Whats Up With UPMIFA

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Summary of California rules applicable to management of investment funds by charitable institutions.

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Whats Up With UPMIFA

  1. 1. WHAT’S UP WITH UPMIFA? Presented by: Cynthia Rowland July 2009
  2. 2. UMIFA 1972 • Guidance on Investment Authority • Expenditure of appreciation • Historic dollar value UPMIFA 2006 • Updates investment guidance • Changes rules on spending • Adds rules for modification
  3. 3. Definitions • Endowment Fund – Donor – Accountant – Lawyer • Quasi Endowment • Institution • Institutional Fund • Historic Dollar Value • Gift Instrument • Program Related Asset
  4. 4. Investment Standards • General Economic Conditions • Effects of Inflation and Deflation • Tax Consequences • Overall Portfolio • Expected total return • Charity’s other resources • Needs of the charity to make distributions and preserve capital • Special relationship or value of asset to charitable purposes
  5. 5. Mission Investing • Special Relationship of Investment to Purposes • Private Foundation Rules: – Jeopardizing Investments – Qualifying Expenditures – Recapture – Minimum Distribution Requirement
  6. 6. Expenditure Standards • Duration and preservation of the fund • Purposes of the Institution and the Fund • General Economic Conditions • Possible effect of inflation or deflation • Expected Total Return • Other Resources • Investment Policy
  7. 7. Presumption of Imprudence • California rule: 7% • Three year rolling average • Not a safe harbor
  8. 8. Donor Makes the Rules • UPMIFA is default—donor can vary • Gift Instrument may be drafted as contract, with remedies for breach • Solicitation materials
  9. 9. Accounting Issues • UMIFA: – HDV = permanently restricted – Purpose restriction = temporarily restricted – Endowment restriction = unrestricted • UPMIFA: – Explicit donor restriction or Board’s determination of permanent restriction by law = permanently restricted – Other amounts = temporarily restricted until Board authorizes expenditure
  10. 10. Practical Application: Investment Policy • Get Professional Help • Develop Investment Policy considering short, medium and long term financial needs and risk tolerance • Reconsider Policy Regularly • Determine Asset Allocations and Re-Balance when Appropriate • Select Individual Assets
  11. 11. Practical Application: Spending Policy • Purpose of the Institution— Purpose of the Fund • General Economic Conditions • Donor Intent • Reconsider Policy Regularly • Coordinate with Investment Policy
  12. 12. Release or Modification of Restrictions • Written consent of donor(s) • Deviation • Cy Pres • Small and Old Funds
  13. 13. Other Notes • Retroactive • Default rule—Donor and charity can change by agreement
  14. 14. What’s Up with UPMIFA? Presented by: Cynthia Rowland

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