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In March and April of 2009, the Association of Governing Boards of Universities and Colleges (AGB), in partnership with NACUBO and the Commonfund Institute, conducted a survey of colleges, universities, and affiliated foundations in states in which the Uniform Prudent Management of Institutional Funds Act (UPMIFA) had been enacted, in order to learn how institutions are managing endowment spending under UPMIFA and to inform decision making by boards, finance officers, and endowment managers.

Of the 181 institutions and foundations that participated in the survey, 53 percent were public/foundations institutions and 34 percent were private institutions. On average, 38 percent of the dollar value of survey participants' total endowment pool was underwater as of December 31, 2008. Public institutions and institutions with smaller endowments reported significantly higher percentages of underwater endowment.

The survey demonstrates that the legislation has significantly enhanced the ability of colleges, universities, and other charities to provide sustained funding for endowed purposes during the current financial crisis and has encouraged boards to strengthen their processes for determining prudent endowment spending. Institutions and foundations are clearly taking advantage of the flexibility afforded by UPMIFA to increase funding available for student and faculty support and other endowed purposes.

Under UPMIFA, the mean number of institutions and foundations that reported discontinuing all distributions from underwater funds decreased by 11.3 percent, and the number distributing only interest and dividends dropped by 9.8 percent. Of the 69 institutions and foundations that discontinued all distributions from underwater funds prior to the adoption of UPMIFA, 43.1 percent now utilize new approaches that provide increased ongoing support for endowed purposes.

College, university, and foundation boards have responded quickly to adapt to the new standards of UPMIFA and demonstrate that they are actively engaged in decisions regarding underwater endowment spending. However, board processes could be strengthened in several areas. Only 56.5 percent reported that the board or a board committee has discussed spending from underwater funds since their state's enactment of UPMIFA.

NACUBO Contact:

Santiago Merea
Research Associate

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