Enrollment at many private schools has seen a downturn, forcing schools to become more aggressive with their scholarship programs. In order to still have the necessary cash flow, many schools have established endowments to help fund these scholarships. While this can help to close the gap in funding created by more aggressive scholarship programs, it also opens these schools up to greater regulations under the New York Prudent Management of Institutional Funds Act (“NYPMIFA”).

NYPMIFA is not a new law; its been around since September 17, 2010, when it was enacted into law. The problem is that many schools have not really focused on the regulations pursuant to NYPMIFA for some time now. NYPMIFA governs the management and investments held by nonprofits and it provides information on spending for nonprofit organizations. NYPMIFA requires nonprofit schools to have in place compliant investment and spending policies. In addition, NYPMIFA requires a formal review of the school’s decisions regarding their investments and endowments, with such review memorialized at the Board level.