Maryland has adopted the Uniform Management of Institutional Funds Act. See Md. Code Ann., Est. & Trusts §§ 15-401-15-402 & 15-409. Under these provisions, the governing board of a charity may use the net appreciation over the historic dollar value of an endowment free from the restrictive provisions governing the endowment itself. § 15-402. For a donor to reverse this result, it is not sufficient for the gift to be an endowment and for only its income, dividends or the like to be used for the charitable purposes. If a donor wants to have the assets which establish the endowment fund remain as the fund along with all of the appreciation on that original historic amount, he or she must specifically reverse the statutory provisions.
The Uniform Management of Institutional Funds Act was the result of a Ford Foundation study conducted in the late 1960s. The study found that enormous amounts of funds were locked in endowments in various colleges and universities. Currently, 46 states have adopted the Act. It is designed to free assets from restrictive gifts:
“Over the past several years the governing boards of eleemosynary institutions, particularly colleges and universities, have sought to make more effective use of endowment and other investment funds. They and their counsel have wrestled with questions as to permissible investments, delegation of investment authority, and use of the total return concept in investing endowment funds. Studies of the legal authority and responsibility for the management of the funds of an institution have pointed up the uncertain state of the law in most jurisdictions. There is virtually no statutory law regarding trustees or governing boards of eleemosynary institutions, and case law is sparse. In the late 1960′s the Ford Foundation commissioned Professor William L. Cary and Craig B. Bright, Esq., to examine the legal restrictions on the powers of trustees and managers of colleges and universities to invest endowment funds to achieve growth, to maintain purchasing power, and to expend a prudent portion of appreciation in endowment funds. They concluded that there was little developed law but that legal impediments which have been thought to deprive managers of their freedom of action appears on analysis to be more legendary than real. Cary and Bright, The Law and the Lore of Endowment Funds, 66 (1969)…
One further problem regularly intruded upon the discussion of efforts to free trustees and managers from the alleged limitations on their powers to invest for growth and meet the financial needs of their institutions. Some gifts and grants contained restrictions on use of funds or selection of investments which imperiled the effective management of the fund. An expeditious means to modify obsolete restrictions seemed unnecessary…
It is established law that the donor may place restrictions on his largesse which the donee institution must honor. Too often, the restrictions on use or investment become out-moded or wasteful or unworkable. There is a need for review of obsolete restrictions and a way of modifying or adjusting them. The act authorized the governing board to attain the acquiescence of the donor to release the restrictions and, in the absence of the donor, to petition the appropriate Court for relief in the appropriate cases.”
Prefactory Note to Unif. Mgmt. of Inst. Funds Act (1972).
Maryland has also adopted § 15-407 as part of the Act to permit a release of restrictions on the use or investment. Section 15-402, which redefines endowment, addresses the same concern of attempting to free endowment funds from provisions that were seen as overly restrictive by the Ford Foundation.