New Law for Endowments
In January 2009, the Governor signed Ohio's version (House Bill 522) of The Uniform Prudent Management of Institutional Funds Act ("UPMIFA") into law. The effective date is June 1, 2009.
The law affects endowments that are institutional funds or part thereof that, under the terms of a gift instrument, is not wholly expendable by the institution on a current basis. The law does not affect assets that an institution designates as an endowment fund for its own use which are known as "board-designated endowment funds".
The act provides for detailed provisions regarding standard of care, appropriation for expenditure or accumulation of the endowment fund, delegation of management and investment functions and release or modification of restrictions.
Enactment of the law also requires compliance with FASB Staff Position FAS 117-1 for years ending after the effective date of June 1, 2009. Organizations with endowments, as defined above, will want to take the following steps to prepare for the enactment of UPMIFA and FAS 117-1:
- Ensure that board members and management are aware of the status of UPMIFA legislation.
- Review endowment funds to determine which funds include a donor stipulation as to the amount of the fund that must be permanently restricted and which funds fall within their governing board's interpretation of enacted law.
- Review the impact on financial reporting resulting from FAS 117-1's requirement that the portion of an endowment fund that is not classified in permanently restricted net assets be classified as temporarily restricted net assets, even in the absence of purpose restrictions.
Further information on the act can be found at upmifa.org.
Questions?
Contact:
Brandon R. Miller, CPA
Principal & Director
HW Nonprofit Advisors
(216) 831-1200
millerb@hwco.com
