RALEIGH, N.C. – New legislation is in the works that would aid North Carolina charities whose endowments have been hammered by the recession.
A law adopted in North Carolina over 30 years ago, called the Uniform Management of Institutional Funds Act, or UMIFA, prohibits spending from endowments that are “under water,” or whose value has dropped below their original worth.
Given the recent market spiral and recession, that’s the case for many endowments in North Carolina.
That means that group like universities or arts endowments that are under water cannot tap their endowments to provide scholarships or to continue providing core programs.
However, private foundations, which are mandated to pay out at least 5 percent of their assets annually, do not face the same restrictions.
The proposed new North Carolina law, introduced by Democratic Rep. Deborah Ross and Republican Sen. Fletcher Hartsell, would give charities the flexibility they need to use money from their endowments to keep their organizations operating.
The bill also would modernize investing rules governing charitable endowments.
The North Carolina legislation, which originated with the state’s General Statues Commission, primarily is the adoption of the Uniform Prudent Management of Institutional Funds Act, or UPMIFA, created by the National Conference of Commissioners on Uniform State Laws.
The state legislation includes changes that would make the act conform to North Carolina law, Ross says.
If adopted, the law would take effect immediately upon passage.
The Uniform Prudent Management of Institutional Funds Act, which was approved by the national conference in 2006, has been adopted by about 26 states.
Given the state of endowments nationwide, nonprofits in other states are asking lawmakers to consider adopting the new act, the Wall Street Journal reported Feb. 11.