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NACUBO Makes Adoption of UPMIFA a Priority

At its March 2007 meeting, the NACUBO Board of Directors adopted a resolution calling for the prompt adoption of the Uniform Prudent Managament of Institutional Funds Act (UPMIFA). The model legislation, approved by the National Conference of Commissioners on Uniform State Laws (NCCUSL) in the summer of 2006, is now being circulated in the states. The new model law updates and improves the Uniform Management of Institutional Funds Act of 1972 (UMIFA), which provided legal guidelines for the management, investment, and expenditures of endowment funds held by charitable institutions.

NACUBO is pleased to be working with the Association of Governing Boards, and Commonfund to inform higher education institutions about this new model law.

Major Provisions of UPMIFA

  • Portfolio managers are not limited in the kinds of assets that may be sought for the portfolio (a more flexible rule than UMIFA)
  • Investment expenses must be managed prudently in relationship to the assets, the purposes of the institution and the skills available to the institution (not addressed in UMIFA)
  • Total return expenditure is expressly authorized under comprehensive prudence standards relating to the whole economic situation of the charitable institution (UMIFA does not address this standard)
  • UPMIFA abolishes the historic dollar value limitation on expenditures that was in UMIFA
  • States may adopt an optional rule that presumes expenditure exceeding 7% of fair market value of a fund is imprudent (not addressed in UMIFA)
  • Establishes a new procedure for releasing restrictions on small institutional funds (less than $25,000) held for a long period of time (20 years), requiring only notice to the Attorney General 60 days in advance of the release (not addressed in UMIFA)
  • UPMIFA applies to funds held in any form, including nonprofit corporate form, except charitable trusts, with a commercial or individual trustee (UMIFA applies only to endowments held by a charitable institution for its own account)

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