Question

Which of the following statements concerning the Uniform Prudent Management of Institution Funds Act (UPMIFA) is correct?

A) All nongovernmental not-for-profit entities are required to comply with the provisions of the act.
B) The act sets an investment risk level for entities to ensure contributed assets are not placed in overly risky investments.
C) The act sets a spending rate equal to 5 percent of the average three-year return earned on investments.
D) The act provides guidance on conditions under which a not-for-profit can modify restrictions placed on net assets.

Answer 1

The correct statement concerning the Uniform Prudent Management of Institutional Funds Act (UPMIFA) is that all nongovernmental not-for-profit entities are required to comply with the provisions of the act.

Step-by-step explanation:

The correct statement concerning the Uniform Prudent Management of Institutional Funds Act (UPMIFA) is: All nongovernmental not-for-profit entities are required to comply with the provisions of the act. UPMIFA is a model law that provides guidance on the management and investment of institutional funds held by nonprofit organizations. It encourages nonprofits to adopt prudent investment and spending practices to protect and grow their assets while fulfilling their charitable missions.

Option B is incorrect because UPMIFA does not set an investment risk level for entities. Instead, it advises organizations to consider the overall investment objectives and circumstances when making investment decisions. Option C is incorrect because UPMIFA does not set a specific spending rate. It allows organizations to determine an appropriate spending rate based on factors like the purpose of the institution, the nature of the fund, and the intended duration of the fund. Option D is incorrect because UPMIFA does not provide guidance on modifying restrictions placed on net assets. That is usually governed by the organization's governing documents and applicable laws.