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The funding of not-for-profit entities' programs has become more difficult in the present adverse economic circumstances.
The passage of the legislation increasing the Massachusetts sales tax from 5% to 6¼% to balance the budget will provide the funds to allow for the state's support for programs run by not-for-profit organizations.
Another piece of legislation before the legislature is the adoption of the "Uniform Prudent Management of Investment Funds Act (UPMIFA)." This legislation would replace the current M.G.L. Chapter 180A "Management of Investment Funds Act (MIFA)." Most of the states have already adopted "UPMIFA."
It is viewed that "UPMIFA" allows not-for-profit organizations more latitude in allocating for expenditure of endowment fund assets, for support of not-for-profit entities' programs, which they support.
A comparison of "UPMIFA" with "MIFA" shows the following differences, among other differences.
UPMIFA
SECTION 4. APPROPRIATION FOR EXPENDITURE OR ACCUMULATION OF ENDOWMENT FUND; RULES OF CONSTRUCTION.
(a) Subject to the intent of a donor expressed in the gift instrument (and to subsection (d), an institution 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. Unless stated otherwise in the gift instrument, the assets in an endowment fund are donor-restricted assets until appropriated for expenditure by the institution. In making a determination to appropriate or accumulate, the institution shall act in good faith, with the care that an ordinarily prudent person in a like position would exercise under similar circumstances.
MIFA
SECTION 2. APPROPRIATION FOR EXPENDITURES FROM ENDOWMENT FUNDS AUTHORIZED; PRESUMPTION OF IMPRUDENCE
The governing board may appropriate for expenditure for the uses and purposes for which an endowment fund is established so much of the net appreciation, realized and unrealized, in the fair value of assets and the endowment fund over the historic dollar value of the fund as is prudent under the standard established by section eight; provided, however, the appropriation of net appreciation for expenditure in any year in an amount greater than seven per cent of the fair market value of the institution's endowment funds calculated on the basis of market values determined at least quarterly and averaged over a period of three or more years, shall create a rebuttable presumption of imprudence on the part of the governing board. This section does not limit the authority of the governing board to expend funds as permitted under other law, the terms of the applicable gift instrument, or the charter of the institution.
The full comparison can be found at www.upmifa.org
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