Page 48 - C&A's Nonprofit Board Guide

NYPMIFA: WHAT IS IT AND WHAT DOES IT MEAN FOR ME? NYPMIFA: WHAT IS IT AND WHAT DOES IT MEAN FOR ME?

So, what does this specifically mean for your Let’s recap, because this is not a simple subject. 4. Prior to NYPMIFA, a nonprofit had to obtain 5. NYPMIFA also requires that an organization
nonprofit? Donor intent documented in a gift approval from the donor or would have to soliciting new endowment funds include
document must always be respected. If the 1. NYPMIFA advocates for stronger protocols resort to soliciting the supreme court in its a statement in its solicitation materials,
donor is silent as to appreciation and spending on investment management and requires jurisdiction or the surrogate court where the unless otherwise restricted by the grant
rules, NYPMIFA then comes into play. Boards prudence from the Board in investing will was probated (for an intestate donation) instrument, noting that the nonprofit may
will have to set specific spending policies institutional funds held in endowments or for if the nonprofit wanted an endowment expend as much of the endowment fund as it
in place that either call for the preservation investment purposes. It requires nonprofits released. Thankfully, NYPMIFA provides deems prudent after considering the factors
of endowment funds or prudent spending to have formal investment policies some level of flexibility in dealing with governing appropriation decisions set forth
of endowment fund assets as outlined by that consider factors such as economic funds that have become obsolete, wasteful, in NYPMIFA.
NYPMIFA. Should the Board choose to spend conditions, inflation rates, tax implications, impractical, or impossible to effect.
endowment funds as it deems prudent, it and others noted within this article. An institution may request the donor’s It is essential that nonprofit Boards and
must act in good faith and exercise care while 2. In an effort to try to preserve organizational written consent to modify or remove a use investment committees are well educated on
considering, if relevant, the following factors: assets, many nonprofit Boards take a very restriction. If the donor is unavailable or the rules surrounding NYPMIFA to ensure
► the purpose of both its organization and conservative approach to investments by refuses to provide consent, the institution that all of its provisions are properly being
the endowment fund; keeping them all in certificates of deposits may also petition the court to lift the considered and implemented. Retaining
or U.S. Treasury securities. Pursuant donor’s restriction on the use of funds qualified and experienced legal counsel to
► the duration and preservation of the to NYPMIFA and the need for prudent if the restriction becomes impossible, help navigate through the complexities of
endowment fund; consideration of the factors outlined above, impracticable, unlawful, or wasteful, as NYPMIFA may be a good first step to ensuring
► the overall economic environment; this may no longer be an appropriate way outlined in N-PCL § 555(c). A significant compliance.
of handling an organization’s investments. change from previous law is that under
► the organization’s investment policy; NYPMIFA requires the diversification of NYPMIFA, an institution can seek court
► the anticipated investment return on the investments; unless the Board determines approval to release a restriction even without
endowment; special circumstances exist that deem doing the donor’s consent. In either case, the donor
► the possible impact of inflation or so inappropriate. Such a decision should be and State Attorney General must be given
documented and is required to be evaluated
deflation; notice. NYPMIFA also allows nonprofits
annually. to modify or release donor restrictions
► other resources that may exist within the without receiving judicial approval, upon
organization; and 3. Should a nonprofit decide to utilize the
services of an external investment advisor 90 days’ notice to the Attorney General, if
► if appropriate and necessary, alternatives for management of its institutional funds, (1) the fund’s value is under $100,000, (2)
to spending of the endowment fund and the Board must exercise care in selecting the fund has existed for more than twenty
the impact such alternatives may have on and monitoring the advisor. This is inclusive years, and (3) the proposed use of the fund
the organization. of ensuring no conflicts of interest exist, after release is consistent with the purpose
establishing the advisor’s role and level of outlined in the original gift.
For each of the aforementioned factors, the control, and monitoring performance results.
organization must maintain contemporaneous
records of the Board’s decision, the
consideration given, and, if applicable, the
action taken.

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