VII. Uniform Prudent Management of Institutional Funds Act

The Uniform Prudent Management of Institutional Funds Act (“UPMIFA”), Minn. Stat. §§ 309.73-.77, provides standards and procedures for charities managing institutional funds.

Key Definition

An “institution” is an entity operated exclusively for charitable purposes, a government entity to the extent it holds funds for a charitable purpose, and certain types of trusts. (96) With certain exceptions, UPMIFA defines an “institutional fund” as a fund held by an institution exclusively for charitable purposes. (97) Institutional funds do not include “program-related assets,” which is an asset held by an institution primarily to accomplish a charitable purpose of the institution and not primarily for investment. (98) An institutional fund is typically created when a donor provides a donation or grant to an institution, but restricts the institution to using the funds for a particular charitable purpose. Examples include endowments, scholarship funds, and restricted-use gifts to institutions like universities or health care systems.

Managing Institutional Funds

UPMIFA requires institutions to honor restrictions placed by donors on institutional funds, and to manage institutional funds in good faith and with the care of an ordinarily prudent person in a like position. The law provides specific standards to help guide institutions when managing and investing institutional funds. (99)

Modifying Institutional Fund Restrictions

UPMIFA establishes procedures for institutions that want to release or modify donor restrictions placed on the management, investment, or charitable purpose of an institutional fund. An institution may seek written consent from the donor to release or modify such a restriction, or it may seek court permission. (100) UPMIFA requires prior notice to the Attorney General’s Office of any such court proceedings. UPMIFA also provides an alternative procedure to release or modify fund restrictions without donor consent or court involvement. Under this alternative procedure, an institution may, 60 days after providing notice to the Attorney General’s Office, release or modify a restriction on an institutional fund if the fund has a total value of less than $50,000, and is more than 20 years old, and the institution uses the remaining assets consistent with the donor’s charitable purpose. (101)