- For a donor weighing a significant gift, understanding how the organization plans to manage the funds is often something they weigh before making their decision.
- A detailed reserve policy and investment policy statement can give an organization a concrete way to demonstrate sound financial stewardship.
- Reporting that ties back to policy is one of the clearest ways an organization can show that its fiduciary duty is being met.
- Documentation helps donor intent carry forward as boards, staff, and advisers change.
- An investment adviser can be useful in building donor confidence. For example, we support nonprofit development teams with donor engagement, attending meetings to answer questions about a nonprofit’s investment policies, reporting, and general stewardship.
Overview
For a donor weighing a significant gift, understanding how the organization plans to manage their gift in addition to its reserves, endowments, and any other gifts, is often something they consider before making their decision. This helps provide confidence that their gift will be stewarded responsibly and contribute to their desired impact.
Financial stewardship is the disciplined management and governance of an organization’s reserves, endowment, and gifts in service of its mission. This article covers what donor confidence in financial stewardship tends to be built on: the policies that anchor it, the reporting that shows those policies are being followed, and the documentation that carries donor intent forward over time.
What Builds Donor Confidence in Financial Stewardship?
An organization can build donor confidence through detailed policies, consistent reporting, a focus on documentation, and decisions that clearly follow the standards set within the policies. When a donor makes a significant gift, they are considering more than the organization’s mission. They also want assurance that the organization will manage the gift responsibly and in keeping with its intended purpose.
For a major donor considering a planned gift, being able to produce documentation that demonstrates fiduciary responsibility can influence whether the gift is made by building confidence and trust. This is important because according to the Give.org Donor Trust Report 2026, published by the BBB Wise Giving Alliance in May 2026, 67.7 percent of surveyed U.S. adults said it is essential to trust a charity before donating, while 18.3 percent reported having high trust in charities.
In practice, three documents carry most of that weight: the reserve policy, the investment policy statement, and the most recent investment report. Read together, they show a donor what the money is for, how it is invested, and whether the organization did what it said it would do.
"An organization can build donor confidence through detailed policies, consistent reporting, a focus on documentation, and decisions that clearly follow the standards set within the policies."
THE ROLE OF THE Reserve Policy and Investment Policy Statement IN FINANCIAL STEWARDSHIP
Sound financial stewardship is often anchored by two board-approved policies that every nonprofit with reserves should have in place: a reserve policy and an investment policy statement, often called an IPS. Together, these policies offer a nonprofit a defensible framework for how its reserves, endowments, and gifts are governed and invested.
- Reserve Policy: A reserve policy provides the structure. It defines what the organization’s reserves are for, including how much to hold in each pool and when the funds can be used. It separates day-to-day operating cash from funds set aside to protect the organization and funds intended to support long-term goals.
- Investment Policy Statement: An investment policy statement defines the nonprofit’s objectives and sets the guidelines and accountability for how reserves are managed and governed. It generally, at minimum, documents the target allocation, the role of each asset class, the benchmarks used to evaluate performance, and the fiduciary responsibilities of the board, staff, and adviser.
Overall, while the reserve policy states what each pool is for, the IPS states how each pool is invested. When creating these policies, detail is critical. A policy written in broad, general language gives a donor little to rely on, while one that specifies purpose, targets, and accountability gives the organization something concrete to reference and gives the board a defined standard to govern against. When developing these policies, or factoring in restrictions on donor gifts, documentation is critical: it gives the current board a clear reference point, and it gives future board members what they will need to familiarize themselves with the policies and the reasoning behind them
How Investment Reporting Demonstrates Fiduciary Duty
An investment policy statement supports donor confidence and fiduciary duty only when the organization can show it is being followed through investment reporting. Having a reserve policy and an IPS on file is important, but is not enough. In practice, fiduciary duty comes down to the decisions and reporting that show the organization is acting in accordance with its policies.
Reporting is where the policy becomes visible. An investment report that supports stewardship does more than list returns. It shows the current allocation next to the target allocation set in the IPS, measures performance against the benchmarks the IPS defines, and confirms that spending stayed within the policy’s guidelines. Read alongside the policies, that reporting connects the governance framework on paper to the decisions that were made.
"An investment policy statement supports donor confidence and fiduciary duty only when the organization can show it is being followed through investment reporting."
Reading the IPS and the Report Side by Side
We recommend reviewing the IPS and the most recent investment report side-by-side while evaluating a short set of questions:
- Does the current allocation match the target allocation in the policy?
- Are the benchmarks used in the report the ones the IPS names?
- Has spending stayed within the policy’s guidelines?
- Where the report and the policy differ, is there a documented reason?
When the answers align, the organization has evidence it can point to. A development officer can reference that evidence in a donor conversation.
Wondering whether your reporting would hold up in a donor conversation?
Honoring Donor Intent for Restricted and Endowed Gifts
Donors who give restricted or endowed gifts want assurance that their intent will be honored, not only in the current year but for as long as the gift is held. Meeting that expectation is a matter of governance: clear gift documentation that is shared as boards turn over, restrictions that are tracked and respected, and spending decisions that stay aligned with what the donor specified.
Some donors also express specific wishes about how their gift is invested. A donor may ask that funds support a particular purpose, or that the portfolio reflect certain values. Accommodating a request of that kind, where the organization chooses to, calls for a way to document the wish, reflect it in the investment approach, and potentially report back to the donor on how it is being met.
Documentation is the common element across restricted gifts, endowments, and donor-specific requests. It is what helps donor intent carry forward as board members rotate, staff turn over, and as advisers change: everyone working from the same written record instead of institutional memory. Intent that is not documented is harder to keep aligned across those transitions.
How an Investment Adviser Supports Donor Engagement
An investment adviser may be able to partner with a nonprofit in ways that extend past managing the portfolio. At Raffa, we help organizations not only with investment management and governance policies, but also with donor engagement. This can include attending meetings with the development team, meeting one-on-one with donors, or offering educational sessions to either the development team or donors themselves. In each case, the support is meant to reinforce the donor confidence a development team is already working to build, not replace it.
Our donor and member engagement support works alongside a development team in four ways:
- Demonstrating stewardship: showing donors that reserves, endowments, and gifts are managed with thoughtful governance.
- Donor education: presentations and seminars for donors on planned giving, donor-advised funds, and tax-efficient charitable giving.
- Development team support: educating the development team and joining the donor conversations that call for financial expertise.
- Personalized donor guidance: one-on-one consultations with donors on general giving questions and on their own charitable giving.
Educational sessions of this kind also build a development team’s own financial fluency, which is part of why we treat board and staff education as a service rather than an add-on.
What to Ask When Interviewing Advisory Firms
When interviewing investment advisory firms, organizations interested in donor engagement assistance should ask what the firm’s donor engagement services include and whether they are included in the fee. Not every investment advisory firm is able to assist with donor engagement, some may view it as an add-on service, and the services offered may vary from one firm to the next.
DEMONSTRATING Financial Stewardship IN SUPPORT OF Donor Confidence
Demonstrating financial stewardship is a pattern: governance policies with supporting documentation, reporting that shows those policies are being followed, and donor intent that is honored consistently. It is not done through any single action. For nonprofits and associations that depend on donor support, having comprehensive policies in place, along with the knowledge and insight to properly explain them, can increase donor confidence and help a donor feel comfortable making a large gift.
We have spent more than 20 years helping nonprofits and associations bring this kind of clarity to their reserve policies, investment policy statements, and donor conversations.
Frequently Asked Questions Related to Engaging Nonprofit Donors
What is financial stewardship for a nonprofit?
Financial stewardship is the disciplined management and governance of the money a nonprofit holds beyond its immediate operating needs, including its reserves, its endowment, and the gifts it receives. In practice it means board-approved policies that set the standards, decisions made within those policies, and reporting that shows the standards were met.
Does a nonprofit need both a reserve policy and an investment policy statement?
Most nonprofits with reserves benefit from having both a reserve policy and investment policy statement, as the two documents work together supporting different objectives. A reserve policy states what each pool of money is for and when it can be used, while an investment policy statement states how each pool is invested and who is accountable. An organization with reserves but no investment policy statement has no documented standard to measure its investment decisions against.
What financial documents should a nonprofit share with a major donor?
The reserve policy, the investment policy statement, and the most recent investment report are the documents that most directly show how funds are governed and invested. Gift agreements and documentation of any restrictions matter as well when the conversation concerns a restricted or endowed gift. What an organization chooses to share is its own decision, and many organizations summarize the documents rather than distribute them in full.
Can a donor restrict how their gift is invested?
Yes, a donor may ask that a gift support a particular purpose or that the portfolio reflect certain values, and some organizations choose to accommodate a request of that kind, within limits. Doing so calls for documenting the request, reflecting it in the investment approach, and deciding in advance how it will be reported back to the donor. An organization is not obligated to accept a restriction that conflicts with its policies or its fiduciary responsibilities.
How often should a nonprofit report to donors on an endowed gift?
Many organizations report to endowment donors annually and draw those figures from the quarterly investment reporting the finance committee already receives, so that what a donor is told matches what the board reviewed. There is no single required schedule or process, and the process varies by organization and by the terms of the gift. Your investment adviser may be able to assist with the reporting.
What is the difference between a restricted gift and an endowed gift?
A restricted gift must be used for the purpose the donor specified, and it may be spent in full once that purpose is met. An endowed gift is intended to be held and invested, with spending limited to a portion of the fund over time. A gift can be both and should be thoroughly documented at the time the gift is made, providing detailed documentation for the adviser and a reference point for both current and future board members.
Juliana Salamone, CFP®
Senior Portfolio Manager
Juliana Salamone, CFP®, is a Senior Portfolio Manager at Raffa, where she works closely with nonprofit clients and individuals to develop thoughtful, prudent investment strategies aligned with their goals, preferences, and financial condition. She brings deep experience serving clients, guiding them through comprehensive financial planning, portfolio construction, and ongoing investment oversight. Juliana is a CERTIFIED FINANCIAL PLANNER™ professional and an investment adviser representative of Raffa.
Disclosures:
For informational purposes only. All economic and performance information is historical and not indicative of future results. Any forward-looking statements are based on current expectations and are subject to uncertainties. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this material will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. You should not assume that any discussion or information provided here serves as the receipt of, or as a substitute for, personalized investment advice from Raffa Investment Advisers or any other investment professional. To the extent that you have any questions regarding the applicability of any specific issue discussed to your individual situation, you are encouraged to consult with Raffa Investment Advisers.
All investments involve risk, including the possible loss of principal. Past performance is not indicative of future results. Indexes are unmanaged and cannot be invested in directly. References to specific indexes or benchmarks are illustrative examples of commonly used references and are not recommendations.
Raffa Investment Advisers is a registered investment adviser with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. All information is obtained from sources believed to be reliable, but Raffa Investment Advisers does not guarantee its reliability. Information pertaining to Raffa Investment Advisers’ advisory operations, services, and fees is set forth in Raffa Investment Advisers’ current disclosure statement, a copy of which is available from Raffa Investment Advisers upon request.
Statistics cited in this article are drawn from the Give.org Donor Trust Report 2026, published by the BBB Wise Giving Alliance in May 2026. Raffa Investment Advisers is not affiliated with Give.org or the BBB Wise Giving Alliance and does not endorse either organization. Third-party information is obtained from sources believed to be reliable but has not been independently verified by Raffa Investment Advisers.
Portions of this article were drafted with the assistance of AI tools and reviewed by Raffa Investment Advisers staff for accuracy and compliance.