Sample Investment Policy Statement for Small Nonprofits

Sample Investment Policy Statement for Small Nonprofits

Creating a solid investment policy statement is crucial for small nonprofits looking to effectively manage their financial resources. This document outlines the organization's investment goals, risk tolerance, asset allocation strategies, and guidelines for decision-making. By establishing clear guidelines and procedures, nonprofits can ensure that their investments align with their mission and values while maximizing returns.

Small Nonprofit's Investment Policy Statement Sample

Small Nonprofit's Investment Policy Statement Sample

Developing an investment policy statement (IPS) is crucial for any organization, including small nonprofits. An IPS outlines the guidelines and objectives for managing the organization's investments, helping to ensure transparency and accountability in decision-making. Below is a sample IPS for a small nonprofit to provide a template for creating your own:

1. Purpose

The purpose of this Investment Policy Statement is to establish guidelines for the investment of the assets of [Name of Nonprofit Organization] to maximize returns while managing risk prudently.

2. Objectives

• Preservation of Capital: The primary objective is to preserve the capital of the organization while generating a reasonable return on investments.
• Income Generation: Generate income to support the operations and programs of the nonprofit.
• Long-Term Growth: Achieve long-term growth of the investment portfolio to ensure sustainability and future financial stability.

3. Asset Allocation

The asset allocation strategy will be as follows:

• Equities: 60%
• Bonds: 30%
• Alternative Investments: 10%

4. Risk Tolerance

The organization acknowledges that investments carry inherent risks, and the investment strategy will be aligned with the organization's risk tolerance. The portfolio will be diversified to mitigate risks and optimize returns.

5. Investment Guidelines

a. Investments shall be made in accordance with state and federal laws and regulations governing nonprofit organizations.

b. The investment portfolio shall be reviewed quarterly by the Investment Committee to assess performance and make necessary adjustments.

c. Investment decisions shall be made in consideration of the organization's mission, values, and ethical guidelines.

6. Investment Manager Selection

The organization shall select investment managers based on their expertise, track record, and alignment with the organization's investment objectives. Investment managers shall be monitored regularly to ensure they meet performance expectations.

7. Reporting and Accountability

The Investment Committee shall provide regular reports to the Board of Directors on the performance of the investment portfolio. Transparency and accountability are paramount in all investment decisions.

8. Revisions to the IPS

The IPS shall be reviewed annually and revised as necessary to reflect changes in the organization's financial situation, investment goals, or market conditions. Any revisions to the IPS shall be approved by the Board of Directors.

Creating an IPS is essential for small nonprofits to establish a clear framework for managing their investments. By following a structured IPS like the sample provided above, organizations can ensure that their investments are aligned with their mission, goals, and risk tolerance.

Remember that this sample IPS is just a starting point, and organizations should tailor their IPS to fit their specific needs, circumstances, and objectives. Consulting with financial advisors or investment professionals can also provide valuable guidance in developing an effective investment policy statement for a small nonprofit.