A recent study reported on in the Chronicle of Philanthropy stated that nearly 40 percent of small and midsize charities and nonprofit associations do not have guidelines to ensure that their investment reserve is diversified, and nearly 20 percent have no policy at all for governing how their reserve is managed. Having worked at nonprofits of both small and midsize, organizations that avoid clear investment guidelines, do so at their peril. An organization must invest in many different areas to ensure success. One of those key areas should be the development of a clear and thoughtful investments policy. What are the long-term goals of the institution and how does the organization guide its investments to achieve those goals. Too often, nonprofits without clear investment policies and goals will assume as a reactive stance to market conditions. This inevitably will not help an organization meet their goals.
Organizations should have clear investment diversification and management policies. It should have a group (Board, Board subcommittee or outside agent) responsible for the implementation of this plan and the governing body should review progress of this group regularly throughout the year ensuring they are following the plan or making decisions that are in the long-term best-interest of the organization.
Question for discussion: How does your nonprofit manage its investments effectively?