Although the legislation only applies to institutions based in New York, the New York Prudent Management of Institutional Funds Act of 2010 has led to discussion in other states about how endowments should be managed to respect donor intentions while meeting institutional needs. Some key points include:
- Institutions may spend endowment funds that are below their historic dollar value without obtaining court approval if the institution’s board concludes that this spending is prudent.
- Donors who contributed funds before September 17, 2010 may opt to have their funds exempt from being spent below historic dollar value.
- Boards of trustees must consider alternatives before spending any money from endowment funds.
- Spending more than 7 percent of an endowment’s fair market value is presumed to be imprudent. An institution may spend more, but it must be prepared to document why the spending was prudent.
- New donors to endowment funds must be notified that their gift may be spent below its historic dollar value.
Because New York is a wealthy, populous state and home to many major institutions—and donors—all university administrators need to be aware of these principles.