Sample NYPMIFA Language for Endowment Pledge Forms and Other Solicitation Materials

I just spent the morning trying to formulate a short, plain language NYPMIFA disclosure statement for a proposed endowment gift pledge form.  If you have been following the NY nonprofit community’s trauma in dealing with NY’s unique UPMIFA law, one of the vaguest and challenging requirements is this disclosure thing on all solicitations involving permanent endowments.

Basically, NYPMIFA requires some sort of disclosure statement regarding the option of invading principal from NYPMIFA on anything having to do with a potential endowment solicitation.  This seems to mean that pledge forms, mailings, newsletters, etc.. that might have anything to do with a potential endowment solicitation need to tell potential donors that the charity can spend all of their endowment gift (that’s is how the law actually sounds).

The question is how do we soften up this statement so that it isn’t like a warning label on a cigarette box and still fulfill the intent of the law.  Clearly, using what the law actually says is unacceptable.  Read it for yourself:

UNLESS OTHERWISE RESTRICTED  BY  THE  GIFT  INSTRUMENT PURSUANT  TO  PARAGRAPH  (B)  OF SECTION FIVE HUNDRED FIFTY-THREE OF THE NOT-FOR-PROFIT CORPORATION LAW, THE INSTITUTION MAY EXPEND SO MUCH OF AN ENDOWMENT FUND AS IT DEEMS PRUDENT AFTER  CONSIDERING  THE  FACTORS  SET FORTH  IN  PARAGRAPH  (A)  OF  SECTION  FIVE  HUNDRED FIFTY-THREE OF THE NOT-FOR-PROFIT CORPORATION LAW.

We might as well not ask for endowment gifts anymore if we are required to use that statement verbatim.

So, plenty of charities and lawyers are working on language that includes the message without ruining the mood.

Here are four versions that I was playing around with this morning.  (some were from friends in the field so I am not taking credit on these – and, y0ur nonprofit really needs to run these things by its own legal counsel and not use this blog as your legal counsel!):

  1. Note: Gifts to permanent endowment funds of NY-NONPROFIT are governed by New York state law which dictates that annual distributions from permanent endowment funds are to be formulated using a series of prudent factors contained in the law.  While this law also allows for limited invasion of principal where warranted, it is the NY-NONPROFIT Board of Director’s policy to maintain and grow these funds over time.
  2. Note:  Gifts to permanent endowment funds of NY-NONPROFIT are governed by the New York Prudent Management of Institutional Funds Act (NYPMIFA) which allows for limited spending of principal. Endowed funds are prudently managed by the NY-NONPROFIT Board of Directors with the goal to maintain and grow these funds.
  3. Note:  Endowment gifts to NY-NONPROFIT are governed by the New York Prudent Management of Institutional Funds Act (NYPMIFA) which provides that, unless otherwise restricted by a gift agreement, institutions may expend so much of an endowment fund as it deems prudent after considering eight factors contained in the law.  A copy of NYPMIFA and NY-NONPROFIT’s gift acceptance policies are available upon request.
  4. Note: NY-NONPROFIT may expend so much of the endowment fund as it deems prudent after considering the factors governing appropriation decisions set forth in the New York Prudent Management of Institutional Funds Act (NYPMIFA).  A copy of NYPMIFA and NY-NONPROFIT’s gift acceptance policies are available upon request.

So ironic that the law specifically states that NYPMIFA applies to all new permanent endowment fund gifts, regardless of any disclosure in the actual gift agreement (unless the gift agreement specifically opts out of NYPMIFA).  This means that the law doesn’t really require this disclosure in the actual gift agreement but it does require it to be on a post card promoting any endowment fund giving.  To be safe, this language or more needs to in the gift agreements, anyway.

Who could have believed that NY nonprofits might actually be wishing for the good old days of UMIFA.  Sorry, too late for that.

One comment

  1. I’d shy away from the usage of any statement that contains the word “invasion.” Of the four, #4 seems to make all of the relevant points while avoiding alarmist language. Of course, that’s me — and not our institution’s legal counsel — talking.

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