Wednesday, February 11, 2009

WSJ: states' adoption of UPMIFA reflects the dire straits of endowed charities

In an article entitled "Battered Nonprofits Seek to Tap Nest Eggs," the WSJ reports that the current crisis has added urgency to state adoption of the Uniform Prudent Management of Institutional Funds Act (UPMIFA). "Universities, museums and other nonprofits battered by investment losses are pushing states to ease legal limits on spending so they can tap their endowments to avoid imminent layoffs and deep cuts to programs." But the real story here is the prescience of the Uniform Law Commissioners (ULC), which completed UPMIFA in 2006, to replace the Uniform Management of Institutional Funds Act of 1972 (UMIFA).  A majority of states adopted UPMIFA before the current crisis. UPMIFA, explains its drafters, permits the "prudent expenditure of both appreciation and income and replac[es] the old trust law concept that only income (e.g., interest and dividends) could be spent," and also eliminates "the rule that a fund could not be spent below `historic dollar value.'”   UPMIFA permits institutions to spend "so much of an endowment fund as the institution determines to be prudent for the uses, benefits, purposes and duration for which the endowment fund is established.”   Criteria for setting spending include "general economic conditions," "expected total return from income and the appreciation of investments, and "other resources of the institution." 


State – Legislative | Permalink

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