Senate Bill No. 294-Committee on Human Resources and Facilities
(On Behalf of the Commission on Postsecondary Education)
April 16, 1997
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Referred to Committee on Human Resources and Facilities
SUMMARY--Adopts Uniform Management-of-Institutional-Funds Act and authorizes disclosure of financial records of postsecondary educational institution under certain circumstances. (BDR 13-401)
FISCAL NOTE: Effect on Local Government: No.
Effect on the State or on Industrial Insurance: No.
EXPLANATION - Matter in italics is new; matter in brackets [ ] is material to be omitted.
AN ACT relating to financial administration; providing standards for the investment and management of money for eleemosynary purposes; authorizing the disclosure of the financial records of postsecondary educational institutions under certain circumstances; and providing other matters properly relating thereto.
THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:
Section 1 Chapter 164 of NRS is hereby amended by adding thereto the provisions set forth as sections 2 to 15, inclusive, of this act.
Sec. 2. Sections 2 to 15, inclusive, of this act may be cited as the Uniform Management-of-Institutional-Funds Act.
Sec. 3. As used in sections 2 to 15, inclusive, of this act, the words and terms defined in sections 4 to 9, inclusive, of this act have the meanings ascribed to them in those sections.
Sec. 4. "Donative instrument" means a will, deed, grant, conveyance, agreement, memorandum, writing or other governing document, including the terms of any institutional solicitations from which an institutional fund resulted, under which property is transferred to or held by an institution as an institutional fund.
Sec. 5. "Endowment fund" means an institutional fund, or any part of the fund, not wholly expendable by the institution currently under the terms of the applicable donative instrument.
Sec. 6. "Governing board" means the body responsible for the management of an institution or institutional fund.
Sec. 7. "Historical monetary value" means the aggregate fair value in money of an endowment fund at the time it became an endowment fund, each subsequent donation to the fund at the time it is made, or each accumulation made pursuant to a direction in the applicable donative instrument at the time the accumulation is added to the fund.
Sec. 8. "Institution" means an organization, whether or not incorporated, 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.
Sec. 9. "Institutional fund" means a fund held by an institution for its exclusive use, benefit or purposes, but does not include a fund held for an institution by a trustee that is not an institution or a fund in which a beneficiary that is not an institution has an interest other than possible rights that could arise upon violation or failure of the purposes of the fund.
Sec. 10. 1. A governing board may appropriate for expenditure for the uses and purposes for which an endowment fund is established so much of the net appreciation, realized and unrealized, in the fair value of the assets of the fund over the historical monetary value of the fund as is prudent under the standard established by section 14 of this act. This section does not limit the authority of the governing board to expend funds as permitted under other law, the terms of the applicable donative instrument or the charter of the institution.
2. A determination of historical monetary value made in good faith by the institution is conclusive.
Sec. 11. 1. Section 10 of this act does not apply if the applicable donative instrument indicates the donor's intention that net appreciation may not be expended. A restriction upon the expenditure of net appreciation may not be implied from a designation of a gift as an endowment, or from a direction or authorization in the applicable donative instrument to use only "income," "interest," "dividends," or "rents, issues or profits," or "to preserve the principal intact," or a direction that contains other words of similar import.
2. This rule of construction applies to donative instruments executed or in effect before, on or after October 1, 1997.
Sec. 12. In addition to an investment otherwise authorized by law or by the applicable donative instrument, and without restriction to investments a fiduciary may make, a governing board, subject to any specific limitations set forth in the applicable donative instrument or in the applicable law other than law relating to investments by a fiduciary, may:
1. Invest and reinvest an institutional fund in any real or personal property deemed advisable by the governing board, whether or not it produces a current return, including mortgages, stocks, bonds, debentures and other securities of profit or nonprofit corporations, shares in or obligations of associations, partnerships or natural persons, and obligations of any government or governmental subdivision or instrumentality;
2. Retain property contributed by a donor to an institutional fund for as long as the governing board deems advisable;
3. Include all or any part of an institutional fund in any pooled or common fund maintained by the institution; and
4. Invest all or part of an institutional fund in any other pooled or common fund available for investment, including shares or interests in regulated investment companies, mutual funds, common trust funds, investment partnerships, real estate investment trusts or similar organizations in which funds are commingled and investments are determined by persons other than the governing board.
Sec. 13. Except as otherwise provided by the applicable donative instrument or by applicable law relating to governmental institutions or funds, a governing board may:
1. Delegate to its committees, officers or employees of the institution or the fund, or agents, including investment counsel, the authority to act in place of the board in investment and reinvestment of institutional funds;
2. Contract with independent investment advisers, investment counsel or managers, banks, or trust companies, so to act; and
3. Authorize the payment of compensation for advisory or managerial services.
Sec. 14. 1. In the administration of the powers to appropriate appreciation, to make and retain investments, and to delegate management of the investment of institutional funds or of property held as an investment, members of a governing board shall exercise ordinary care and prudence, appropriate to the character of the institution, under the facts and circumstances prevailing at the time of the action or decision. In so doing, they shall consider present and future needs of the institution in carrying out its educational, religious, charitable or other eleemosynary purposes, present and anticipated financial requirements, expected total return on its investments, price level trends and general economic conditions.
2. Each investment must be considered in its relation to other investments made or contemplated.
Sec. 15. 1. With the written consent of the donor, a governing board may release, in whole or in part, a restriction imposed by the applicable donative instrument on the use or investment of an institutional fund.
2. If the written consent of a donor cannot be obtained by reason of his death, disability, unavailability or impossibility of identification, the governing board may apply in the name of the institution to the district court for release of a restriction imposed by the applicable donative instrument on the use or investment of an institutional fund. The attorney general must be notified of the application and given an opportunity to be heard. If the court finds that the restriction is obsolete, inappropriate or impracticable, it may by order release the restriction in whole or in part. A release under this subsection may not change an endowment fund to a fund that is not an endowment fund.
3. A release under this section may not allow a fund to be used for purposes other than the educational, religious, charitable or other eleemosynary purposes of the institution affected.
4. This section does not limit the application of the doctrine of applying a charitable gift as nearly as possible in conformity with the intention of the donor.
Sec. 16. NRS 394.026 is hereby amended to read as follows:
394.026 "Confidential" means information that is subject to disclosure only to:
1. The attorney general;
2. A member of the commission or its staff; or
3. As deemed appropriate by the administrator, a person responsible for reviewing the curriculum or financial records of a postsecondary educational institution.
Sec. 17. This act becomes effective upon passage and approval.