INDEPENDENT AUDITOR’S REPORT
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Board of Directors
University of North Carolina at Chapel Hill Arts and Sciences Foundation, Inc.
Opinion
We have audited the accompanying financial statements of University of North Carolina at Chapel Hill Arts and Sciences Foundation, Inc. (a nonprofit organization), which comprise the statements of financial position as of June 30, 2025 and 2024, and the related statements of activities and changes in net assets, functional expenses, and cash flows for the years then ended, and the related notes to the financial statements.
In our opinion,the financial statements referredto above presentfairly,inallmaterialrespects,the financial position of University of North Carolina at Chapel Hill Arts and Sciences Foundation, Inc., as of June 30, 2025 and 2024, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of University of North Carolina at Chapel Hill Arts and Sciences Foundation, Inc., and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design,implementation,andmaintenanceofinternalcontrolrelevanttothepreparationandfairpresentation of financial statements that are free from material misstatement, whether due to fraud or error.
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In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about University of North Carolina at Chapel Hill Arts and Sciences Foundation, Inc.’s ability to continue as a going concern within one year after the date that the financial statements are available to be issued.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not absolute assurance, and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements, including omissions, are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted auditing standards, we:
Exercise professional judgment and maintain professional skepticism throughout the audit.
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of University of North Carolina at Chapel Hill Arts and Sciences Foundation, Inc.’s internal control. Accordingly, no such opinion is expressed.
Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about University of North Carolina at Chapel Hill Arts and Sciences Foundation, Inc.’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
Chapel Hill, North Carolina September 30, 2025
UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL ARTS AND SCIENCES FOUNDATION, INC.
STATEMENTS OF FINANCIAL POSITION
June 30, 2025 and 2024
ASSETS
LIABILITIES AND NET ASSETS
UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL ARTS AND SCIENCES FOUNDATION, INC.
STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS
Page 1 of 2 For the Years Ended June 30, 2025 and 2024
UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL ARTS AND SCIENCES FOUNDATION, INC.
STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS
Page 2 of 2 For the Years Ended June 30, 2025 and 2024
STATEMENTS OF CASH FLOWS
June 30, 2025 and 2024
UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL ARTS AND SCIENCES FOUNDATION, INC.
STATEMENTS OF FUNCTIONAL EXPENSES
For the Years Ended June 30, 2025 and 2024
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NATURE OF ACTIVITIES
The University of North Carolina at Chapel Hill Arts and Sciences Foundation, Inc. (the “Foundation”) is a North Carolina non-profit corporation. Its purpose is to promote and support the College of Arts and Sciences at the University of North Carolina at Chapel Hill (the “University”).
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Accounting.
The Foundation’s financial statements are presented on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which require the use of certain estimates made by the Foundation’s management. Accordingly, revenues are recognized when earned, and expenses are recognized when the obligation is incurred.
The Foundation reports gifts of cash and other assets as restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, net assets with donor restrictions are reclassified to net assets without donor restrictions and reported in the statements of activities and changes in net assets as net assets released from restrictions.
B. Cash and Cash Equivalents.
Cash and cash equivalents consist of monies on deposit with the University of North Carolina at Chapel Hill Temporary Investment Pool, which is a governmental external investment pool. The pool is uninsured under FDIC, but is invested in highly liquid securities including, but not limited to, U S Government securities. At June 30, 2025 and 2024, cash and cash equivalents includes $1,814,041 and $1,443,389, respectively, restricted for various endowments.
C. Investments.
Investments are stated at fair value. Donated securities are recorded at fair value at the date of gift.
D. Promises to Give.
Unconditional promises to give are recognized as support and assets in the period received. Unconditional promises to give that are expected to be collected within one year are recorded at net realizable value. Unconditional promises to give that are expected to be collected in future years are recorded at the present value of estimated future cash flows. Conditional promises to give are recognized when the conditions on which they depend are substantially met. An allowance for uncollectible promises to give is calculated based on management’s estimate.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
E. Accounts Receivable.
Accounts receivable consist of donor contributions due from the University. No allowance for credit losses is necessary since it is anticipated by management that these funds will be collected in their entirety.
F. Property and Equipment.
Property and equipment are recorded at cost for purchased assets, and at fair value for donated assets. The Foundation’s policy is to capitalize all items with a life greater than one year and a cost greater than $5,000. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets.
The Foundation reports gifts of land, buildings, and equipment as support without donor restrictions unless explicit donor stipulations specify how the donated assets must be used. Gifts of long-lived assets with explicit restrictions that specify how the assets are to be used and gifts of cash or other assets that must be used to acquire long-lived assets are reported as support with donor restrictions Absent explicit donor stipulations about how long those long-lived assets must be maintained, the Foundation reports expirations of donor restrictions when the donated or acquired long-lived assets are placed in service.
The Foundation reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability is measured by a comparison of the carrying amount to the future net undiscounted cash flow expected to be generated and any estimated proceeds from the eventual disposition. If the long-lived assets are considered to be impaired, the impairment to be recognized is measured at the amount by which the carrying amount exceeds the fair value as determined by an appraisal, discounted cash flow analysis or other valuation technique. There were no impairment losses recognized for the years ended June 30, 2025 and 2024.
G. Contribution of Nonfinancial Assets.
The Foundation recognizes contributions that create or enhance nonfinancial assets or that require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation.
H. Income Tax Status.
The Foundation is exempt from income tax as a not-for-profit organization under Section 501(c)(3) of the Internal Revenue Code and is classified as other than a private foundation. If applicable, the Foundation reports interest and penalties related to unrecognized tax positions as interest expense under management and general expenses.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
I. Net Assets.
Net assets, support and revenue, gains and losses are classified based on the existence or absence of donor or grant imposed restrictions. Accordingly, net assets and changes therein are classified and reported as follows:
Without Donor Restrictions – Resources of the Foundation that are not restricted by donors or grantors as to use or purpose. These resources include amounts generated from operations, undesignated gifts, and property and equipment.
With Donor Restrictions – Resources that carry a donor-imposed restriction. Some donor restrictions allow the Foundation to use or expend the donated assets for a specific purpose; those restrictions can be satisfied by the passage of time or by actions of the Foundation. Other donor restrictions are perpetual in nature, where the donor stipulates that donated assets be maintained in perpetuity; those restrictions permit the Foundation to use or expend part or all of the income derived from the donated assets.
J. Estimates.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from estimates, and those differences can be material
K. Leases.
The Foundation determines if an arrangement is a lease at inception and reassesses if there are changes in terms and conditions of the contract. Operating leases are included in right-of-use assetsoperating leases, and operating lease liabilities on the statements of financial position. Lease assets and liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Foundation’s leases do not provide an implicit rate, the Foundation uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. Lease assets also include any lease payments made before lease commencement and initial direct costs and reduced for any lease incentives. In determining the lease term at lease commencement, the Foundation includes the noncancellable term and the periods which the Foundation deems it is reasonably certain to exercise or not to exercise a renewal or cancellation option. Operating lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.
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LIQUIDITY AND AVAILABILITY
The following represents the Foundation’s financial assets at June 30:
Financial assets at June 30, 2025 2024
Less amounts unavailable for general expenditures within one year, due to: Time and purpose restrictions by donor and board (594,311,135) (565,326,678)
Financial assets available to meet cash needs for general expenditures within one year 31,488,444 $ 7,449,170 $
The Foundation’s programs are supported both by contributions with and without donor restrictions. Donors include individuals, corporations, and foundations. Because a donor’s restriction requires resources to be used in a particular manner or in a future period, the Foundation must maintain sufficient resources to meet those responsibilities to its donors. Thus, financial assets may not be available for general expenditure within one year. As part of the Foundation’s liquidity management, it has a policy to structure its financial assets to be available as its general expenditures, liabilities, and other obligations come due.
INVESTMENTS
Most investments are invested in The University of North Carolina at Chapel Hill Foundation Investment Fund, Inc. (“CHIF”). All investments of CHIF are comprised solely of shares in an external investment pool, UNC Investment Fund, LLC (the “Fund”). Within the Fund, the fair value of all debt and equity securities with readily determinable fair values are based on quoted market prices. Investments for which a readily determinable fair value does not exist may include investments in private equity, hedge funds, and limited partnerships. These investments are carried at estimated fair values as provided by the respective fund managers of these investments.
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INVESTMENTS (CONTINUED)
UNC Management Company, Inc., the manager of the Fund, reviews and evaluates the fair values provided by the respective fund managers as well as the valuation methods and assumptions used in determining the fair value of such investments. Those estimated fair values may differ significantly from the values that would have been used had a ready market for these investments existed. Such differences could be material.
A derivative is a financial instrument created from, or whose value is derived from, the value of one or more underlying assets, reference rates, indexes, or asset values. These instruments may include forwards, futures, options, and currency and interest rate swaps. The Fund utilizes various external investment managers to identify specific investment funds and limited partnerships that meet asset allocation and investment management objectives. These managers and related funds are used to increase the yield and return on the investment portfolio given the available alternative investment opportunities and to diversify its asset holdings. Some of these investments expose the Fund to market risk by trading or holding direct and indirect derivative securities and by leveraging the securities in the Fund. This risk is mitigated by the Fund’s Board requirement that leveraged securities must be fully collateralized.
Indirect derivatives held by the Fund, (i.e., derivatives held by external investment managers) are primarily used to manage portfolio risk. The Fund’s managers use indirect derivatives primarily to hedge underlying positions or to gain exposure to specific markets in an efficient, inexpensive, liquid, and diversified manner. By holding indirect derivatives, the Fund could be exposed to interest rate risk, credit risk, concentration of credit risk, and foreign currency risk. The Fund considers the risk associated with these holdings to be prudent and within acceptable bounds.
Investments consist of the following at June 30:
The following table sets forth a summary of changes in the fair value of the Foundation’s investments in CHIF for the years ended June 30:
INVESTMENTS (CONTINUED)
At June 30, 2025 and 2024, the investment allocation of the Fund consisted of the following:
FAIR VALUE OF ASSETS
Investments are presented in the financial statements at fair value determined in accordance with FASB Accounting Standards Codification Topic 820 (“ASC 820”), Fair Value Measurement. U.S. GAAP defines fair value as the price that would be received to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. It also establishes a fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Foundation.
Unobservable inputs reflect the Foundation’s assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
The fair value hierarchy is categorized into three levels based on the inputs as follows:
Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets as of the reporting date.
Level 2 - Valuations based on inputs other than quoted prices, which are either directly or indirectly observable as of the reporting date, are valued at prices for similar assets or liabilities in markets not active, or determined through the use of models or other valuation methodologies.
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FAIR VALUE OF ASSETS (CONTINUED)
Level 3 - Pricing inputs are unobservable and include situations where there is little, if any, market activity for the asset. Fair value for these assets is determined using valuation methodologies that consider a range of factors, including but not limited to the price at which the asset was acquired, the nature of the assets, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance and financing transactions subsequent to the acquisition of the asset. The inputs into the determination of fair value require significant management judgment. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these assets existed.
ASC 820 permits reporting entities, as a practical expedient, to estimate the fair value of their investments in certain entities that calculate net asset value (“NAV”) per share, by using NAV if the net asset value per share of the investment is calculated in a manner consistent with the measurement principles of FASB ASC Topic 946 (“ASC 946”), Financial Services-Investment Companies, as of the reporting entity’s measurement date.
The Foundation elects to use NAV as a practical expedient to estimate the fair value of its investments in CHIF CHIF’s manager calculates NAV using fair value estimates of the underlying securities and other financial instruments. The estimated fair values of these underlying investments, which may include private placements and other securities for which prices are not readily available, may not reflect amounts that could be realized upon immediate sale, nor amounts that ultimately may be realized. Accordingly, the estimated fair values may differ significantly from the values that would have been used had a ready market existed for these investments. The fair value of the Foundation’s investments in CHIF generally represents the amount the Foundation would expect to receive if it were to liquidate its investment excluding any redemption charges that may apply.
Determining whether CHIF’s manager has calculated NAV in a manner consistent with ASC 946 requires the Foundation to independently evaluate the fair value measurement process utilized to calculate the NAV. Such an evaluation is a matter of professional judgment and includes determining that CHIF’s manager has an effective process and related internal controls in place to estimate the fair value of its investments that are included in the calculation of NAV. The Foundation’s evaluation of the process used by the CHIF’s manager includes initial due diligence, ongoing due diligence, and financial reporting controls.
The Foundation’s investments in US Treasury securities and money market funds are classified as Level 1. There were no changes during the years ending June 30, 2025 and 2024, to the Foundation’s valuation techniques used to measure asset values on a recurring basis.
SPLIT-INTEREST AGREEMENTS
The Foundation has been named the recipient of irrevocable annuities and trusts. The Foundation is not serving as trustee for these trusts. These trusts have been reflected in the financial statements at net present value of $5,493,341 and $3,013,787, as of June 30, 2025 and 2024, respectively. Net present value was computed using the IRC 7520(a) rate of 5.0% and 5.6%, as of June 30, 2025 and 2024, respectively. The computation was based on the life expectancy of the beneficiaries and the required distribution under the terms of the trusts.
The Foundation was named a beneficiary in a gift agreement. The donor gifted real estate to a University related entity, which is holding the real estate until sold. When sold, a specific amount is promised to another entity, and the Foundation was expected to receive the remainder of the net sale proceeds. The donor changed the beneficiary, so the receivable in the amount of $3,513,848 was removed and offset against contributions, for the year ended June 30, 2025.
PROMISES TO GIVE
Unconditional promises to give are recognized as support in the period received and as assets, decreases in liabilities, or expenses depending on the form of the benefits received. The gross promises to give amount has been discounted to the present value of the estimated future cash flows based on an interest rate of 5.0% and 5.6%, as of June 30, 2025 and 2024, respectively, according to the following schedule:
Unconditional promises to give:
in one to five years
14,417,165 Receivable in more than five years 1,433,697 1,136,104
(1,330,000) (1,617,000)
Gross promises to give includes $14,584,892 and $14,780,635, at June 30, 2025 and 2024, respectively, which is donor restricted for investment in various endowment funds.
The Foundation has knowledge that donors have promised contributions to the Foundation that are considered conditional promises to give, and therefore are not recorded in the accompanying financial statements. At June 30, 2025, conditional promises to give total approximately $5.7 million.
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PROPERTY AND EQUIPMENT
Property and equipment consist of the following at June 30:
Furniture and equipment 604,887 $ 561,860 $ Building and improvements 4,304,579 4,304,579
Leasehold interest - building 3,750,483 3,750,483 8,659,949 8,616,922
Less: allowance for depreciation (3,423,154) (3,215,070) Total property and equipment 5,236,795 $ 5,401,852 $
Depreciation expense amounted to $208,084 and $203,781, for the years ended June 30, 2025 and 2024, respectively.
LOAN PAYABLE
The Foundation is obligated under a loan agreement with a financial institution. Interest on the loan is currently 2.0%. Quarterly principal and interest payments amount to $56,299. The loan matures in September 2032. The loan agreement stipulates a prepayment penalty only if principal payments come from external funds, such as if the loan is refinanced with another financial institution. The prepayment penalty clause of the loan expired in September 2024. The schedule of maturity obligations for the loan is as follows:
Year ending June 30,
CLASSIFICATION OF NET ASSETS
Net assets with donor restrictions at June 30, 2025 and 2024, consist of the following funds:
Purpose restricted:
Support of the College of Arts and Sciences at the University of North Carolina at Chapel Hill
Net assets without donor restrictions at June 30, 2025 and 2024, consist of the following funds:
ENDOWMENTS
The Foundation’s endowments were established for a variety of purposes. The endowments include both donor-restricted endowment funds and funds designated by the Board of Directors to function as endowments. As required by U S GAAP, net assets associated with endowment funds, including funds designated by the Board of Directors to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions.
Interpretation of Relevant Law
The Board of Directors of the Foundation has interpreted the State Prudent Management of Institutional Funds Act (SPMIFA) as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary.
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ENDOWMENTS (CONTINUED)
As a result of this interpretation, the Foundation classifies as net assets with donor restrictions in perpetuity (a) the original value of gifts donated to the endowment, (b) the original value of subsequent gifts to the endowment, and (c) accumulations to the endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified in perpetuity is classified as purpose restricted net assets with donor restrictions until those amounts are appropriated for expenditure by the Foundation in a manner consistent with the standard of prudence prescribed by SPMIFA.
In accordance with SPMIFA, the Foundation considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds:
1. The duration and preservation of the fund
2. The purposes of the Foundation and the donor-restricted endowment fund
3. General economic conditions
4. The possible effect of inflation and deflation
5. The expected total return from income and the appreciation of investments
6. Other resources of the Foundation
7. The investment policies of the Foundation
Return Objectives and Risk Parameters
The Foundation has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of the endowment assets. Endowment assets include those assets of donor-restricted funds that the Foundation must hold in perpetuity or for a donor-specified period(s) as well as board-designated funds. The Foundation expects its endowment funds, over time, to provide an average rate of return of approximately 5.5% plus consumer price index. Actual returns in any given year may vary from this amount.
Strategies Employed for Achieving Objectives
The Foundation relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The Foundation makes investments in CHIF.
Funds with Deficiencies
From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that SPMIFA requires to retain as a fund of perpetual duration. As of June 30, 2025 and 2024, there were no endowment funds that were below the required amount.
ENDOWMENTS (CONTINUED)
The endowment net asset composition by type of fund as of June 30, 2025, was as follows: Without Donor Restrictions With Donor Restrictions Totals
Donor-restricted
The changes in endowment net assets for the year ended June 30, 2025, were as follows: Without Donor Restrictions With Donor Restrictions Totals
Endowment net assets,
Endowment net assets, June 30, 2025
ENDOWMENTS (CONTINUED)
The endowment net asset composition by type of fund as of June 30, 2024, was as follows: Without Donor Restrictions With Donor Restrictions Totals Donor-restricted
$ endowment funds
The changes in endowment net assets for the year ended June 30, 2024, were as follows:
Without Donor Restrictions With Donor Restrictions Totals
Endowment net assets, June 30, 2023
$
$
Appropriation of endowment assets for
(908,819) (11,458,913) (12,367,732) Transfers - (246,001) (246,001)
Endowment net assets, June 30, 2024
CONTRIBUTION ON NONFINANCIAL ASSETS
The Foundation recognizes contributions that create or enhance nonfinancial assets or that require specialized skills and would typically need to be purchased if not provided by donation. During the years ended June 30, 2025 and 2024, the Foundation recorded $5,475,265 and $4,391,222, respectively, as contributions of nonfinancial assets The majority of these amounts represent staff related expenses for salaries and benefits paid by the University for work performed on behalf of the Foundation.
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PROGRAM EXPENSES
Grants to the College of Arts and Sciences totaling $27,943,414, during the year ended June 30, 2025, consisted of the following:
Source of Funds Without Donor Restrictions Endowment Earnings/Principal With Donor RestrictionsExpendable
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PROGRAM EXPENSES (CONTINUED)
Grants to the College of Arts and Sciences totaling $23,158,644, during the year ended June 30, 2024, consisted of the following:
Source of Funds
RELATED PARTY TRANSACTIONS
On August 25, 2005, the Foundation purchased a leasehold interest in a building in London, England, for approximately $3,750,000, which is utilized for the European Study Center. The purpose of the building is to advance the education of students at UNC and particularly the students at the College of Arts and Sciences (“College”) and to promote the scholarly interests of the College faculty in England and Wales. The College entered into an agreement with Carolina Trust Limited (“Trust”) in September 2005 to manage the operations of the European Study Center. The Trust recognizes all revenues and incurs all expenses related to the operations of the building. The Executive Director of the Foundation is a required member of the management board of the Trust and has full voting rights on all matters relating to the Trust.
NOTES TO FINANCIAL STATEMENTS
CONCENTRATION
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At June 30, 2025 and 2024, promises to give from five donors account for approximately 64% and 57%, respectively, of the total outstanding promises to give.
FUNCTIONAL ALLOCATION OF EXPENSES
The costs of providing various programs and other activities have been summarized on a functional basis in the statements of activities and changes in net assets. The statements of functional expenses present the natural classification detail of expense by function. Accordingly, certain costs have been allocated between programs and supporting services benefited based on management’s estimates. The expenses that are allocated include supplies and other expenses, office expenses, interest and occupancy costs, which are allocated on the basis of estimates from a historical review of the purposes of the expenses, as well as salaries and benefits, which are allocated on the basis of estimates of time and effort.
RECLASSIFICATIONS
Certain reclassifications have been made to amounts previously reported in the 2024 financial statements in order to conform to 2025 presentation. Such reclassifications had no effect on net assets.
SUBSEQUENT EVENTS
Management has evaluated subsequent events for recognition or disclosure through September 30, 2025, which was the date that the financial statements were available to be issued Management did not identify any events that require disclosure.
Arts and Sciences Foundation Board of Directors
Minutes of the Finance Committee Meeting April 24, 2025
On Thursday, April 24, 2025, the Finance Committee of the Arts and Sciences Foundation Board of Directors met at the Chancellor’s Conference Room in South Building 105 at 3:30 p.m.
The following directors, staff and guests were present:
Board of Directors
Touré Claiborne
Alec McLean
Staff Members
Jacob Bacharach
Katy Galbraith
André Williams
Guests
Matt Guest
Ken Smith (Chair)
Kristen Rogister
Erin Schwie Langston
David Driscoll
Jonathon King (UNC Management Company)
Call to Order
Jim White
Dan Kelly
Alison Yerger
Nela Parsons
The meeting was called to order at 3:30 p.m. by Ken Smith. Erin Schwie Langston introduced the recently hired Arts and Sciences Foundation Accountant, David Driscoll and thanked Kristen Rogister for her continued support.
Approval of the Minutes
The Finance Committee approved the minutes from the Finance and Audit Committees meeting held on October 4, 2024
Mr. Smith requested a vote to update the fund purpose for the Hammond Medal in Dramatic Arts and the John J. Fisher and Nancy Sue Himelick Fisher Endowment Fund. The Finance Committee approved updating the fund purpose for both funds.
Fiscal Year 2024-2025 Budget Report and Summary (3rd Quarter)
The Finance Committee reviewed the FY25 budget report as of March 31, 2025. Jacob Bacharach, Senior Associate Dean of Operations and Strategy and Foundation Treasurer, reported on the FY25 budget for the period that ended March 31, 2025.
For the period ended March 31, 2025, total revenue was $6,249,764 and total expenses were $5,427,540
Revenue Highlights:
Arts and Sciences Fund contributions, as of March 31, 2025, totaled $1,856,671. This amount includes all gifts that have been processed on the accounting ledger as of March 31, 2025.
Endowment Administration Fee (EAF) maintained the same rates as the previous years: 60 basis points to the College of Arts and Sciences (owning unit), 20 basis points to University Development, and 20 basis points to the OneCarolina Development Investment Fund, which is directed to support University Development.
University Interest Income the Foundation anticipates another investment income allocation for FY25 during the fourth quarter
Truist Money Market/Investment Income - The Arts and Sciences Foundation continues to maintain a checking and money market account with Truist Bank, although most of the balances are held within treasury bills or high-yield money markets.
To maintain short-term earnings alongside low-risk liquidity, the Foundation purchased $4.5 million in treasuries using the balances held within the Truist Bank money market account in January 2024. In August and November 2024, the Foundation redeemed its second and third treasury bills at $1.25 million and $2.5 million, respectively. With these redemptions, the Foundation purchased additional bills and invested $205,377 into the Lighthouse Group’s money market account with a 5.10% rate for additional liquidity. There were additional redemptions in January 2025 and February 2025. During each redemption period, cash liquidity needs are assessed prior to purchasing additional treasuries. There is one outstanding treasury that matures in August 2025.
Expense Highlights:
Personnel is under budget as of the third quarter due to ongoing efforts to hire additional staff. In June 2024, the Foundation contracted with WittKieffer, a search firm, to recruit a senior director of development. The contract was paid in the second quarter of FY25, and the goal is to have the position filled by the end of the fourth quarter. There have been numerous personnel actions over the course of the fiscal year. Since the October 2024 meeting, a Director of Development for Honors Carolina started in January, a Director of Development was promoted to Senior Director of Development and Assistant Vice President in February, and an Associate Director of Development was promoted to Director of Development in March. The new Foundation Accountant started in April. Active recruitments in March and April include finalizing the hiring processes for one Senior Director of Development and Assistant Vice President, as well as two Directors of Development. We anticipate recruitment for the Assistant Director of Annual Giving and an Associate Director of Development before the end of the fiscal year.
The state of North Carolina passed a budget which included a 3% raise for all state employees effective July 1, 2024, In addition, the Foundation submitted market rate increases for select employees during the second quarter. In the fourth quarter, the Foundation paid bonuses to select employees.
Travel is below budget at the close of the third quarter as the Foundation continues to hire staff. Development Officer travel will continue to increase through the end of the fiscal year.
Building Debt Service, Building Maintenance, Special Events/Entertainment, Communications and Postage and Insurance are at or below expected levels.
Building maintenance is expected to be just above budget. We anticipated larger expenses into the first quarter attributable to HVAC issues in July 2024. Recently, there has been landscaping and exterior improvements at Buchan House. Significant upcoming projects include the removal of several damaged trees, as well as safety and security improvements to replace existing exterior doors with new hardware, security enhancements, and improved ADA accessibility requirements.
Legal/accounting expenses have exceeded budget. These costs and fees include payments for the audit, the 990 preparation costs, state registration fees, and the annual charge from the University for the associated entities agreement, which covers support from central Accounting Services. The University has charged $14,000 for the associated entity services, but there is an expected increase moving forward. Though outside counsel fees were included in the budget, we have exceeded the anticipated expenses for FY25. This line also includes ad hoc costs for miscellaneous outside counsel.
Office supplies/equipment are above expected levels. In June 2024, the Foundation upgraded several computers; these expenses hit in July 2024. A new AV system was installed in the Buchan House boardroom. Some of these costs may flow into the building maintenance budget line.
Other services/miscellaneous expenses are over budget. This category includes subscription services used for prospect research; broadcast emails and stewardship of top donors; professional development opportunities for employees; and Truist banking fees. University Development no longer absorbs the 3% credit card transaction fee, so this unbudgeted expense comprises a significant portion of the increased expense.
The Dean’s discretionary grant (Arts and Sciences Fund) is allocated at the end of each fiscal year and comes from unrestricted contributions to the Arts and Sciences Fund. We anticipate allocating the entire amount raised to the Dean’s discretionary fund.
Fiscal Year 2025-2026 Proposed Operating Budget
Jacob Bacharach presented the Foundation’s $8.25 million budget request for fiscal year 2026. The request reflects an overall increase from the approved budget for FY25. This is attributable to significant hiring and Foundation restructuring plans that will ultimately position the Foundation to raise more money for the College of Arts and Sciences.
Revenue Highlights:
The Arts and Sciences Fund will increase to $2.15 million. The Foundation expects to transfer the full amount to support the Dean’s discretionary grant.
Endowment Administration Fee will maintain the same rates as previous years: 60 basis points to the College of Arts and Sciences (owning unit), 20 basis points to University Development, and 20 basis points to the OneCarolina Development Investment Fund, which supports University Development.
The Arts and Sciences Foundation anticipates starting the fiscal year with roughly $5.6 million in balances within the Truist bank account and treasury investments.
University Interest Income is expected to be $14,000 for FY26.
Truist Money Market/Investment Income for FY26, we anticipate small earnings in the Truist money market account. This estimate is based on a money market rate of 4.10% and treasury returns throughout FY26. The liquidated treasuries remain in a high-yield money market. We are anticipating a modest $5,500 in interest earnings. Below is the current treasury return in FY26:
Expense Highlights:
Personnel - The FY26 budget reflects a modest decrease from the FY25 budget. This is, in part, due to University Development covering 50 percent of Anne Collins’ salary given the new reporting structure. The Foundation has budgeted for organizational growth in FY26 that includes additional frontline fundraiser positions, increased business operations, communications, and stewardship support. Three positions will be split with their focused departments: the Director of Development for Honors Carolina, the Director of Development for the Institute of the Arts and Humanities (IAH), and the Director of Development for the Shuford Program in Entrepreneurship. The increase in staffing is designed to position the Foundation to raise additional funds in the upcoming campaign.
Travel – We anticipate increased travel during FY26. Even with increased travel, we have reduced the FY26 travel budget slightly, by $10,000, as we were significantly under budget in FY25.
Building Debt Service, Office Supplies/Equipment, Communications and Postage Expenses will remain the same in FY26.
Special Events/ Entertainment – This budget has a nominal decrease. It includes both Foundation board meetings, two Dean’s Arts and Sciences Leadership Council meetings, regional events, and other donor gatherings.
Building Maintenance – This category includes operating maintenance for Buchan House. For improved facility management and unexpected occurrences, we maintain larger balances for unforeseen events. As the Foundation team continues to scale, there are plans to construct additional offices and conference rooms. The exterior door replacements and tree removal expenses contracted in FY25 may flow into FY26 expenses.
Legal/Accounting – The FY26 proposed budget includes auditing and tax preparation fees, annual state solicitation renewals, and the annual charge from the University for the associated entities operating agreement which covers support from central Accounting Services. The associated entities operating agreement will be renewed in FY26, and we anticipate an increase to the regular $14,000 annual cost. The Foundation will continue the contract with Copilevitz, Lam and Raney, P.C. in processing the state renewal forms. For FY26, there is an increase for additional legal counsel.
Other Services/Miscellaneous – This category includes the budget for prospect management research tools and staff professional development, as well as for employee engagement activities. We anticipate exceeding the budget in FY25. The FY26 budget line has been increased to account for projected credit card processing fees.
Insurance – Due to the anticipated annual increase in costs, we have budgeted a 2% increase to this budget line, totaling $26,110. This includes new cyber security insurance coverage.
The Dean’s discretionary grant (Arts and Sciences Fund) is made at the end of each fiscal year and comes from unrestricted contributions to the Arts and Sciences Fund.
The Finance Committee approved the proposed FY26 budget, and a motion passed unanimously to recommend the proposed budget to the full board for a vote.
Ms. Langston presented information regarding the Coates Hall Renovation project. The Arts and Sciences Foundation will act as the project manager for the Coates Hall (owned by UNCChapel Hill) renovation which will be funded by philanthropy. The existing building will be moved forward, and an addition will be added to the back of the building.
UNC Investment Management Report
The Finance Committee reviewed the performance of the UNC Management Company. Jon King, President and CIO of the UNC Management Company, presented the performance report for the UNC Investment Fund (UNCIF) Key takeaways from the investment report included the following:
The Fund’s primary objective is to maintain the purchasing power of its underlying funds after accounting for spending distributions and inflation over the long term. Annualized returns in excess of approximately +8.0 percent are deemed to have achieved this target. The most important and difficult challenge remains striking the proper balance between upside participation and downside protection.
The UNC Investment Fund returned +11 0% for CY 2024. The Fund’s +11.0% 5-year return (top decile (1)) beats SIPP’s +8.5%.
Domestic equity markets shrugged off geopolitical volatility and surged following the election to reach all-time highs.
UNCIF has produced 9.5%+ annualized returns and top decile performance over the mediumand long-term. The Fund’s +9.5% 10-year return [top decile (1)] beats SIPP’s +7.6%
For the period ending December 31, 2024, the Fund’s 5-, 7- and 10-year annualized returns exceed 9.4 percent, beat SIPP, significantly beat the Global 70/30 Portfolio, and are in the top decile relative to peers over the medium and long term.
UNCIF has produced 9.05% annualized returns and top decile performance of the medium- and long-term.
The U.S. economy shows healthy signs with the December 2024 CPI YoY at 2.9% and the unemployment rate at a stable 4.1% although tariffs could complicate the Fed’s efforts to lower inflation to target. Mexico, China and Canada, the targets of the first round of tariffs collectively account for more that 40% of U.S. trade. Tariffs could stoke inflation and pose a downside risk to growth, which could force the Fed to pause or even raise rates once again.
The labor market remains resilient with job growth outpacing expectations though the unemployment rate has risen from a 50-year low of 3.7% to 4.1% as of December 2024. Nonfarm payrolls grew by 256,000 in December, well above the consensus forecast of 155,000.
Adjournment
With no other discussion needed, the meeting adjourned at 4:50 p.m.
