Can the Mesalands Community College Board of Trustees demand money from the Mesalands Community College Foundation when the College needs cash?

Plain-English summary

Senator Pat Woods and Representative Jack Chatfield asked whether the Mesalands Community College Board can compel its affiliated Foundation to write a check whenever the College asks. The Attorney General said no.

The Foundation is a separate nonprofit organized to support the College, but its directors owe fiduciary duties (good faith, care, and loyalty) to the Foundation itself, not to the College. The Uniform Prudent Management of Institutional Funds Act (UPMIFA) requires the Foundation to weigh seven factors before spending fund assets, including the needs of the institution, the duration of the fund, and the requirement to preserve capital. The College Board can ask, the Foundation can decide, and any bylaw provision purporting to require automatic funding on demand would be unenforceable as conflicting with UPMIFA.

Section 6-5A-1 (the statute that imposes accounting controls on college-affiliated foundations) acknowledges the symbiotic relationship but does not require any particular timing, amount, or purpose of support. The College Board's own statutory duties under Section 21-13-10 do not include power to compel funds from related entities.

What this means for you

If you are on the Mesalands Community College Board

You can request funds from the Foundation and explain the College's needs. You cannot demand them. The Foundation's board has independent fiduciary obligations and decides whether to grant the request based on its own analysis of the seven UPMIFA factors.

If your relationship with the Foundation is strained, the productive path is improving the request process (clear documentation of need, planning horizon, alignment with the Foundation's mission and donor intent) rather than asserting authority. Building a memo of understanding or annual budget submission protocol can structure communication without trying to compel.

If you are on the Mesalands Community College Foundation Board

The opinion confirms your fiduciary duties run to the Foundation, not to the College. Your duty of loyalty requires you to make funding decisions in the Foundation's best interest, considering donor intent and the seven UPMIFA factors before approving any expenditure.

The opinion says the Foundation must consider its mission, donor intent, fund preservation, and the expenditure factors it identifies under UPMIFA when deciding whether to appropriate money. It does not prescribe a specific written decision process.

If your bylaws contain language that could be read to require automatic funding to the College, talk to counsel about updating the language. Such a provision is unenforceable under State ex rel. Black v. Aztec Ditch Co., but the cleanup avoids confusion.

If you are a donor to a New Mexico college foundation

The opinion says the Foundation's decisions about College funding are subject to donor limitations and must take donor intent into account. It does not decide how a particular gift restriction should be administered.

If you advise a New Mexico community college, college foundation, or other 501(c)(3)

The opinion applies UPMIFA to the Foundation and cites its expenditure factors in Section 46-9A-4(A). It also cites NMSA 1978, § 53-8-25.1, Saylor v. Valles, 2003-NMCA-037, and IRS guidance on directors' loyalty to their nonprofit corporation.

The opinion says an agreement or other legal instrument can be a potential source of an obligation, but any obligation remains subject to UPMIFA, relevant state law, and donor limitations.

If you are a New Mexico legislator

Section 6-5A-1 imposes accounting controls but no mandate for a particular amount, purpose, or time of Foundation support. The opinion also says a duty to provide money merely on request would conflict with UPMIFA.

Common questions

Q: Can the College sue the Foundation for failing to fund a request? A: The opinion concludes that the Foundation has no obligation to honor a specific College request. It does not decide whether a particular agreement, gift instrument, or other legal claim could support a lawsuit.

Q: What are the UPMIFA seven factors?
A: The opinion does not enumerate all seven factors. It quotes the need to consider "the needs of the institution and the fund to make distributions and to preserve capital" from § 46-9A-3(E)(1)(g) and cites the seven factors in Section 46-9A-4(A) when discussing the Foundation's discretion.

Q: What if the bylaws say the Foundation must give the College a fixed amount? A: The opinion did not consider a fixed-amount bylaw. It addressed an obligation to provide funds merely upon request and said that such an obligation would conflict with UPMIFA and be unenforceable. A particular bylaw would require separate analysis.

Q: What about restricted donations the donor specified for the College? A: The opinion says the Foundation's discretion is subject to donor limitations and that it must consider donor intent when deciding whether to appropriate funds. It does not interpret a particular donation or direct a payment from one.

Q: Can the College Board members sit on the Foundation Board? A: The opinion does not address whether College trustees may serve on the Foundation Board. It describes nonprofit directors' duties to the corporation but does not resolve a specific dual-role arrangement.

Q: Does this apply to the four-year universities?
A: The opinion addresses the Mesalands Foundation, its bylaws, and the community college board statute. It does not decide the obligations of a university foundation, whose own governing law and documents would need review.

Background and statutory framework

NMSA 1978, § 6-5A-1 governs the financial relationship between state agencies (including colleges) and their affiliated foundations. The statute imposes accounting controls and contemplates the foundation's "complement, contribute to and support" role, but does not impose a funding mandate or right to demand support.

UPMIFA, NMSA 1978, §§ 46-9A-1 to -10, governs the Foundation's management of donated funds. The opinion says the Foundation must exercise good faith, care, and loyalty, consider its mission and donor intent, and use the seven expenditure factors in Section 46-9A-4(A) when deciding whether to appropriate or withhold funds.

Director duties under the Nonprofit Corporation Act run to the corporation itself. NMSA 1978, § 53-8-25.1 requires good faith, the care of an ordinarily prudent person, and action in or not opposed to the best interests of the corporation. Saylor v. Valles, 2003-NMCA-037, confirms that nonprofit directors owe a fiduciary duty to the corporation.

The College Board's authority comes from Section 21-13-10. That section allows the College to accept gifts and donations but does not authorize compelling funds from a related foundation.

When bylaws or contractual provisions conflict with statute, they are unenforceable (State ex rel. Black v. Aztec Ditch Co., 1919-NMSC-057). That principle defeats any bylaw read to create a non-discretionary funding obligation contrary to UPMIFA.

Citations and references

Statutes:

• NMSA 1978, § 6-5A-1
• NMSA 1978, §§ 46-9A-1 to -10 (UPMIFA)
• NMSA 1978, § 21-13-10
• NMSA 1978, § 53-8-25.1 (Nonprofit director duties)

Cases:

• State ex rel. Black v. Aztec Ditch Co., 1919-NMSC-057, 25 N.M. 590
• Saylor v. Valles, 2003-NMCA-037, 133 N.M. 432

Source

• Landing page: https://nmdoj.gov/publication/opinion/2025-04-opinion-mesalands-community-college-foundation/
• Original PDF: https://nmdoj.gov/wp-content/uploads/Attorney-General-Opinion-2025-04.pdf

Original opinion text

January 13, 2025
OPINION
OF
RAÚL TORREZ
Attorney General

Opinion No. 2025-04

To:

Senator Pat Woods, New Mexico State Senator
Representative Jack Chatfield, New Mexico State Representative

Re:

Attorney General Opinion – Mesalands Community College Foundation

Question
What obligation, if any, does the Mesalands Community College Foundation ("Foundation") have to the financial well-being of Mesalands Community College ("College")? More specifically, does the Mesalands Community College Board (also referred to herein as the "College" or the "College Board") have the authority to request funds from the Foundation? Answer Although the College may request funds from the Foundation, the Foundation is not obligated to comply with any specific request. Rather, the Foundation must exercise its lawful fiduciary duties when deciding when and in what amount it donates to the College. Background Generally, legal obligations arise under law, agreement, legal instrument, or judicial determination. Whether the College may require distribution of funds from the Foundation depends on whether any legally enforceable obligation to support, or right to demand support, is established under any such legal mechanism. There is no law that by itself requires the Foundation to donate to the College upon any specific request. The law that governs the financial relationship between the College and the Foundation is NMSA 1978, Section 6-5A-1 (2023). That statute imposes financial and accounting controls where, as here, a foundation is established to support a college. The statute implicitly recognizes the symbiotic relationship between a college and a foundation, and that the latter may exist

to complement, contribute to and support or aid the function of or forward the purposes of a single [college] through financial support or contribution of services, goods, data or information that help or aid the [college] in carrying out its statutory purpose and goals, including, but not limited to, the provision of scholarships to students of educational institutions and the provision of grants to supplement ongoing research or to provide funds for research and programs being carried out by an agency. Id. Nothing in Section 6-5A-1 mandates any particular amount, purpose, or timing of a foundation's financial support of its affiliated college. In addition, New Mexico law precludes the Foundation from having a non-discretionary duty to support the College. This is provided in the Uniform Prudent Management of Institutional Funds Act (UPMIFA or Act), NMSA 1978, §§ 46-9A-1 to -10 (2009). The Act requires institutions, defined as "a person, other than an individual, organized and operated exclusively for charitable purposes," to analyze the purpose of the institution as well as the purpose of its fund when managing gifts and donations. UPMIFA allows institutions to accumulate or expend as "much of an endowment fund as the institution determines is prudent for the uses, benefits, purposes and duration for which the endowment fund is established." In determining whether to expend funds, UPMIFA requires institutions to exercise the duties of good faith, care, and loyalty. These obligations are collectively referred to as fiduciary duties. A compelled obligation of support would be contrary to the fiduciary responsibilities of the Foundation. By law, the Foundation is required to consider, within the scope of its mission and donor intent, whether it will appropriate funds to the College. The Foundation must conduct this analysis in a manner that ensures continuing loyalty to the mission of the Foundation—not necessarily the College—and must comply with the duties of care and obedience. In other words, the Foundation's fiduciary obligations face inwards, not outwards. In addition, UPMIFA provides seven factors institutions must consider to determine whether an expenditure violates the institution's duty of care. One of the key factors requires the institution to consider "the needs of the institution and the fund to make distributions and to preserve capital[.]" See § 46-9A-3(E)(1)(g). The institution determines its fund expenditures. In sum, New Mexico law contains no obligation for the Foundation to provide funds to the College upon request or demand. As for other potential sources of obligation—such as agreement, legal instrument, or judicial determination—the governance and operation of a foundation is generally governed by a set of bylaws. Bylaws are a legal instrument expressing both what a foundation will do and, in some instances, when and how the foundation will implement its mission and purpose. The Foundation's bylaws grants the Board of Directors the discretion "to direct and control the disbursement of its funds." The bylaws further indicate that the Foundation has a discretionary financial relationship with the College that is subject to donor limitations. However, even if an obligation appeared in the Foundation's bylaws or existed by some other source of obligation, the Foundation's obligations are still subject to UPMIFA, relevant state law, and donor limitations. Thus, as pertinent to the question presented, to the extent an obligation to provide funds to the college merely upon request were found within the bylaws or other obligation, such an obligation would conflict with the UPMIFA and would therefore be unenforceable. See, e.g., State ex rel. Black v. Aztec Ditch Co., 1919-NMSC-057, ¶ 13, 25 N.M. 590 (New Mexico law has long provided that terms found within a contract or bylaw, which conflict with statute, are unenforceable). Analysis While the College Board may always request funds from the Foundation, it has no right to compel distribution of monies that are not already appropriated to the College. The relevant law governing the duties of a community college board of directors is outlined in NMSA 1978, Section 21-13-10 (2014). Section 21-13-10 does not provide a college board with the authority to compel funds from related institutions. Likewise, although the College Board Policies allow the College to accept gifts, grants, donations, devises, and titles to property on behalf of the College, it does not provide authority to compel funding from the Foundation. The Foundation is separate from the College. Its stated purpose is, in relevant part, to solicit, maintain, and receive donations and properties for the benefit of the College. It does not obligate itself to expend funds under the specific direction or in response to any specific request of the College or its Board. The Nonprofit Corporation Act elucidates the duties owed to a nonprofit corporation by its director(s). In relevant part, the statute provides that "[a] director shall perform his duties as a director including his duties as a member of any committee of the board upon which the director may serve, in good faith, in a manner the director believes to be in or not opposed to the best interests of the corporation and with such care as an ordinarily prudent person would use under similar circumstances in a like position." NMSA 1978, § 53-8-25.1 (1987) (emphasis added). See also Saylor v. Valles, 2003-NMCA-037, ¶ 19, 133 N.M. 432 ("Directors of nonprofit corporations have a fiduciary duty to act in the best interests of the corporation."). In essence, a director owes a fiduciary duty of good faith to the nonprofit corporation itself. When exercising this fiduciary duty, a director must (1) act with the judgement of a prudent individual and (2) perform his duties in a manner that a similarly situated (hypothetical) director would do under similar circumstances. Similarly, the Internal Revenue Service (IRS) has observed that "[t]he directors of a charity owe it a duty of loyalty. The duty of loyalty requires a director to act in the interest of the charity rather than in the personal interest of the director or some other person or organization." In essence, this fiduciary duty of loyalty requires that the financial well-being of the charity itself be a paramount consideration when entering into a monetary transaction on behalf of the charity. Although the Foundation's purpose is to support the College, it must consider expenditures to the College in light of the preservation and duration of the fund, and it is required by law to exercise the care that an ordinarily prudent person would under similar circumstances. The Foundation may only appropriate those funds in a manner prudent to the situation, and it has discretion to appropriate or withhold funds based on the seven factors listed in Section 46-9A-4(A). Conclusion For the foregoing reasons, although the Board may request funds from the Foundation, the Foundation has no legal obligation to honor the request. Please note that this opinion is a public document and is not protected by the attorney-client privilege. It will be published on our website and made available to the general public.

RAÚL TORREZ
ATTORNEY GENERAL

/s/ Alexander W. Tucker
Alexander W. Tucker
Assistant Solicitor General