New Legislation Aids Nonprofit Organizations
Nonprofits enabled to receive greater support from endowments
Because area nonprofits are facing substantial cutbacks from numerous funding sources, as illustrated in this chart, they may need to rely more heavily on the spendable income generated by their endowment funds. Greater flexibility regarding expenditure of endowment funds is permitted by the Uniform Prudent Management of Institutional Funds Act (UPMIFA).
Foundation For The Carolinas manages numerous endowment funds, which are permanent legacies established to preserve gifts in perpetuity and to provide a source of support to nonprofit organizations. When the financial market declined in the fall of 2008, these endowment funds were not immune to market changes and also declined in value.
Under North Carolina law that was in effect at the time, many nonprofit organizations were able to access their endowment funds in an extremely limited manner. This resulted in decreased support for these nonprofit organizations at a time when the need was the greatest. Recognizing the financial crisis area nonprofit organizations were facing, Foundation For The Carolinas advocated for legislation in North Carolina that would allow nonprofit organizations to receive greater support from their endowment funds.
We are pleased to report that this legislation, called the Uniform Prudent Management of Institutional Funds Act, was signed into law by Governor Perdue on March 19, 2009. The law gives boards of directors greater discretion in establishing spending policies. It also provides updated investment standards for endowments. After carefully considering the statutory guidelines, Foundation For The Carolinas’ Board of Directors adopted a prudent spending policy that provides stable support to area nonprofit organizations while also protecting the endowment assets intended to exist in perpetuity.
Please contact Foundation For The Carolinas’ Client Services Team for more information.