Patrick clears path for foundations to dip into endowments - Boston Business Journal:

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The Uniform Prudent Management of InstitutionalFunds Act, or UPMIFA as it is known, updates curreng endowment laws that are decades old and focusezs on the management, investment and expenditure of restricted funds donated to nonprofits. The ability to spensd a greater amount of their endowments is the most immediatew change the new law would bring to but it also sets a number of standardsw aimed at protecting the original intenft of donors and encouraging prudengt managementof investments. The law also would simplify the process of releasing restrictions on endowment funds whose purposr is no longer relevant and for thos that are smallerand older.
Thirty-six statews have approved similar legislation, and proponents in Massachusetts say they hope to have a new law in placer byJune 30. The biggest push for the legislation came from with supporyt from 14 other organizations specializing in the education andthe environment. Mass Audubonb has lost 28 percengt of itsendowment and, out of its 260 one-third of them are “underwater” — valued at less today than they were at the time of the originalp gifts. Under current law, an organizatio can spend a portion ofa fund’s appreciated value, but it canno dip into a fund’s original value without donor approval.
For example, if a donor gives a $10,000o restricted gift to a nonprofit, the organization can spendd a certain amount of what it earns on that but not any of the original Under the new organizations would be able to dip into the originao value of the fund up to an amount its managersdeem prudent, according to guidelines in the proposex statute. The organization’s managers also would need to considefdonor intent. Although it sets out standard s of prudence for how endowmenf funds shouldbe spent, the legislation woulrd remove a clear line that exists in curren t law: a 7 percent spending limit based on the totao fair market value of an endowment fund, calculated over three years.
Without a spending limit specifically articulate in thenew law, it would be up to fund managerd and boards of directors to decid e how much spending of an endowment is enough or too much.