1、Uniform Prudent Management of Institutional Funds Act(UPMIFA)Presented by CSU and KPMG LLPJanuary 2009 2008 KPMG LLP,the U.S.member firm of KPMG International,a Swiss cooperative.All rights reserved.Printed in U.S.A.KPMG and the KPMG logo are registered trademarks of KPMG International.2TopicslBackg
2、roundlUMIFA vs.UPMIFA lFAS 117-1 Endowment of Not-for-Profit OrganizationslNet Asset Classification for Funds Subject to UPMIFAlEnhanced Disclosures for All Endowment FundslImpact of AdoptionlEffective Date and TransitionlSenate Bill No.1329 lEnactment of UPMIFA in CaliforniaJanuary 2009 2008 KPMG L
3、LP,the U.S.member firm of KPMG International,a Swiss cooperative.All rights reserved.Printed in U.S.A.KPMG and the KPMG logo are registered trademarks of KPMG International.3BackgroundlIn July 2019,the National Conference of Commissioners on Uniform State Laws approved the Uniform Prudent Management
4、 of Institutional Funds Act(UPMIFA).lUPMIFA is designed to replace the existing Uniform Management of Institutional Funds Act(UMIFA).January 2009 2008 KPMG LLP,the U.S.member firm of KPMG International,a Swiss cooperative.All rights reserved.Printed in U.S.A.KPMG and the KPMG logo are registered tra
5、demarks of KPMG International.4 UMIFA vs.UPMIFATwo principles:lAssets would be invested prudently in diversified investments that sought growth as well as income1.Appreciation of assets could prudently be spent for purposes of any endowment fund held by a charitable institutionIncorporates the exper
6、ience gained in the last 35 years under UMIFA and provides for even stronger guidance for investment management and enumerating a more exact set of rules for investing in a prudent manner.Allowed endowments to:lInvest in any kind of assetslPool endowment funds for investment purposeslDelegate invest
7、ment management to others(e.g.,professional investment advisors).Requires:lInvestment“in good faith and with the care an ordinary prudent person in like position would exercise under similar circumstances.”lPrudence in incurring investment costs,authorizing“only costs that are appropriate and reason
8、able.”lFactors to be considered in investing include:lEffects of inflationlInvestment decisions must be made in relation to overall resources of the institution and its charitable purposes.lNo investment decision may be made in isolation,but in light of the funds entire portfolio.lInvestment should
9、be part of a strategy“having risk and return objectives reasonably suited to the fund and the institution.”lDiversify assets as an affirmative obligation unless“special circumstances”dictate otherwise.lInvestment experts,whether in-house or hired,are held to a standard of care consistent with that e
10、xpertise.January 2009 2008 KPMG LLP,the U.S.member firm of KPMG International,a Swiss cooperative.All rights reserved.Printed in U.S.A.KPMG and the KPMG logo are registered trademarks of KPMG International.5 UMIFA vs.UPMIFA(cont)lInitiated the concept of total return expenditure of endowment assets
11、for charitable program purposes.lPermitted prudent expenditure of both appreciation and income replacing the old trust law concept that only income(e.g.,interest and dividends)could be spent.lAsset growth and income could be appropriated for program purposes,subject to the rule that a fund could not
12、 be spent below“historic dollar value”.lBuilds upon UMIFAs rule on appreciationlEliminates the concept of“historic dollar value”lProvides better guidance on prudence lMakes the need for a floor on spending unnecessarylSeven criteria to guide yearly expenditure decisions:*lDuration and preservation o
13、f the endowment fundlPurposes of the institution and the endowment fundlGeneral economic conditionslEffect of inflation or deflationlExpected total return from income and the appreciation of investmentslOther resources of the institutionlInvestment policy of the institutionlOptional provision that a
14、llows states to enact another kind of safeguard against excess expenditure.If a state does not want to rely solely upon the rule of prudence provided in UPMIFA,the state may adopt a provision that creates a rebuttable presumption of imprudence if an institution expends an amount greater than 7 perce
15、nt of fair market value of a fund,calculated in an averaging formula over three years.Per SB 1329,Section 18504,(d)(2),the CSU is exempt from the 7 percent rebuttable presumption of imprudence.*These standards mirror the standards that apply to investment decision-making,thereby unifying both invest
16、ments and expenditure decisions more concretely.January 2009 2008 KPMG LLP,the U.S.member firm of KPMG International,a Swiss cooperative.All rights reserved.Printed in U.S.A.KPMG and the KPMG logo are registered trademarks of KPMG International.6 UMIFA vs.UPMIFA(cont)l The only option with respect t
17、o a restriction,was“release”of the restriction.lAuthorizes a modification that a court determines to be in accordance with the donors probable intention.If the charity asks for court approval of a modification,it must notify the states chief charitable regulator.lAllows a charity to modify a restric
18、tion on a small(20 years old)fund without going to court.SB 1329 allows up to$100,000.lIf a restriction becomes impracticable or wasteful,the charity may notify state charitable regulator,wait 60 days,and then modify the restriction consistent with the charitable purposes expressed in the original g
19、ift.January 2009 2008 KPMG LLP,the U.S.member firm of KPMG International,a Swiss cooperative.All rights reserved.Printed in U.S.A.KPMG and the KPMG logo are registered trademarks of KPMG International.7FAS 117-1lOn August 6,2019,FASB issued FASB Staff Position(FSP)FAS 117-1,Endowments of Not-for-Pro
20、fit Organizations:Net Asset Classification of Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act,and Enhanced Disclosures for All Endowment FundslGuidance on net asset classification of donor-restricted endowment funds for not-for profit organization tha
21、t is subject to UPMIFA.lImproves disclosures about an organizations endowment funds(both donor-restricted endowment funds and board-designated endowment funds),whether or not the organization is subject to UPMIFA.January 2009 2008 KPMG LLP,the U.S.member firm of KPMG International,a Swiss cooperativ
22、e.All rights reserved.Printed in U.S.A.KPMG and the KPMG logo are registered trademarks of KPMG International.8Net Asset Classification for Funds Subject to UPMIFAlClassify a portion of a donor-restricted endowment fund of perpetual duration as permanently restricted net assets.lThe portion of a don
23、or-restricted endowment fund that is classified as permanently restricted net assets is not reduced by losses on the investments of the fund,except to the extent required by the donor.Likewise,the amount of permanently restricted net assets is not reduced by an organizations appropriations from the
24、fund.lClassify the portion of the fund that is not classified as permanently restricted net assets as temporarily restricted net assets(time restricted)until“appropriated for expenditure”.lAppropriation for expenditure:lOccurs upon approval for expenditure(e.g.,annual budget,or during the year as un
25、expected needs arise such as for emergency relief efforts).lIf approval is for a future period,appropriation occurs when that period is reached.lFinancial statement reclassifications required:lUpon appropriation for expenditure,the time restriction expires to the extent of the amount appropriated an
26、d,in the absence of any purpose restrictions,results in a reclassification of that amount to unrestricted net assets.lIf fund is also subject to a purpose restriction,the reclassification of that amount to unrestricted net assets would not occur until that purpose restriction is met,in accordance wi
27、th the provisions of 17 of Statement 116.January 2009 2008 KPMG LLP,the U.S.member firm of KPMG International,a Swiss cooperative.All rights reserved.Printed in U.S.A.KPMG and the KPMG logo are registered trademarks of KPMG International.9Enhanced Disclosures for All Endowment FundslNot-for-Profit o
28、rganizations,whether or not subject to UPMIFA,shall disclose information to enable users of financial statements to understand the net asset classification,net asset composition,changes in net asset composition,spending policies,and related investment policies of its endowment funds(both donor-restr
29、icted and board-designated).January 2009 2008 KPMG LLP,the U.S.member firm of KPMG International,a Swiss cooperative.All rights reserved.Printed in U.S.A.KPMG and the KPMG logo are registered trademarks of KPMG International.10Enhanced Disclosures for All Endowment Funds(cont)lAt a minimum,organizat
30、ion shall disclose the following information in its financial statements:lDescription of governing boards interpretation of the laws that underlie the organizations net asset classification of donor-restricted endowment funds.lDescription of organizations policies for the appropriation of endowment
31、assets for expenditure(its endowment spending policies).lDescription of organizations endowment investment policies(include return objectives and risk parameters;how they relate to the organizations endowment spending policies;and strategies employed for achieving those objectives).lComposition of o
32、rganizations endowment by net asset class at the end of the period,in total and by type of endowment fund,showing donor-restricted endowment funds separately from board-designated endowment funds.a.Reconciliation of the beginning and ending balance of organizations endowment,in total and by net asse
33、t class,including,at a minimum,(as applicable):Investment return,separated into investment income(e.g.,interest,dividends),and net appreciation or depreciation of investments;contributions;amounts appropriated for expenditure;reclassifications,and other changes.January 2009 2008 KPMG LLP,the U.S.mem
34、ber firm of KPMG International,a Swiss cooperative.All rights reserved.Printed in U.S.A.KPMG and the KPMG logo are registered trademarks of KPMG International.11Enhanced Disclosures for All Endowment Funds(cont)lOrganization also shall provide information about the net assets of its endowment funds,
35、including:lNature and types of permanent restrictions or temporary restrictions(14 and 15 of Statement 117).lAggregate amount of deficiencies for all donor-restricted endowment funds for which fair value of the assets is less than the level required by donor stipulations or law.lBelow is an illustra
36、tive example of the Disclosures from FAS 117-1January 2009 2008 KPMG LLP,the U.S.member firm of KPMG International,a Swiss cooperative.All rights reserved.Printed in U.S.A.KPMG and the KPMG logo are registered trademarks of KPMG International.12Impact of AdoptionlWhen enacted,UPMIFA is to be applied
37、 retroactively(unless specifically amended in jurisdiction)to all donor-restricted endowment funds in existence as of the effective date of UPMIFA in the relevant jurisdiction lThe Staff Position modifies what is often referred to as the“deemed spent”or the“first dollar rule,”a requirement in 17 of
38、Statement 116.lUnder the provisions noted above,organizations may have previously deemed“spent”earnings on endowment funds that were never specifically appropriated for spending.lAccording to the Staff Position,in initially applying the net asset classification guidance,in addition to considering th
39、e time restrictions imposed by UPMIFA,an organization must consider a donor-imposed purpose restriction to be reinstated to the extent that the restriction was previously deemed“spent”but the amount had not been“appropriated”for expenditure.lFor example,a not-for-profit organization with an endowmen
40、t for scholarships for many years may have granted more dollars in scholarships than it appropriated for through its budgets to be spent from the earnings on the scholarship endowment.lWhen the Staff Position is adopted,the organization will have to reclassify the amount released that is in excess o
41、f the amount specifically appropriated for scholarships.January 2009 2008 KPMG LLP,the U.S.member firm of KPMG International,a Swiss cooperative.All rights reserved.Printed in U.S.A.KPMG and the KPMG logo are registered trademarks of KPMG International.13Effective Date and TransitionlEffective for f
42、iscal years ending after December 15,2019(June 30,2009 for CSU FASB Auxiliary Organizations)lWhen initially applying the net asset reclassification,organizations should report the reclassification as a separate line item on the statement of activities.January 2009 2008 KPMG LLP,the U.S.member firm o
43、f KPMG International,a Swiss cooperative.All rights reserved.Printed in U.S.A.KPMG and the KPMG logo are registered trademarks of KPMG International.14Senate Bill No.1329lOn September 30,2019,the Governor approved Senate Bill No.1329.lThis Bill repealed the provisions of UMIFA and enacted the UPMIFA
44、.lChanged the rules applicable to charitable institutions,so charity may spend the amount it deems prudent after considering the donors intent,the purposes of the fund,and relevant economic factors.lAllows modification of a restriction without court approval not exceeding$100,000 and older than 20 y
45、ears,with notice to the Attorney General.lAuthorizes a court,upon petition by the Attorney General,to order the winding up and dissolution of a nonprofit public benefit corporation without meeting the requirements of existing law,on the ground that it is impossible or impractical to meet some or all
46、 of those requirements.January 2009 2008 KPMG LLP,the U.S.member firm of KPMG International,a Swiss cooperative.All rights reserved.Printed in U.S.A.KPMG and the KPMG logo are registered trademarks of KPMG International.15ReferenceslTo view this recording,please go to the Financial Accounting Servic
47、es Training,Education&Development portal lhttps:/zeta.calstate.edu:8250/portal/page?_pageid=74,1&_dad=portal&_schema=PORTALlTo view the PowerPoint presentation,please go to the Systemwide Financial Services website lcalstate.edu/sfo/January 2009 2008 KPMG LLP,the U.S.member firm of KPMG Internationa
48、l,a Swiss cooperative.All rights reserved.Printed in U.S.A.KPMG and the KPMG logo are registered trademarks of KPMG International.16SummaryIn light of UPMIFA,FASB issued FAS 117-1,Endowments of Not-for-Profit Organizations:lGuidance on net asset classification of donor-restricted endowment funds for not-for profit organization that is subject to UPMIFA.lImproves disclosures about an organizations endowment funds(both donor-restricted endowment funds and board-designated endowment funds),whether or not the organization is subject to UPMIFA.
