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Call for Comments on Proposed Revisions to the Uniform Management of Institutional Funds Act

November 18, 2004

The National Conference of Commissioners on Uniform State Laws delayed approval of a revised Uniform Management of Institutional Funds Act (UMIFA) to allow the drafting committee to garner more input from interest groups. NACUBO is seeking comments by November 29.

UMIFA is one of a series of nonbinding “model” statutes recommended to individual state legislatures. Originally released in 1972, UMIFA prescribes a standard of care and prudence to guide governing boards in exercising their duties. It countermands two important tenets of trust law by specifically permitting endowment trustees to spend a prudent portion of realized endowment gains and to delegate investment discretion to qualified professionals. It has been adopted in 46 states and the District of Columbia.

Key issues that impact higher education endowments are:

• eliminating the concept of “historical gift value” as a minimum threshold below which endowed funds could not be spent;
• including a “prudence” standard specifying that spending within a defined range (2 percent to 7 percent) is prudent;
• including an “imprudence” standard, specifying that spending above 7 percent is imprudent;
• retroactively applying the revised act; and
• structuring UMIFA to cover trusts.

NACUBO would like to know what outcomes would be in the best interest of your institution and what information would inform the commission’s final decisions. Send comments to Anna Marie Cirino, associate director of financial management policy, by November 29. Please include your name, title, institution, and contact information.

Read the memo outlining proposed changes to UMIFA and the current draft of the revised UMIFA.