Page 47 - C&A's Nonprofit Board Guide

NYPMIFA:

WHAT IS IT AND WHAT DOES IT MEAN FOR ME? In passing NYPMIFA, New York State

has adopted much of UPMIFA’s standard
principles, but with three major differences,
The first difference relates to its requirements
surrounding written policy. NYPMIFA
requires the Board to develop formal spending
and investment policies, and also to review
those policies on an annual basis. Additionally,
there are eight standards of prudent spending
outlined by NYPMIFA. Nonprofits are
required to have a written policy describing
how those standards have been adopted. The
second difference relates to NYPMIFA’s
presumption of imprudence. The Act believes
that a nonprofit’s spending would be considered
imprudent if it spends more than 7% of the
endowment’s market value, which is to be
measured on a quarterly basis and calculated
over a period of no less than the preceding
five years. The third and last major difference
relates to written notification. NYPMIFA,
unlike any other state’s version of UPMIFA,
requires nonprofits to notify their existing
endowment donors, in writing, for approval
to spend below the original gift amount. The
Act specifies the required language to be used
when notifying donors as well as guidelines for
YPMIFA – what does this strange
N acronym mean? These seven letters the notification itself. Nonprofits must allow
donors a 90-day window to respond to the
are used to abbreviate the New York How does this affect the nonprofit sector? notice before encumbering endowment funds
Prudent Management of Institutional Funds One, it enables nonprofits to spend from for the first time under NYPMIFA. A donor
Act. NYPMIFA is not something completely endowments whose fair values have dropped is considered “available” under NYPMIFA
new as it was signed into New York State below the original gift level, so long as the if the individual is living (or if the donor
Law by Governor Patterson on September 17, spending is deemed prudent by the nonprofit. is an institution, is in existence) and can be
2010 and is NY States’ version of the Uniform And two, it creates restrictions on any earnings located and identified with reasonable efforts.
Prudent Management of Institutional in excess of the spending policy, even in the However, notification is not required if (1) the
Funds Act (“UPMIFA”). UPMIFA provides absence of a donor restriction. In other words, gift instrument already allows for spending
guidance regarding investment management should the Board establish a spending policy below the fund’s historical value, (2) the gift
and spending. UPMIFA strives to promote that allows up to 3% of earnings to be spent instrument specifically limits the nonprofits
a total return approach to spending by by the organization and the investments yield ability to encumber or accumulate funds, or
supporting investing at a rate that will preserve 10% in a year, the extra 7% of earnings would (3) the endowment is the result of a gift which
the purchasing power of the principal over the be treated as a temporarily restricted amount was part of a solicitation/funding originated
long-term, while spending endowment funds at until appropriated. by the nonprofit.
a rate that will reflect a donor’s intentions.

45 46