New York charities, eat your heart out. Take a look at NJ’s version of UPMIFA: NJ UPMIFA.
I have been writing about NYPMIFA, NY’s version, for months and finally took a look at my home state’s version for a former client. Wow.
I can’t believe these are supposed to be essentially the same “Uniform” statutes.
If you are like most people, and might not get to the details, here is a summary of NJ’s UPMIFA: NJ charities now “may appropriate for expenditure or accumulate so 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…” (i.e. spend what you think is prudent!) And use these 7 factors in your decision making:
- the duration and preservation of the endowment fund;
- the purposes of the institution and the endowment fund;
- general economic conditions;
- the possible effect of inflation or deflation;
- the expected total return from income and the appreciation of investments;
- other resources of the institution; and
- the investment policy of the institution.
No 7% presumption of imprudence, no requirement of a contemporaneous documentation of the application of the factors, NO NOTICE TO PRE-EXISTING FUND DONORS. No concerns about old funds under the old scheme v. new funds under the new scheme.
What about the clean-up part of UPMIFA? NJ gives their charities the option of fixing 20 year old/under $250,000 funds – NO notice to living donors required. NY says you that it is only for under $100,000, you need to notify living donors, and that their AG’s office is already hinting that they will initially reject all applications and put you through the ringers before letting you merge an old fund.
Ok, NJ charities. Your legislature just gave you carte blanche, total freedom, to do basically what you want with your endowments funds (even spending down the principal if it can be justified under the prudent factors).
NY charities – you thought endowment management was challenging before NYPMIFA… Well, it just got worse.
Amazing if you think about it because on the one hand, NJ may have given too much freedom to its nonprofits. On the other hand, NY created a whole series of issues and challenges with their version of UPMIFA. Managing endowments under the prior law (UMIFA) was a lot easier!
Have a great weekend!