Policies and Procedures
Policy 204 – Types of Funds
January 1, 1999
November 23, 2015
November 23, 2015
Moneys received by the University come from various sources, including: State appropriation or grants and receipts, Federal government grants, customer sales of goods and services, private source gifts, contracts and grants, foundation support, endowment and investment income, interest income, rental of real property, royalties, and proceeds from debt. The definitions and criteria for each type of fund is critical to establish Source and Fund Authority appropriately and ensure funds are received and related financial transactions are accounted for in a manner that will demonstrate compliance with legal requirements and with the authority provided by the State of North Carolina.
For accounting purposes, University funds are separated into three major groups, each having its own office for Source establishment and accounting responsibility:
State fund Sources (the chartfield in ConnectCarolina) are established and maintained by the Budget Office. These are funds received from the State as direct appropriations and institutional receipts, and are recorded in State-controlled budget codes. There are three broad categories of State budget codes:
- Fund/Source combination 201XX/12XXX corresponds to State Budget Code 16020 (Academic Affairs)
- Fund/Source combination 211XX/13XXX corresponds to State Budget Code 16021 (Health Affairs)
- Fund/Source combination 221XX/140XX corresponds to State Budget Code 16022 (Area Health Education Centers)
Contract and Grant Funds
Contracts and grants are by definition, part of the Institutional Trust Funds category, and are administered by the Office of Sponsored Research (OSR).
Contract and grant funds are received from the federal government, not-for-profit organizations, state government and for-profit organizations. The award amount is stated in the notice-of-award letter. The award contract dictates how these funds will be allocated and includes funding parameters, such as the effective date of the award and the number of years the award is granted. The agency awarding the funds determines whether budget remaining from one project year may be carried forward to the next project year.
OSR is responsible for sponsored programs that encompass any scholarly, professional or creative activity conducted by University personnel using support from external funding sources through grants, contracts, cooperative agreements or other agreements. Such programs include but are not limited to organized research, instruction/training, other sponsored activities and research/support services. The criteria to identify “sponsored programs” are provided by the University of North Carolina Sponsored Programs Research Council (SPARC).
Institutional Trust Funds, Special Funds, and Endowment Funds
These are non-appropriated funds and authority for the establishment is granted through general statutes and General Administration policy. Institutional trust funds, special funds and endowment funds are often collectively referred to as “trust funds” in practice. Trust fund Sources are established and maintained by Accounting Services in accordance with the North Carolina State General Statutes that govern the type of Source.
- Chapter 116, Article 1of the General Statues, General Provisions
Provides legal requirements, corporate powers, rights and duties of the University of North Carolina System.
- General Statute 116-36.1, Regulation of Institutional Trust Funds.
Provides the legal authority for the University to establish institutional trust funds.
The trust funds are described in State legislation as follows:
- Moneys, 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;
- Moneys received by an institution pursuant to grants from, or contracts with, the United States Government or any agency or instrumentality thereof;
- Moneys received by an institution pursuant to grants from, or contracts with, any State agencies, any political subdivision 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 moneys, to conduct research, training or public service programs, or to provide financial aid to students;
- Moneys collected by an institution to support extracurricular activities of students of the institution;
- Moneys received from or for the operation by an institution of activities established for the benefit of scholarship funds or student activity programs;
- Moneys 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. See Auxiliary Funds.
- Moneys 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.
- Moneys received 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 real property had first been acquired by gift, devise or bequest or through expenditure of moneys defined in Section II.A. as "trust funds", except the net proceeds from disposition of an interest in real property first acquired by the institution through expenditure of moneys received as a grant from a State agency (Chapter 529 of the 1981 Session Laws).
- General Statute 116-36.2, Regulation of Special Funds of Individual Institution
Provides the legal authority for the Chancellor of each institution to have custody and manage the institution’s special funds. It provides that 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. The special funds of an individual institution include:
- Moneys received from or for the operation by an institution of its program of intercollegiate athletics;
- Moneys held by an institution as fiscal agent for individual students, faculty, staff members, and organizations.
- General Statue 116-36, Endowment Fund
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 the 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, to the endowment fund of the University. In other words, gifts or donations where the principal is to remain intact (the gift exists in perpetuity) and is to be invested to produce income that may be expended or reinvested are called Endowment funds. Endowments can be funded by one gift or several gift installments over time. The solicitation of these funds is usually coordinated through the Office of University Advancement. Endowment funds are comprised of principal and income elements. Endowment income is considered expendable, which means the funds are immediately available for expenditure.
Proceeds from any endowment fund shall not take the place of State appropriation or any part thereof but rather supplement the State appropriations so it may improve and increase its functions and enlarge its area of service.
Income from the endowment, which is invested in the UNC-CH Foundation Investment Fund, is distributed annually in June of each year.
For different types of Endowment Funds refer to the UNC Development Office.
For accounting purposes, the University has classified the following as plant funds:
- Capital improvement funds, institutional trust funds, and bond proceeds for capital projects
- Debt retirement funds as required by the debt the University has incurred for capital projects
- Investment in plant funds reflects assets and liabilities of the University.
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 moneys 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 moneys shall be paid shall act as trustee of such moneys and shall hold and apply the same for the purposes hereof, subject to such regulations as such resolution may provide.
Auxiliary funds are another category of Institutional Trust Funds regulated by General Statute 116-36.1 and result from the sales of merchandise and the rendering of services by self-supporting operations. Many times these operations serve students, faculty, staff and the general public. Examples include: housing operations, food services, bookstores, student health services, parking services, central warehouse operations, printing and duplicating services and facilities service and repair operations. The funds generated from these activities are expended to meet the service mission of the department.
Another example is Organized Practice Plans, which provide medical, dental or other health care services (UNC Health Care and Dental Faculty Practice). The funds generated from these activities are budgeted to maintain or improve the areas of teaching, research, patient care and public service as well as to support the administration of the plan.
Auxiliary funds include recharge centers (also referred to as Internal Service funds) which provide goods or services to campus departments. University funds are used to pay for the goods or services. Departments with auxiliary funds set prices for their services based upon their own costs to provide these services, and are subject to other rules and regulations as to how much they can charge.
Facilities and Administrative (F&A) Funds, also known as Overhead Receipts
These funds are generated by contracts and grants activity used to support infrastructure and other research-related activities, commonly referred to as indirect costs. These costs are not readily identifiable with a particular project or activity, but are necessary to the general operation of the University and the conduct of the activities it performs. The costs of operating and maintaining buildings and equipment, depreciation, general and departmental administrative salaries and expenses, and library costs are examples of these types of expenditures.
F&A receipts are calculated based on certain expenses (i.e. direct cost base) paid from contracts and grants accounts from the prior fiscal year (July 1 – June 30), then multiplied by the rate negotiated at the time of the award. Effective July 1998, F&A funds are classified as Institutional Trust Funds, but are treated in some respects like a state fund. This is because these funds must follow the same rules and regulations as state appropriations but with a few exceptions.
Funds are classified as agency funds when the University is acting as an agent for these funds belonging to an external organization affiliated with the University. These are monies held by an institution as a fiscal agent for individual students, faculty, staff members, University-related foundations and organizations. Agency funds are generally expendable. However, endowments of an affiliated foundation are administered in agency funds. University-related foundations are the most common example of agency funds. Funds held in a University-related foundation are transferred to the university as foundation allocations (foundation grants/awards) for spending by the University department.
Reason for Policy
Frequently Asked Questions
Q: What do you do when a trust fund that was previously established does not to meet trust fund requirements but could be an activity that should be accounted for as appropriated receipts?
A: You need to contact the Budget Office to review the activities and establish an account in the proper fund, if needed. Moneys in the trust fund related to the particular activity should be moved to the new appropriated receipt fund account.
Q: What is meant by self-supporting?
A: A self-supporting activity is an operation that pays for all its costs and is not supported by other operations. All costs incurred by other funds for the benefit of the activity must be reimbursed.
Q: Can Sales and Service Trust Funds (Auxiliary Funds) use State funds to support their activities?
A: No. Sales and Service Trust Funds are required to be self-supporting and any activity supported by State funds must be reimbursed.
Q: We have some gift and residual funds that are used primarily by one professor or primary investigator for their research. Are these funds “owned” by that professor?
A: All monies received by the University as gifts funds or residing in residual funds are considered University property. These funds are available for use for the purpose intended as stated in the Fund Authority. While some are restricted to one particular use, such as scholarships or a particular research, those that do not have a specific restriction are considered departmental funds to be used at the discretion of the dean, director, or department chair.
University Policies and Procedures on Institutional Trust Funds and Special Funds
As required by general Statue 1116-36.1(a) and 116-36.2, the Board of Governors of the University of North Carolina 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 System Administration Policy and Procedure Manual.
For requesting a Source, refer to Policy 205 - Account Establishment
For investment opportunities available for non-endowment trust funds, refer to Policy 401- General Guidelines for Investing Funds on Deposit.
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November 23, 2015: Updated references to chartfield strings, terminology. Added Related Data file.
April 19, 2010