Associated Entity should consider requiring bonding of
appropriate employees.
2. Insurance. The governing body of an Associated Entity,
working in collaboration with the Approving Institution’s insurance and risk
management personnel, 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.
F. Provision
of Administrative and Other Services by University for Associated Entity
1. 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.
2. 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.
3. 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.
G. Acceptance
of Gifts by Associated Entity
1. 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.
2. 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.
3. 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.
H. Conflict
of Interest and Ethics Policies
1. 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.
2. Transactions
Between Associated Entity and its Employees.
All transactions (other than reimbursements as provided in section D.4.)
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.
3. 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.
4. 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.
I. Reports
Required to be Submitted by Associated Entity to University
1. The
Associated Entity must file annual reports with the president or chancellor of
Approving Institution covering the following items:
a. A list of all members of the
Associated Entity’s governing body;
b. A copy of the publicly disclosed portion of the Associated
Entity’s Form 990, or other series 990 form or other similar information
return; and
c. A copy of the Associated Entity’s CPA audit report and
related management letters and responses to management letters.
2. At
the request of the chancellor, president, or the chair of governing body of the
Approving Institution, the Associated Entity must meet with the requesting
person, his or her designee, or the internal auditor of the Approving
Institution and allow that person to inspect any information requested.
J. Miscellaneous
Requirements
1. 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.
2. 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.
3. 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.
4. 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.
K. 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.
L. Effective Date
Every Associated Entity shall be in compliance with these regulations
no later than July 1, 2015.