SEGMENT 1:

Jeffrey D. Mechanick, Project Manager, Not-for-Profit Organizations,
Financial Accounting Standards Board

- FSP FAS 117-1: (1) provides guidance on net asset classification of donor-restricted endowment
  funds subject to UPMIFA, and (2) improves disclosures on overall organizational endowments
  (including both donor-restricted and board-designated endowment funds), whether or not the
  organization is subject to UPMIFA yet.

- The FSP reaffirms existing guidance in Statements 117 and 124 for classifying a portion of a donor-
  restricted endowment fund as permanently restricted net assets, corresponding to the
  organization’s fiduciary duty for a fund of permanent duration. This reflects the FASB’s
  conclusion that, in the absence of an interpretation and enforcement history for UPMIFA,
  a major overhaul of the FASB’s net asset classification framework at this time is not in
  the best interests of financial statement users such as donors, regulators, and creditors.

- Since neither UPMIFA nor the various enacted versions thus far contain an absolute requirement to
  maintain the purchasing power of a donor-restricted endowment fund, I would not expect to see
  significant changes in the amounts that organizations classify as permanently restricted.

- The primary impact on net asset classification resulting from UPMIFA and the FSP will be the
  reclassification to temporarily restricted net assets of amounts in donor-restricted endowment
  funds that were previously considered unrestricted net assets. The FASB concluded that UPMIFA
  effectively imposes a time restriction on the net assets of a donor-restricted endowment fund
  until they are appropriated for expenditure by the organization.

- The disclosures on net asset classification, composition, and changes, and on endowment
  spending policy and related investment policy are aimed at giving financial statement users a better
  insight into the size and nature of organizational endowments and how statement organizations are
  managing them. This is especially important in an era of increased public scrutiny of endowments
  and in light of the changes made by UPMIFA (elimination of historic dollar value and greater
  emphasis/ specificity on prudent spending from donor endowments).

- While there is a long-standing, general consistency in the higher education sector about what
  constitutes a board-designated endowment fund (as defined in Statements 117 and 124), there is
  much more diversity in other not-for-profit sectors. Organizations should look at how they
  are investing and managing, and how they have publicly characterized, their various
  longer-term “reserve funds” to determine whether their inclusion is necessary to satisfy the
  FSP’s objective of providing disclosures that give a holistic picture of the organization’s endowment.

SEGMENT 2:

Barry C. Hawkins, Partner, Chair, UPMIFA Drafting Committee,
Shipman & Goodwin, LLP

- Why did the Uniform Law Conference draft a replacement statute for UMIFA which has been in wide
  use since 1972?
- Background on the process of UPMIFA creation from initial study to adoption in 2006 by ULC
  including enactment by 26 states to date, including California last week, together with plans for the
  remaining jurisdictions in 2009.
- Historical Dollar Value and its replacement in UPMIFA as the key change from UMIFA - Why?
- The 7% Presumption of Imprudence Option as a partial bright line alternative to total prudent
  standards.
- The "small and new entity option" as an alternative to elimination of HDV by requiring prior
  notification to the chief charitable regulator.
- The UPMIFA Section 4a Treatment of Accounting Classifications - does the law trump the standards
  or can they be reconciled?
- When are funds appropriated for expenditure under UPMIFA or FASB117-1 - Are they the same?
- How will institutions determine what portion of their endowment funds are permanently restricted
  and at what cost?
- Does the nomenclature and classification system of FASB still work under UPMIFA or is an entirely
  new approach for endowment funds needed?
- Is the answer to Number 9 the same even in a non-UPMIFA jurisdiction ( i.e is the problem new or
  is there just a new focus on an old problem)

SEGMENT 3:

Ian J. Benjamin, Partner,
McGladrey & Pullen, LLP

- Pronouncement applies to all not-for-profit organizations whether or not they are in an UPMIFA
  state, and whether or not they believe they have an endowment.
- Advanced preparation is required - to be prepared for the required financial statement disclosure
  not-for-profit organizations will need to consult their board of directors/trustees and may need to
  consult counsel.
- Not-for-profit organizations will need to review their policies for spending and investment of
  endowment funds.
- FASB definition of endowment is broader than legal definition, and broader than commonly
  understood definition. Not-for-profit organizations will need to evaluate all investment funds to
  determine if they meet the definition of an endowment.
- Not-for-profit organizations in UPMIFA states will need to review donor documentation and their
  state’s laws to determine if net assets need to be reclassified.

SEGMENT 4:

Cynthia A. Pierce, CPA, Audit Executive, Public Sector Services Business Unit,
Crowe Horwath, LLP

- Implementation of the FSP will potentially result in significant net asset category reclassifications
  for not-for-profit organizations that are in UPMIFA states.
- All not-for-profit organizations with donor-restricted endowment funds will be subject to new
  endowment disclosure requirements - regardless of the status or adoption of UPMIFA in their state.
- The provisions of the FSP are effective for fiscal years ending after December 15, 2008.
- Financial statements issued prior to implementation of the FSP should disclose the requirements
  of the FSP that are not yet adopted in their financial statements. Further, those organizations located
  in states where UPMIFA is currently effective should consider the significance or materiality of
  required net asset category reclassifications, and disclosures should include a reference to future
  reclassifications.
- A not-for-profit organization that is subject to an enacted version of UPMIFA shall classify a portion of
  a donor-restricted endowment fund of perpetual duration as permanently restricted net assets.
- For each donor-restricted endowment fund for which the restriction described in subsection 4(a) of
  UPMIFA is applicable, a not-for-profit organization shall classify 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 by the organization.
- Consistent with paragraphs 11 and 12 of FASB Statement No. 124, the portion of a donor-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, including losses related to
  specific investments that the donor requires the organization to hold in perpetuity. Likewise, the
  amount of permanently restricted net assets is not reduced by an organization’s appropriations
  from the fund.
- If the donor-restricted endowment fund is also subject to a purpose restriction, the reclassification
  of the appropriated amount to unrestricted net assets would not occur until that purpose restriction
  also has been met, in accordance with the provisions of paragraph 17 of Statement 116.
- In the initial application of the guidance contained in paragraphs 8 and 9 of the FSP, any amounts
  within a donor-restricted endowment fund that were previously considered available to meet a
  purpose restriction under the provisions of paragraph 17 of Statement 116, but that have never been
  appropriated for expenditure, shall, like other unappropriated amounts in that fund, be considered
  unavailable until appropriated, and, therefore, the purpose restriction previously considered fulfilled
  shall be considered reinstated.
- A not-for-profit organization, whether or not it is subject to an enacted version of 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 policy(ies), and
  related investment policy(ies) of its endowment funds (both donor-restricted and board-
  designated).
- When initially applying the net asset reclassification guidance in the FSP, organizations should
  report the reclassification as a separate line item on the statement of activities for the reporting
  period.
- If UPMIFA was effective for an organization in FY 2008 and the organization initially applies the
  provisions of the FSP in FY 2009 (the effective date of the guidance) - and the organization reports
  comparative financial information in FY 2009 - the reclassification will also need to be displayed in
  FY 2008.