Investment Governance for Not-For-Profit Boards and Foundations

Investment policy, cash reserve strategy, ESG frameworks, and fiduciary compliance for NFP boards.

General Advice Warning: Any advice on this site is general in nature only and has not been tailored to your personal objectives, financial situation and needs. Please seek personal advice prior to acting on this information.

Most NFP boards have a fiduciary obligation to manage their organisation’s financial reserves prudently. In practice, this often means a term deposit rolling over year after year because nobody on the board feels qualified to make a different decision.

The problem is not a lack of options. The problem is a lack of governance infrastructure. Without an investment policy statement, a defined risk framework, a spending policy tied to the mission, and an ESG overlay that reflects the organisation’s values, the board cannot make investment decisions with confidence.

Build MyWealth works with NFP boards and foundations to build that infrastructure. We are not an institutional fund manager. We do not require a minimum fund size. We work with boards where the reserves range from $500,000 to $10 million and the challenge is governance, not scale.

The Three Governance Gaps in NFP Investing

Gap 1: No Investment Policy Statement

An Investment Policy Statement (IPS) is the foundation of NFP investment governance. It defines the organisation’s risk tolerance, asset allocation targets, return objectives, liquidity requirements, and any ethical or ESG constraints.

Without an IPS, every investment decision is made ad hoc. The board cannot demonstrate to the ACNC, to donors, or to its own members that investment decisions are consistent, transparent, and aligned with the organisation’s mission.

An IPS does not need to be complex. For many small-to-medium NFPs, it is a 5 to 10 page document that provides a clear framework for decision-making and a benchmark against which performance can be measured.

Gap 2: Cash Reserves Sitting in Term Deposits

Term deposits are familiar and feel safe. For short-term operational cash (the next 6 to 12 months of expenses), they are appropriate. For reserves intended to support the organisation over 3, 5, or 10 years, they are likely to underperform inflation after accounting for tax.

The transition from term deposits to a diversified portfolio does not need to happen all at once. A staged approach, moving reserves into a mix of fixed income, Australian and international equities, and property in line with the IPS, allows the board to build confidence while improving the long-term return on reserves.

Gap 3: ESG Alignment Without a Framework

Many NFPs have mission-based investment restrictions but no formal ESG framework. They know they should not invest in sectors that conflict with their values, but they have not documented what those restrictions are or how they should be applied.

A formal ESG overlay, documented in the IPS, provides the board with a defensible position. It ensures investment decisions are consistent with the organisation’s stated values and can be reported to stakeholders with clarity.

What Build MyWealth Does for NFP Boards

1. Investment Policy Statement development. We work with the board to define risk tolerance, return objectives, liquidity needs, and ESG constraints, then document the policy in a clear, functional IPS.

2. Cash reserve strategy. We model the transition from term deposits to a diversified portfolio, including the asset allocation, the implementation timeline, and the expected return improvement relative to the current position.

3. Portfolio construction and implementation. We construct a portfolio aligned to the IPS using a combination of managed funds, ETFs, and direct investments. We implement through platforms that provide institutional-grade reporting at NFP-appropriate cost.

4. Ongoing governance support. Quarterly investment reporting, annual IPS review, board presentation support, and investment committee participation as needed.

5. ESG reporting. Transparent reporting on the portfolio’s alignment with the organisation’s ESG framework, including sector exclusions, positive impact allocations, and any deviations from the stated policy.

Published on This Topic

Sangram Rana’s commentary on NFP financial health has been published in Benefolk: “From Surviving to Thriving: A New Playbook for NFP Financial Health.” This article addresses the structural challenges facing Australian NFP organisations and the role of governance infrastructure in financial sustainability.

Illustrative Scenario: The Community Foundation

This scenario is illustrative only and uses simplified figures.

A community foundation holds $3.2 million in reserves. The reserves have been in a rolling 12-month term deposit for four years, earning approximately 4 per cent. After fees and any applicable tax, the net return is approximately 2.8 per cent. Tax outcomes vary significantly across NFP structures and charity registrations, and tax exempt status depends on the organisation’s registration and structure. Inflation over the same period has averaged 3.5 per cent. The foundation’s reserves have been losing purchasing power every year.

The board engages Build MyWealth to develop an IPS. The process identifies that $800,000 is needed for operational liquidity (12 months of expenses). The remaining $2.4 million has a 7 to 10 year time horizon and can support a diversified growth allocation.

The IPS defines a target allocation of 30 per cent Australian equities, 20 per cent international equities, 30 per cent fixed income, 10 per cent property, and 10 per cent cash. ESG exclusions are documented: no tobacco, no gambling, no weapons manufacturing.

Over a 10-year horizon, the diversified portfolio is modelled to deliver a net return approximately 2 to 3 per cent per annum above the term deposit strategy, compounding to an additional $600,000 to $900,000 in reserves available for mission delivery.

This scenario is illustrative only. Past performance is not an indicator of future results.

Frequently Asked Questions

If your organisation holds reserves that are invested beyond operational cash, yes. An IPS provides governance, accountability, and a framework for consistent decision-making.
Board members have a fiduciary responsibility to act in the best interests of the organisation, exercise reasonable care and diligence, and manage the organisation assets prudently.
Yes, provided the investments are consistent with the organisation purposes and documented in an IPS.
A documented set of environmental, social, and governance criteria that guide investment decisions. For NFPs, this typically includes sector exclusions (activities that conflict with the mission) and may include positive impact allocations.
A general guideline is 6 to 12 months of operating expenses in liquid cash or short-term deposits. The exact amount depends on the organisation’s funding cycle, revenue predictability, and planned expenditure.
The target return depends on the time horizon, risk tolerance, and spending policy. A common target for medium-term reserves is CPI plus 2 to 3 per cent after fees and tax.
We provide a fee proposal after the initial consultation, based on the complexity of the engagement. There are no hidden fees, trailing commissions, or product-based incentives.
Yes. We regularly present to NFP boards on investment policy, portfolio performance, and governance framework reviews.
Quarterly investment reports showing portfolio performance against the IPS benchmarks, asset allocation, ESG compliance, and any recommended changes.
We work with NFPs holding reserves from $500,000 to $10 million. We do not require an institutional-scale minimum.
An investment adviser provides strategic advice on how to invest. A fund manager actively manages the portfolio. Build MyWealth provides advisory services and constructs portfolios using managed funds, ETFs, and direct investments rather than managing a fund directly.
Staged implementation is recommended. Move reserves into the target allocation over 3 to 6 months as term deposits mature. This allows the board to build confidence and avoids timing risk.
The ACNC governance standards require NFPs to manage financial resources responsibly. The AICD’s NFP Governance Principles provide a framework for board responsibilities including financial oversight.
Salary packaging is an employment benefit, not an investment decision. However, Build MyWealth can advise NFP boards on the financial implications of salary packaging programs for the organisation.
Request a consultation. We begin with a review of your current reserves, investment arrangements, governance documents, and board composition to identify what is in place and what is missing.

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If you would like to discuss your organisation’s investment governance, reserve strategy, or ESG framework, we will confirm the most appropriate next step within one business day.

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Rates and thresholds should be confirmed on ATO published pages at the time of implementation, as indexation and legislation changes can occur.