Our society had a program called Teens Talk about Racism with money in an earmarked fund, but the program has not been held for years and is not coming back. Who has the authority to redirect the remaining money? The money is primarily from earlier years’ budgets, but possibly some individual donations as well. We can talk to the founder of the program, whose money was spent years ago, for advice. Are we bound by that advice, or can the membership of the society or the board make a decision? —From the Website.
Charities often get confused about “restricted” funds. Under the Uniform Prudent Management of Institutional Funds Act (“UPMIFA”), which has been enacted in some form in every state except Pennsylvania, a fund is considered “restricted” only if it has been restricted by a third-party donor. It is not considered restricted when so designated by the board of the organization itself, and the board can change the designation whenever it wishes.
It sounds like the primary source of money for your fund was the designation by the board in the earlier budgets and therefore is not “restricted” for legal purposes. The board can redirect that money as it wishes, just as it could have revised its budget in the earlier years and used the money for something else. Money given to the fund by third-party donors would have been considered legally restricted, but the restriction would have been fulfilled as to those gifts if the money had already been spent for the restricted purpose.
To the extent that you can identify unspent third-party contributions still in the fund, UPMIFA says that a donor may release the restrictions so long as the new use is for charitable purposes. You may be able to identify enough donors willing to release the restriction to eliminate your problem. Since money is fungible, check with your accountant to see if you can make these distinctions.
UPMIFA also allows you to eliminate restrictions on small funds that have been held for a long time. Those provisions vary by state, so check your statute to see if that provision applies to your situation. If all else fails, you may need to get approval of a court, or in lieu thereof, a letter of no objection from the state Attorney General (who is probably the only person with standing to complain). (See Ready Reference Page: “New UPMIFA Sets Rules For Management of Charitable Funds”)
Rather than spend the time and money to go to court, however, you might just want to have another program where teens talk about racism. It sounds like it is still a timely topic.
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