UPMIFA, Three Years Later

When the National Conference of Commissioners on Uniform State Laws (NCCUSL) approved the Uniform Prudent Management of Institutional Funds Act (UPMIFA) in July 2006, they could not have predicted how imprudent the financial world would seem to nonprofit board members three years later. The NCCUSL drafting committee worked hard to improve the Uniform Management of Institutional Funds Act (UMIFA) by modernizing endowment fund rules for fiduciaries. Indeed, UPMIFA does take into account important facts and circumstances for investment policies, spending policies, expense management, and delegation in ways that UMIFA did not. Under UMIFA, the rules were fairly straightforward: as long as the institution did not invade the historic dollar value, any spending rate would be fine. There is little guidance in UPMIFA or the comments about how a prudent board resolves this dilemma, but it is clear that if they get it wrong, the state's attorney general can enforce the charitable interests of the public.