States Attorneys General, which regulate endowments and foundations, are about to launch a wave of investigations across the charitable trust community.  A relatively new law is the benchmark.

DALLAS, TX - Today, leading fiduciary advisor Roland|Criss introduced its newest fiduciary management system, FiduciaryCT™ for charitable trusts, which includes endowments and foundations.   This program was created in response to the finalization of plans by AGs to ramp-up enforcment of the Uniform Prudent Management of Institutional Funds Act, which addresses fiduciary processes for managing donors' contributions to endowments and foundations.

In July of 2006, following years of evaluation and research, the National Conference of Commissioners on Uniform State Laws ("NCCUSL") published the Uniform Prudent Management of Institutional Funds Act ("UPMIFA").   UPMIFA defines fiduciary requirements that apply to charitable organizations, such as endowments and foundations (except trusts), assuming that the trustee is not a charitable organization.

The preface to UPMIFA reinforces the role of states' Attorneys General ("AGs") as the agencies of state governments that "continue to be the protector both of the donor's intent and of the public's interest in charitable funds."

Due to the relative newness of UPMIFA, states' AGs only now are finalizing their enforcement procedures.   The goal of their work has been to develop a uniform method to test charitable trusts' compliance with UPMIFA.

The development of an enforcement process has reached a point where most states' AGs are ready to pull the trigger on tighter enforcement.   As might be expected, the Madoff catastrophe added more urgency to their efforts.

UPMIFA demands that executives who manage a charitable organization must conduct themselves in a "prudent" manner.   Prudent conduct under UPMIFA requires executives to act "in good faith and with the care an ordinarily prudent person in a like position would exercise under similar circumstances."

"Roland|Criss is excited that our new program for endowments and foundations, Fiduciary CT™, so closely matches UPMIFA's prudent process rules," said Ronald E. Hagan, CEO of Roland|Criss.

In addition to using a prudent process to manage a charitable trust, endowment and foundation executives are required by UPMIFA to own relevant skills to make prudent choices.   One example of this requirement is that such executives must possess investment skills equivalent to that of a professional investor.

Activities that fall under UPMIFA's prudence rule include:

• Selection of vendors like investment managers;
• Delegating fiduciary functions such as investment selection to vendors;
• Defining the nature and conditions of delegated duties that align with the mission and purpose of the charitable trust; and
• Using defined steps, conduct periodic reviews of vendors' conduct so as to monitor their adherence to the terms of their contracts.

UPMIFA imposes tough rules on vendors of services to charitable trusts, too.   The law requires investment firms and administration service providers to care for a charitable trust in a reasonable (i.e., fiduciary) way.   Ominously, UPMIFA causes vendors to become personally accountable under the jurisdiction of the state in which the charitable trust operates.

You may learn how an UPMIFA prudence process looks by contacting Roland|Criss.

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