AB 58

Currently, the management and investment of assets in funds held by

institutions that are organized and operated exclusively for educational, religious,

charitable, or other eleemosynary purposes, or a governmental organization to the

extent that it holds funds exclusively for any of these purposes, is governed by the

Uniform Management of Institutional Funds Act (UMIFA). This act, approved and

recommended by the National Conference of Commissioners on Uniform State Laws

(NCCUSL), was enacted into Wisconsin law in 1976.

This bill replaces UMIFA with the Uniform Prudent Management of

Institutional Funds Act (UPMIFA), as approved and recommended by NCCUSL in

2006. Significantly, UPMIFA updates the prudence standard established in UMIFA

to govern the management and investment of the above-mentioned funds, providing

that one of the enumerated prudence factors is the preservation of the funds, a factor

not contained in UMIFA. UPMIFA applies to funds held by institutions exclusively

for charitable purposes. A charitable purpose under UPMIFA specifically means the

relief of poverty, the advancement of education or religion, the promotion of health,

the promotion of a governmental purpose, or any other purpose, the achievement of

which is beneficial to the community.

With respect to the management and investment of assets in these funds,

UPMIFA requires those who manage and invest assets to do all of the following:

1. Consider the charitable purposes of the institution and the purposes of the

institutional fund.

2. Manage and invest the fund in good faith and with the care an ordinarily

prudent person in a like position would exercise under similar circumstances.

3. Incur only costs that are appropriate and reasonable in relation to the assets,

the purposes of the institution, and the skills available to the institution.

4. Make a reasonable effort to verify facts relevant to the management and

investment of the fund.

5. Generally consider general economic conditions; the possible effect of

inflation or deflation; the expected tax consequences, if any, of investment decisions

or strategies; the role that each investment or course of action plays within the

overall investment portfolio of the fund; the expected total return from income and

the appreciation of investments; other resources of the institution; the needs of the

institution and the fund to make distributions and to preserve capital; and an asset's

special relationship or special value, if any, to the charitable purposes of the

institution.

Further, with respect to endowment funds held by these institutions, UPMIFA

authorizes an institution to appropriate for expenditure or accumulate so much of

an endowment fund as the institution determines is prudent for the uses, benefits,

purposes, and duration for which the endowment fund is established. In making a

determination to appropriate or accumulate, an institution must act in good faith,