Gross Mendelsohn Blog

Nonprofit Investment Tips: 4 Ways to Ensure Your Nonprofit Keeps on Giving

Written by Jeff Johnson | Dec 20, 2017 1:59:00 PM

When it comes to investing, nonprofits often struggle to invest their hard earned donation dollars. Not only do organizations need the right knowledge and understanding to make sound investments, but many nonprofits are paralyzed (and understandably so) by the idea of potentially losing charitable funds due to fluctuations in the market.

The reality is, your nonprofit was established to help make the world a better place. Whatever your mission – assisting students, helping the disadvantaged, saving pets, fostering scientific research – all the investing decisions your nonprofit makes must be made in order to serve your philanthropic goals while still prioritizing the preservation of operating costs and capital. In this sense, you must make thoughtful, informed investments that provide your nonprofit a chance to grow while also protecting your organization’s financial viability.

Here are four essential tips to keep your organization healthy and growing for generations to come:

1. Understand Your Fiduciary Obligations

Not only does your board of directors have a fiduciary responsibility to protect assets and further your mission, but increased regulatory scrutiny has placed additional requirements on nonprofit organizations. Whether it’s classifying your endowment funds, establishing a prudent spending policy or having defined document-retention policies, understanding your responsibilities can help you avoid putting your nonprofit at risk.

2. Determine Your Objectives

A sound approach to investing starts with identifying your nonprofit’s objectives, including the adoption of an investment policy and setting appropriate risk tolerance and asset allocation ranges. These objectives will serve as a roadmap to meeting your investment and financial objectives.

Additionally, a clear investment strategy will outline a reasonable set of assumptions and expected returns, allowing your board and/or committee to maintain their focus on executing your nonprofit’s mission.   

3. Engage an Investment Manager

Given the range of complexities and unique investing requirements, many nonprofits hire a professional investment manager to maintain objective oversight, execute the investment strategy, monitor market values, provide advice and handle the day-to-day investment related activities of their endowment. 

4. Review and Control Risk

At the bare minimum, your nonprofit should meet with its investment manager on an annual basis. Risk control should always be a significant consideration, and simply diversifying your assets may not be enough. Your advisor should have well-defined procedures and processes to control portfolio risk and be able to explain how and why investment decisions have been made. Preserving and growing your nonprofit’s portfolio is an essential step towards ensuring your organization is able to continue giving to and serving your community.

Need Help?

Our integrated team of nonprofit accountants and investment advisors can assist you in developing a comprehensive financial roadmap that will help further your mission. Any questions? Contact us online or call 800.899.4623.

About Jeff Johnson

Jeff is the managing director and partner at GGM Wealth Advisors, an independent SEC Registered Investment Advisor and investment arm of Gross, Mendelsohn & Associates. He is a member of the firm’s investment committee and has years of financial industry experience. Learn more about Jeff.