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    • Sample Memo: The Analyst’s Role
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    • Investment Policy Statement
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Investment Policy Statement

I. PURPOSE: This Investment Policy Statement is adopted by the Board of Trustees of the the organization for the purpose of guiding the Investment Committee in the wise allocation and investment of THE ORGANIZATION reserves and endowment funds and other funds held by THE ORGANIZATION but not needed for current operational expenses.  These goals will be pursued without incurring undue risk relative to the practices of comparable non-profit organizations. 

II. OVERVIEW OF CASH MANAGEMENT & INVESTMENT NEEDS: THE ORGANIZATION maintains a bank account used for payroll and other normal operating expenses. It is the intention of the Board of Trustees that cash of no more than three months of projected operational expenses should be held in the bank account. All other funds will be classified as follows:

A. Operational Reserves: unrestricted funds set aside from time-to-time to provide continuity between fiscal years and as contingency reserves for unanticipated expenses or a temporary decline in unrestricted donations.  Operational Reserves are also funds budgeted for expenditure but are not needed for disbursement in the next three months.

B. Restricted Funds: restricted funds gifted to THE ORGANIZATION for a specific project or event and not to be used for general operating purposes.

C. Endowment: funds gifted to THE ORGANIZATION and held for long-term operational or specific project funding, or such other surplus Operational Reserves that at the Board of Trustee’s discretion may set aside for long term investment purposes. Endowment funds may be self-liquidating (where principle and income are used over time) or perpetual (where only income may be used.)

D. Restricted Reserves: restricted funds gifted to THE ORGANIZATION but not budgeted for expenditure within three or more months.

III. INVESTMENT COMMITTEE—DUTIES & RESPONSIBILITIES: The Investment Committee shall consist of the President and two or more Trustees appointed by the Board of Trustees as the Board shall from time-to-time determine. The Investment Committee is responsible for recommending the investment policy that is to guide the investment of the organization’s assets.  The investment policy describes the degree of overall investment risk that the Committee deems appropriate, given prudent investment principles and the basic objective of the preservation of the purchasing power of the Organization’s assets.  The committee shall have the following duties and responsibilities:

A. Monitor investment managers (if any), investment performance, and compliance with THE ORGANIZATION Investment Policies.

B. Review and recommend to the Board of Trustees investment objectives and policies from time-to-time.

C. Recommend banks, brokerage firms, and investment advisors to the Board of Trustees.

D. Under the objectives and policies set by the Board of Trustees, determine and implement specific strategies (e.g., asset allocations, rolling maturities, etc.) as seem best suited to meet the needs of the various investment accounts from time-to-time.

IV.  INVESTMENT OBJECTIVES & POLICIES: The investment objectives for the three investment accounts referred to in item II above shall be as follows:

A. Operational Reserves

Objective: Reasonable return with minimal risk.

Policies: Investments shall be limited to federally insured Certificates of Deposit, instruments issued by the U.S. Treasury or Government Agencies, or any short term (i.e. one year maturity or less) investment grade corporate fixed income instruments. [Investment Grade is defined as debt instruments with at least a Moody’s Baa or Standard & Poor’s BBB rating.] Investments may also include bank or brokerage money market funds.

 B. Restricted Funds

Objective: Reasonable return with no risk.

Policies: Investments may include federally insured savings accounts, certificates of deposit, or fixed income securities issued by the federal government or one of its agencies.

C. Endowment

Objective: Long term growth through income and capital appreciation with moderate risk.

Policies: Investments may include: all investments qualifying for Operational Reserves, plus common and preferred stocks, corporate bonds and debentures, no-load mutual funds and closed-end mutual funds. THE ORGANIZATION shall not invest in any futures contract or stock option nor purchase any security upon margin.

D. Restricted Reserves

Objective: Reasonable return with no risk.

Policies: Investments may include federally insured savings accounts, certificates of deposit, or fixed income securities issued by the federal government or one of its agencies.

V. INVESTMENT STRATEGIES:  The Investment Committee is authorized to formulate specific strategies (e.g. asset class target allocations, length of maturities, etc.) for the various accounts as long as they are within the general limitations as set forth in this Investment Policy Statement.

VI. REBALANCING PROCEDURES:  Normal cash flows will be used to maintain actual allocations as close to the target allocations as is practical.  At times, markets may move in such a way that normal cash flows will be insufficient to maintain the actual allocations within the permissible ranges.  In these cases, balances will be transferred as necessary between the asset types to bring the allocation back within the permissible ranges, as described above.  Rebalancing shall take place when guideline ranges are exceeded.

VII. SHORT-TERM LIQUIDITY/CASH FLOWS:  The Investment Committee will oversee and direct the President on short term investment strategies that provide appropriate cash flow and liquidity. Towards that end, the President shall report to the Investment Committee on a quarterly basis the status of the following short term investment criteria:

A. For day-to-day operational cash needs, monitor checking account cash flows so checking balances are minimal, but sufficient to cover all very short-term cash needs (payroll, rents, etc.).

B. Establish and monitor an interest bearing money market fund, focusing on a high quality, low fee option such as a Vanguard U.S. Treasury or Prime (Admiral Series) Fund.  Monitor and report on the fund’s daily check writing features. Funds not needed within the month but shorter than one year will be allocated here.

C. Establish a short-duration bond fund.  Focus on a high quality, low fee option with a one- to two-year duration.  Funds needed within that duration band (and longer until funding dictates otherwise) will be allocated here.