What type of investments are prohibited for nonprofits?

Non-Profit Organizations in Virginia are prohibited from investing in any activity that is considered speculative and which would result in a risk of the organization’s principal or income. Generally, this includes investments such as stocks, bonds, options, futures, mutual funds, or commodities. Non-profits are also prohibited from investing in real estate or investing with family members or friends. Additionally, non-profits that are registered with the state are not allowed to engage in activities that could lead to personal financial gain. Virginia Nonprofit Law further stipulates that any investment activity must be in the best interest of the organization. To ensure this, non-profits must have an Investment Policy or Investment Statement. This policy should describe the types of investments allowed, restrictions, procedures, practices, and safeguards with regard to the investment activity. An Investment Oversight Committee or Board Approval must also be established to review and approve investment decisions. In Virginia, non-profits should focus on investments that will generate income while still preserving the organization’s principal. This could include conservative fixed-income investments such as treasury notes, certificates of deposit, money market accounts, or government bonds. Non-profits should also be aware of fund-raising investments, as any income generated must comply with Virginia Nonprofit Law for such activity. Lastly, non-profits should review their investments regularly to ensure the goals and objectives of the organization are met.

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What type of investments are prohibited for nonprofits?

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