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 (or any college foundation in New Mexico)

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.

Document your decision-making. UPMIFA's factors include the duration and preservation of the fund, the institution's investment policies, the expected total return, other resources of the institution, the needs of the institution and the fund, and general economic conditions. Each major spending decision should reflect those considerations in writing.

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

Your gift instructions matter. Restricted gifts (where you specify how the funds may be used) limit the Foundation's discretion. Unrestricted gifts give the Foundation flexibility under UPMIFA. Either way, the Foundation cannot ignore your gift terms and cannot reroute restricted gifts to general College needs without violating donor intent.

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

The opinion treats the Foundation as a paradigm UPMIFA institution. Section 46-9A-3 governs investment standards, Section 46-9A-4(A) governs expenditure factors. Director duties run from Section 53-8-25.1 of the Nonprofit Corporation Act and Saylor v. Valles, 2003-NMCA-037. The IRS guidance on the duty of loyalty cited in the opinion reinforces the same framework.

A college that wants more reliable support from its foundation should consider a multi-year MOU or service agreement (a contract that the Foundation knowingly enters into, where it can plan around the commitment) rather than asserting board authority.

If you are a New Mexico legislator

Section 6-5A-1 sets accounting controls but no funding mandate. If the policy goal is to make foundation support more predictable, the legislative path is amendments to that section that work with rather than against UPMIFA. Mandates that ignore donor intent or fund preservation are likely to be invalidated under the same logic.

Common questions

Q: Can the College sue the Foundation for failing to fund a request?
A: No, not on the strength of the request alone. The Foundation has no legal obligation to honor any particular request. A claim would have to rest on a contract, a specific donor restriction the Foundation violated, or a fiduciary breach affecting the Foundation itself.

Q: What are the UPMIFA seven factors?
A: They are listed in NMSA 1978, § 46-9A-3(E)(1): the duration and preservation of the endowment, the purposes of the institution and the fund, general economic conditions, the possible effect of inflation or deflation, the expected total return, other institutional resources, the needs of the institution and the fund to make distributions and preserve capital, and the institution's investment policy.

Q: What if the bylaws say the Foundation must give the College a fixed amount?
A: That bylaw is unenforceable to the extent it conflicts with UPMIFA's discretionary fiduciary structure. State ex rel. Black v. Aztec Ditch Co. holds that contract or bylaw terms conflicting with statute are unenforceable.

Q: What about restricted donations the donor specified for the College?
A: Restricted donations must be used as the donor specified. If the donor said "for the use of the College," those funds need to flow to the College for the donor's purpose. Unrestricted funds are discretionary under UPMIFA.

Q: Can the College Board members sit on the Foundation Board?
A: The opinion does not address overlap, but practice varies. If members do overlap, conflicts of interest must be managed under the Nonprofit Corporation Act and IRS guidance. A College trustee on the Foundation Board still owes the loyalty duty to the Foundation when acting as a Foundation director.

Q: Does this apply to the four-year universities?
A: The opinion focuses on a community college foundation, but the UPMIFA and nonprofit-law analysis applies to all New Mexico college and university foundations. Read with awareness of any specific statutes or governance documents that affect a particular institution.

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 how nonprofit institutions manage donated funds. Section 46-9A-3 sets the standard of conduct: institutions must invest with the care, skill, and caution a prudent investor would use, and consider the seven factors in Section 46-9A-3(E)(1) when deciding whether to expend funds. Section 46-9A-4(A) lists factors specific to expenditure decisions, including preserving fund principal where the donor's gift instrument so provides.

Director duties under the Nonprofit Corporation Act run to the corporation itself. Section 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, §§ 53-8-1 to -99 (Nonprofit Corporation Act)

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