Your Policy For Investing In Continued Nonprofit Success

It’s not enough to make decisions based on a hunch
or to simply jump on just any investment opportunity
that comes your way simply because it might yield results.
Rather, you need to establish a roadmap
that will help you stay on course.

Five Tips To Help You Protect Your Nonprofit’s Investments

A comprehensive investment strategy is essential when it comes to safeguarding your nonprofit’s long-term financial security. Therefore, it’s essential that you work to ensure proper management procedures of your organization’s assets.

Maximizing your organization’s investments begins with tapping the right people to manage your nonprofit’s responsibilities. To do this, your first step should be to balance the leaders of your organization. Your leaders should include those who understand and are passionate about your nonprofit’s mission as well as those who bring the technical expertise and financial prowess necessary to carry out it’s mission.

The following tips will help keep your nonprofit’s leadership team grow and protect the organization’s investment income for years to come.


Listen to episode 109, “What Should You Do When Joining A Nonprofit Board?,” on Rea’s award-winning podcast, unsuitable on Rea Radio, featuring Laura MacDonald, principal and founder of The Benefactor Group.

Tip 1: Clarity

The journey is easier when everybody walks in the same direction.

Before a nonprofit can even begin making investment decisions, the board must establish the organization’s vision, mission and objectives.

It’s not enough to simply state what the organization stands for and what it wants to accomplish in it’s bylaws or strategic plan. Board members must promote transparency throughout the organization. This can be done by actively and consistently communicating critical information with shareholders, volunteers and other invested parties.

With the development of a clear vision, mission and objectives, everyone can better understand their purpose within the greater organization and what programs, services and financial resources will be needed to carry out the organization’s intended purpose.

Tip 2: Experience

Yeah, it’s kind of a big deal.

The people sitting on your finance committee should actually have a background (or at least a thorough understanding) of finance. The same notion holds true for your other specialty specific committees.

Your ideal finance committee, for example, should consist of professionals with backgrounds in banking, investments and/or business. Their understanding of the specialty will help your board of trustees understand the current financial state of the nonprofit more thoroughly, which will help your leadership team make sound financial decisions.

Tip 3: Leadership

Who’s in charge – and how did they get there?

As noted in “Tip 2,” experience (particularly when your nonprofit’s financial stability is at stake) is important. But who should be in charge and what steps should your board take to formally appoint an investment manager? Will a person’s eligibility be based on geography? Will previous experience be a deciding factor?

Your nonprofit’s board must establish clear, written guidelines that will then be used to help identify and select the best candidate to fill this incredibly important leadership position. Possible guideline considerations include:

  • Experience
  • Background
  • Qualifications of principals and portfolio managers
  • Management philosophy and methodology
  • Completeness of strategy and objectives
  • Flexibility and diversity of investments
  • Quality control
  • Performance
  • Availability of electronic information and analysis data
  • Flexibility of contractual agreement
  • Process for transferring funds

Tip 4: Policy

Your guide to success.

It’s not enough to make decisions based on a hunch or to simply jump on just any investment opportunity that comes your way simply because it might yield results. Rather, you need to establish a roadmap that will help you stay on course.

If you haven’t got one in place already, make it a priority to put together a written investment policy that details:

  • The organization’s investment philosophy
  • Investment expectations
  • Types of investments to consider
  • Who can make investment decisions
  • Who can contact the broker to make trades
  • Who will have regular contact with the broker
  • The decision-making process
  • How investment funds will be allocated
  • What return threshold will trigger action
  • The request for proposal process (if applicable)
  • How often investments will be reviewed and by whom

Finally, your investment policy should be reviewed annually and should be regularly updated to reflect current trends. The investment world has dramatically changed over the years, and it will continue to change at a rapid pace. You should work to ensure that your policy effectively reflects these changes.

Tip 5: A Business Mindset

Investing is serious business.

Your board is entrusted to make decisions that are in the best interest of the nonprofit, this is especially true when it comes to executing the organization’s investment strategy. As you continue move forward with your organization’s investment strategy, it is absolutely vital that you closely monitor management fees, as well as keep tabs on rates of return.

A well-written investment policy provides your board with the guidance it needs to make sound investment decisions designed to ultimately benefit the organization and the people and causes it supports. Unfortunately, some well-intended nonprofits will put a comprehensive investment policy in place, only to set it on a shelf and let it collect dust. Keep your organization’s investment policy top of mind to start optimizing your results.

Email the not-for-profit team at Rea & Associates to learn more about developing a comprehensive investment policy and start safeguarding your organization’s finances today.

By Brent Ardit, CPA (Dublin office)

Check out these articles for more not-for-profit policy insight:

Care, Compliance, Loyalty & Financial Accountability: Getting To Know The Role Of A Not-For-Profit Board Member

Are You Getting The Info You Need?

Putting Board Governance & Policies In Perspective


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