Accounting

Effective Date: 12/16/99
Updated: 07/16/03

Policy Statement 10: Special and Institutional Trust Funds


General

The following statements outline the account policies and procedures for East Carolina University regarding the use of Special and Institutional Trust Funds.


Background

Trust fund legislation was enacted by the 1977 General Assembly and revised in 1998 to include Overhead Receipts. Section 116-36.1(a) of the legislation states that the “Board of Governors is responsible for the custody and management of the trust funds of The University of North Carolina and of each institution. The board 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 legislation also requires the trust funds to be deposited with the State Treasurer. Section 116-36.1 (d) states that trust funds “are subject to the oversight of the State Auditor pursuant to G.S. 147-58 but are not subject to the provisions of the Executive Budget Act except for capital improvement projects which shall be authorized and executed in accordance with G.S. 143-18.1.”


Establishing an Account

“Fund Authority Forms” are required by the legislation for each individual account and further define the use of the funds. The legislation specifies that the following items must be included in the fund authority form: “(1) The Institutional Trust Fund Authority within which the account is established, (2) The name of the account and its accounting designation, (3) The source of the moneys to be credited thereto, (4) The purpose of the account, including any specific restrictions, terms or individual authorized to accept receipts and initiate disbursements from the account.” The legislation is very specific that no “disbursement shall be made for a purpose not specified in the appropriate fund or account authority or contrary to any specific restrictions, terms or conditions on the use of the funds.”


Determining Appropriate Expenditures

In a resolution concerning the custody and management of institutional trust funds, the Board of Governors of The University of North Carolina stated that these funds “shall be used to supplement State appropriations to the end that the institution may improve and increase its functions, may enlarge its areas of service, and may become more useful to a greater number of people.” Persons authorized to expend these funds should also assure themselves that the expenditures are consistent with the mission of East Carolina University.

As stated above, trust funds “are subject to the oversight of the State Auditor”. Current trends indicate that the public is demanding more and more accountability from public entities. Therefore, a prudent public stewardship approach should be taken when expending institutional trust funds. A reasonable test of appropriateness for expenditure should include the following questions:

  1. Is this expenditure demonstrably in the best interest of the university?

  2. Is this expenditure clearly for the purpose of meeting university objectives and not for any personal gain or benefit of any university employee?

  3. Will this expenditure be defendable under the scrutiny of a public concerned with waste and excess of public funds?

  4. Would you be proud to have your name associated with this expenditure if reported on the front page of your local newspaper?

You must be able to answer “yes” to each of these questions. Some examples of inappropriate expenditures include payments for non-business related entertainment, payments for bereavement acknowledgments and payments for personal gifts to faculty and staff members. If there is any doubt concerning the appropriateness of expenditure, please consult with Financial Services in advance.


Additional flexibility has been allowed for the following expenditures:

  1. Expenses for staff development activities are allowable if the following information is provided: 1) copy of invitation, 2) agenda, and 3) list of participants. However, expenses related to employee social events are not allowable.

  2. Moderate alcohol purchases for university-related activities may be made from trust funds if student fees are not associated with the source of revenue.

 

Matching Revenues and Expenditures

It is important to “match” the source of revenues and their related expenditures. If expenditure is made from state funds, any resulting revenue should be reported in state funds. Similarly, if state funds generated the revenue, the matching expenditures should be reported in state funds. Trust funds may not be used as a mechanism to collect revenues generated substantially with state time or dollars.

 

Questions

If you have any other questions or concerns regarding special/trust funds, please contact Financial Services at 328-6757.

Also, see Appendix 6: Frequently Asked Questions Regarding the Use of Discretionary Funds