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New UPMIFA Law Will Provide More Flexibility for Charity EndowmentsThis page posted 6/24/2009Legislation to provide relief to charities whose endowment funds have eroded in value due to the recession was signed into law by Governor Corzine on June 10, 2009. S-2583 (Codey/Ruiz)/A-3871 (Deignan/McKeon), the Uniform Prudent Management of Institutional Funds Act (UPMIFA), provides additional discretion to charities to spend their endowments as long as certain conditions are met. Under the previous New Jersey Law originally enacted in 1975, non-profits that have endowment funds were not allowed to tap into those funds if their value falls below the "historic dollar value." With the precipitous declines in the stock market, many endowment funds are now below their historic dollar value, which means that they have been completely unavailable for the institution to provide vital programs and services in these times of severe economic distress. The new law, which is based on model legislation which has been enacted in at least 35 other states, will provide greater flexibility for non-profits within a responsible framework by replacing the "historic dollar value" standard for spending from endowments with a prudence standard, which will enable charities to spend from their endowments as long as such spending is prudent. The law will modernize the standards for management of funds, providing improved clarity and guidance for boards. In limited cases, it will also allows the release or modification of donor restrictions on older (at least 20 years old), comparatively smaller (no greater than $250,000) funds where these restrictions are now illegal or impractical. The findings of the Center's 2009 New Jersey Non-Profit Issues and Trends Survey, conducted earlier this year, underscore the need for this legislation. In that survey, 70% of New Jersey non-profits reported that demand for their services had gone up in the previous year and would continue to rise in 2009. Over 60% expected their expenses to rise in 2009, but only 27% expected their total funding to increase, and reports of denials/reductions from previous funders were widespread. In response to these trends, 29% of non-profits reported that they had curtailed programs or planned to; and 34% had cut staff or planned to do so. The Center for Non-Profits an active part of a broad coalition that supported the UPMIFA legislation. The new law takes effect immediately. For more information: Text of Enacted Bill, Advance Law - P.L. 2009, c. 64 UPMIFA (national site
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