Many Not-for-Profit (NFP) Boards face the increasing challenge of delivering on their mission with less operating cash flow. There are many reasons for the reduction in cash flow including lower funding/donations, rising operating costs and many more.

Often, a focus on more efficient use of working capital and reserves can be part of the solution. As Boards search for a better return on funds, it’s a good reminder of what the ACNC requirements are. You can read a full copy of the Guide on the Australian Charities and Not-for-profits Commission website ( All NFP organisations are unique and regardless of their size, cause or association, should develop an Investment Policy Statement (IPS) that is robust and functional, as well as flexible enough to cater for both Board and organisational change and to meet the long-term goals of the organisation in an ever-changing environment. The Board of a NFP has a fiduciary responsibility to protect the organisation's assets and ensure that its operations and activities use the assets to further the NFPs mission. Therefore, an IPS is critical.

An IPS is essentially a roadmap for funds management; it sets the ground rules for investing and outlines how investment decisions will be made and what steps must be taken to ensure good governance. It also helps link values, mission and operational needs to the organisations’ financial resources. A good IPS is clear and functional and does not need to be overly complicated nor legalistic. It should articulate the governance of the funds, define how the funds are to be invested and confirm what outcomes are expected in terms of returns. It should also clarify any constraints that need to be in place. Many NFPs have ethical and SRI overlays that restrict investment in certain sectors, activities or companies, for example alcohol and tobacco; these restrictions need to be included in the IPS.

A robust IPS will provide certainty that investment decisions are being made in-line with the NFP’s stated risk appetite. Stakeholders should be able to go to the IPS, understand exactly how funds are invested and the governance structure in place.

So what needs to be considered in an IPS?

What is the purpose for the investment assets?

Roles and Responsibilities:

  • Who does what? Risk profile

Investment Framework

  • Types of securities in which the organisation can invest: e.g. Cash, Bonds, Shares, Managed Funds
  • Quality and maturity of fixed income securities
  • SRI-Socially Responsible Investing
  • Target return e.g. a total return on investments of CPI + 3% (risk profile dependent)
  • Type of investments in which the organisation may not invest: e.g. XYZ Organisation will not invest in securities purchased on margin, options, futures or other derivative instruments
  • Asset diversification including a Strategic Asset Allocation (SAA)

Investment Monitoring and Reporting

  • The use of professional financial advisers Reporting framework and cycle
  • Portfolio monitoring and rebalancing to SAA should be adopted as a risk-management strategy

There is a lot to consider for a NFP Board when designing, implementing and managing an investment portfolio. Morgans works with clients in the NFP sector helping them navigate the road to higher returns. We have considerable experience working with large and small organisations and will tailor solutions specific to the NFP’s needs and circumstances.

To learn more about how NFP organisations can earn a greater return and gain the best understanding of the risks involved, please contact a Morgans Adviser near you.

Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

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