Best Practices for Non-Profit OrganizationsWealth Prime
Non-profit organizations have a set of the different mission than what profit enterprises do. Their mission primarily focuses on activities that benefit society at large and their goal is not primarily for profit. Having said that organizations of any sort must have the right management team and business practices in place to function and meet their goals. And for nonprofits, the commitment to maintain a steady, robust income stream, to develop and implement sound investment strategies, and pay daily attention to accounting controls get even more critical because they have a lot at stake– given they are providing for the community and seeking to generate income to best serve them.
Following are the best practices that ensure that a non-profit organization is financially stable, being run according to their stated purposes, is operating in accordance with their tax-exempt status and has a positive outlook for long-term sustainability.
Income streams and Spending budgets should be balanced
Non-profit organizations need an annual operating budget to perform – a realistic operating budget that the organization can adhere to and one that’s approved by the board of directors. Changes are inevitable, especially when it comes to budget. Your budget will evolve throughout the year, so limiting expenses at certain times and allowing you to spend more at others may help to meet the organization’s goals. Also, look out for diverse funding sources in order to balance the continuity and stability of every income stream – very crucial for non-profit organizations. Another way to attain this is by creating a good public image through media coverage which can quickly and inexpensively reach thousands of potential supporters, clients, and volunteers – a good return on investment.
Establish investment objectives and capabilities
Good risk management with regard to an investment strategy requires an organization to balance three, primary goals:
- Minimizing investment risk.
- Obtaining access to the funds when needed.
- Earning a reasonable rate of return. To manage these goals, the board members of a non-profit organization should foremost examine the nonprofit’s short-term and long-term goals. In the context of the mission, operations, and financial needs, the board must then establish investment objectives and risk tolerance. It must consider how many separate instruments and funds to establish and the time horizon of the commitment, the types of acceptable instruments, and the circumstances under which funds may be withdrawn from investments prior to maturity.
Hire A Corporate Officer And Hold The Person Accountable
The board should carefully and diligently screen a corporate officer, who can oversee the investment manager within clear boundaries of authority. The officer would be responsible to authorize investment strategies, approve transactions above a certain monetary level, review account statements, protect against unauthorized trades or unusual activity, ensure that donor restrictions are observed, and recommend investment policy revisions to the board. The officer should be required to make periodic reports to the board outlining his review of the investment manager’s performance.
Next Task – Select An Investment Manager
You can assign the role to someone from your existing team, one with the skill and expertise to manage the investment portfolio. In absence of such a suitable match, look out for an independent professional. Consider a professional with specialized areas of expertise, and compensation arrangements that might affect advice or counsel. Consider whether the candidate is willing and able to handle your account, especially if the commission will look insignificant when compared with his or her other accounts. Make sure the one you select is knowledgeable about investment strategies, as well as the non-profit’s objectives, guidelines, and risk tolerance.
Set relationship goals with the investment manager
After, your investment manager come on board, make sure you set some relationship goals with the professional. Clarify the expected level of service from the moment you assign the professional and talk about how you can facilitate an effective working relationship with him.
- Be clear about the compensation that the professional will receive in exchange for managing the accounts. Carefully read any and all account agreements. Thoroughly read and consciously agree to all terms and conditions.
- Discuss each investment offer with your manager – The investment manager has been screened and trained for a reason. Investment manager is a better person to differentiate between fraud and genuine – so use him or her well.
Follow the Accounting Procedures – the must do’s
The board should throughout safeguard the organization’s assets. The board and senior management should set the tone for the organization. The implementation of basic management controls when combined with accounting controls will help your organization conserve scarce resources and ensure good organizational health. Remember these must do’s:
- Segregate duties – Have multiple professionals to handle these tasks – soliciting donated investment instruments, authorizing the purchase, trade or sale of investment instruments, recording and documenting investment transactions, and reconciling broker or custodial statements with the internal accounts.
- Limit access – Make sure to limit access to the investment instruments (especially bearer bonds, which are cash equivalents). Consider leaving securities instruments in the custody of a professional securities firm or financial institution.
- Schedule regular portfolio reviews – Monitor your investment portfolio’s performance. Evaluate whether the portfolio adequately meets the current investment objectives, else consider other similar instruments and investment opportunities that may be better suited for the organization’s needs.
- Use a reviewer to review transactions and access to funds – Create a current portfolio list with all the required and possible details. Inventory investment instruments and reconcile the inventory with the internal accounts and any broker or trustee statements. Periodically compare market prices and dividend income with published sources.
So these are the practices that you can imply to grow your Non-Profit Organization and If you have any doubts or need help in growing your Non-Profit Organization connect with us now.