What would your not for profit organisation do if you had excess cash?

Some of the main challenges facing a not for profit organisation are to ensure it remains viability, it can cover costs and be able to achieve key strategic objectives.  In addition, there is also a need to raise funds through donations, membership fees, grants and fundraising activities.

As a board member or treasurer often your focus is on how funds have been spent and trying to ensure funds are used as intended.  There is a very strong focus on the efficient distribution of these funds and less on how the funds could be invested.

Some other reasons why there may be less focus on investing funds include:

  • The complexity associated with investing in the financial markets.
  • Difficulty in deciding what to invest in especially if there is no financial expertise on the board.
  • The risk with making an investment decision and the impact if it goes wrong.
  • If there is a regular turnover of board members then it can be hard to establish a consistent approach.
  • The time to monitor and assess whether the performance of the investment is satisfactory or whether there is a need to make changes.

To address some of these issues a financial advisor or planner could be engaged to provide the advice but this needs to be done with caution.

For example, you need to ensure that the financial advisor understands the nature of your organisation, the risk profile and manages any funds accordingly.  Furthermore, there will be a cost to engage a financial advisor and this may be through direct management fees, commissions from the investments or in some cases an actual fee linked to the level of returns.

There is nothing wrong with this approach as long as the board of management can make an appropriate and informed decision that is in the best interest of the organisation.