POL - 01.04.10 University Associated Entities

1. Purpose

The UNC Board of Governors allows private nonprofit groups, called Associated Entities, to support universities (NCCU). They help with fundraising, services, research support, and partnerships. Even though they are independent, they must follow UNC System Office regulation to ensure alignment with NCCU’s metrics, compliance, and donor intent.

2. Key Definitions

• Associated Entity: means any foundation, association, corporation, limited liability company (LLC), partnership, or other nonprofit entity: (1) that was established by officers of NCCU; or (2) that is controlled by NCCU; or (3) that raises funds in the name of NCCU; or (4) that has a primary purpose of providing services or conducting activities in furtherance of the NCCU’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 NCCU.
• Athletically Related Entity: supports or conducts activities in furtherance of NCCU’s intercollegiate athletics program, as determined by the chancellor.
• Special Purpose Entity: means an Associated Entity (including any approved subsidiary or affiliate of an Associated Entity) that: (1) is established by NCCU or is controlled by an Approving Institution; (2) undertakes a specified activity for NCCU as its sole purpose (e.g., constructing or managing facilities, research development, or intellectual property management); and (3) does not engage in fundraising activities
• Approving Institution: The university (chancellor/board of trustees) or UNC System Office (president/Board of Governors).

3. Approval & Oversight

Entities must be formally approved in writing by the chancellor/trustees or by the UNC System president/Board of Governors. At least 1/3 of the governing board members must be appointed by the NCCU Chancellor (required by 2027). All University-associated entities must sign a formal agreement and remain in good standing per UNC System Regulation 600.2.5[R]. [Regulation on Required Elements of University-Associated Entity Relationship].

4. Use of University Branding

An Associated Entity must receive formal approval by the University before accessing any University-provided services or engaging in any activity that utilizes the University’s name, trademarks, logos, symbols, or other institutional identifiers. In accordance with UNC System Policy 600.2.5.2, Regulation on Associated Entities, and UNC Policy 600.1.1, Policy on the Use of University Names, Trademarks, Logos, and Marks, no Associated Entity may represent, market, promote, or imply affiliation with the University without documented authorization from the appropriate University officials and full compliance with all applicable licensing, branding, communications, and marketing standards. NCCU can remove approval if the entity violates rules.

5. Organizational Rules

5.1 Nonprofit and Tax-Exempt Status

Entities must be organized as nonprofits under North Carolina law. They must apply for and maintain state and federal tax-exempt status (usually 501(c)(3)). If a for-profit model is proposed, it must have special approval from the UNC Board of Governors. Endowment accounting for nonprofits is governed by principles that focus on preserving the original principal of the donation while utilizing the investment income to support the organization's mission, adhering strictly to donor restrictions.

5.2 Clear Purpose to Benefit the University

The associated entity’s mission and activities must directly support NCCU or the UNC System’s mission (e.g., scholarships, research support, fundraising for facilities). Activities unrelated to NCCU/UNC System’s mission are not allowed.

5.3 Dissolution Rule (What Happens if the Entity Ends)

If the entity closes, its assets must go back to NCCU, another NCCU-approved entity, or a combination of both. Donor restrictions must still be honored (for example, a scholarship endowment must remain used for that purpose).

5.4 Audit Committee Requirement

Each entity’s governing board must have an audit committee (or committee with audit function). Employees of the entity cannot serve on the audit committee (to prevent conflicts of interest). Ideally, the committee should include someone with financial expertise. The audit committee is responsible for reviewing the annual independent CPA audit and related tax filings.

6. Financial & Accountability Rules

6.1 Sound Accounting Practices

Entities must follow generally accepted accounting principles (GAAP) and operate with strong internal controls. This ensures financial statements are accurate, transparent, and dependable. Endowment funds are classified on the financial statements based on the existence and nature of donor restrictions, in accordance with the Financial Accounting Standards Board (FASB) guidelines for nonprofits. 

6.2 Annual Independent CPA Audits

All entities must be audited by a licensed independent CPA firm. 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 chancellor (or designee). NCCU-related entities that are component units: Audit must be completed by November 1. Other entities: Audit must be completed by March 1. Smaller entities (spending under $250K annually): Can use internal or system auditor reviews instead of an outside audit each year; however, the entity still must undergo a full CPA audit at least once every 5 years.

6.3 Audit Submission & Reporting

Audit reports, management letters, and responses must be shared with: The NCCU Chancellor and Board of Trustees, and the UNC System President and Board of Governors.

6.4 Budgets & Compensation Oversight

Entities must create annual operating and capital budgets, reviewable by NCCU leadership.

All salaries, benefits, and stipends paid to officers or employees must be approved by the entity’s governing board. If those employees are also NCCU staff, the compensation must also be approved by NCCU’s Chancellor (or designee).

6.5 Fund Transfers & Documentation

Every transfer of money between the entity and NCCU (or for NCCU’s benefit) must be documented in writing or electronically. A clear transaction trail must exist.

6.6 Whistleblower Protections

Entities must provide a confidential way to report financial misconduct (e.g., a hotline). Employees who report concerns must be protected from retaliation.

6.7 Debt Limitations

Entities cannot take on debt greater than $500,000 without notifying NCCU’s Chancellor and consulting with the UNC System finance office.

6.8 Investments & Property Transactions

Before investing major funds, entities must seek approval from NCCU leadership to ensure it aligns with the university’s interests. Real estate deals, construction projects, or property sales requiring state funds, tuition, or student fees must get Board of Governors approval.

6.9 Audit Findings

If audits identify problems, entities have 90 days to show progress on a corrective action plan.

7. Fundraising & Gifts

7.1 Coordination with NCCU Division of Institutional Advancement

The Division of Institutional Advancement, the fundraising entity for NCCU, is managed by the Vice Chancellor for Institutional Advancement. He or she is the chief fundraising officer and reports directly to the Chancellor. The Vice Chancellor is responsible for coordinating all fundraising activities, including the supervision of fundraising programs, administration of staff, and stewardship of donors on behalf of the University. All college/constituent fundraising programs are subject to the procedures contained in this policy. All fundraising by an Associated Entity must be coordinated with NCCU’s Institutional Advancement. This ensures that fundraising campaigns do not conflict with NCCU’s own efforts and that donor priorities are aligned with university goals.

7.2 Restrictions on Gifts

Associated Entities cannot accept gifts that place obligations on NCCU without prior approval. NCCU will evaluate proposed gifts to determine their financial, reputational, and operational implications. NCCU reserves the right to decline gifts that are overly restrictive, financially burdensome, or compromise academic freedom or integrity. Gifts will not be accepted if they involve unlawful discrimination based on race, religion, sex, age, national origin, color, disability, or any basis prohibited by law.

Entities also cannot accept gifts that include illegal or inappropriate restrictions (e.g., discriminatory scholarship terms, requirements that conflict with accreditation standards, or conditions that violate state/federal law). The University may return a gift if it is determined to compromise academic values, institutional integrity, or public trust.

7.3 Conditional or Restricted Gifts 

If a gift is restricted (earmarked for a certain use) or conditional (dependent on NCCU doing something in return), in accordance with the Fundraising Coordination Policy, the entity must first obtain written approval from NCCU’s Vice Chancellor for Institutional Advancement before accepting it. Donors must be informed upfront that certain gift conditions may require university approval by the Vice Chancellor of Institutional Advancement before the gift can be accepted.

7.4 Alignment with NCCU Mission

Gifts must support activities that align with NCCU’s mission of teaching, research, and service. Donations that do not advance NCCU’s mission or create reputational risk should be declined.

8. Conflict of Interest & Ethics

8.1 Conflict of Interest & Ethics Policies

Every Associated Entity must adopt a written conflict of interest and ethics policies approved by NCCU. These policies must set ethical standards for board members and employees, covering situations where personal interests could affect their duties.

8.2 Recusal from Business Decisions

If a board member, officer, or employee has a personal or financial interest in a transaction (e.g., their business is bidding on a contract), they must recuse themselves from the discussion and decision-making. This rule prevents individuals from influencing deals that could benefit themselves or their families.

8.3 Transactions with Insiders

Any business transactions between the entity and its board members, officers, or employees (other than reimbursements) must be formally reviewed and approved by the governing board. These approvals must be documented to show transparency.

8.4 Scholarships and Fellowships

Associated Entities cannot award scholarships or fellowships to their own board members, officers, employees, or their family members unless: The recipient is chosen by an independent awards committee, or the process is overseen by NCCU’s Student Aid and Scholarship Office and NCCU Foundation.

8.5 Ethical Standards for Fundraising & Operations

Entities must ensure that all fundraising, investments, and business practices follow ethical guidelines and avoid any activity that could damage NCCU’s reputation. This includes avoiding arrangements that could appear improper, even if technically legal.

9. Annual Reporting

9.1 Governing Board Membership List

Each year, all Associated Entities must submit to NCCU an updated and complete list of every individual serving on the entity’s governing board (e.g., Board of Directors, Executive Committee). This annual submission ensures compliance with the NCCU Associated Entity Regulation and supports required reporting under the UNC System policies governing institutional accountability and oversight. 

At a minimum, the governing board roster must include the following information for each:

• Full Legal Name
• Board Role/Title
• Appointment Type
• Start Date of Appointment
• End Date of Appointment
• Term Length and Term Limits
• Voting Status
• Material Differences in Voting Rights Amongst Board Members
• Affiliation or Representing Entity (if applicable)
• Officer or Committee Assignments
• Contact Information
• Conflict of Interest Disclosure Status

This ensures NCCU and the UNC System know who is making decisions on behalf of the entity and can confirm compliance with requirements (e.g., 1/3 appointed by NCCU chancellor or designee).

9.2 IRS Form 990

Entities must provide a copy of their IRS Form 990 (or equivalent return). This form discloses financial details, governance, compensation, and key activities of the nonprofit. Only the publicly available portion is required, but it must be complete.

9.3 CPA Audit Report & Management Letters

Entities must provide copies of their independent CPA audit report, along with: management letters: notes from auditors highlighting risks or weaknesses; responses to management letters: the entity’s plans to fix issues raised by auditors.

9.4 List of Real Estate Holdings & Capital Projects

Entities must submit a current inventory of all real estate they own or manage. They must also disclose all capital projects with current funding commitments.

9.5 Updates on Property & Project Activity

Entities must report all real estate transactions and capital project activity (completed or ongoing) from the last reporting period. This includes sales, purchases, leases, or construction projects.

9.6 Access for Review

If requested by the NCCU Chancellor, UNC System President, or governing board chair, entities must: Meet with leadership, and allow inspection of any requested information, subject to confidentiality protections.