Half of Irish NGOs lack an investment policy

More than half of nonprofit entities in Ireland operate without an investment policy while one in five achieve a zero rate of return in the current low interest rate environment.

These were two of the key findings in a report on the near-€10 billion nonprofit sector commissioned by AIB and Irish Life and launched last night by the Tánaiste Frances Fitzgerald.

Called Growth and Governance in the Nonprofit Sector, the report also found that 64 per cent of these entities planned to expand the scope of their services, 42 per cent intended to offer new products or services, a quarter intend to expand their missions, and 14 per cent planned to expand internationally.

Half of the organisations plan to use their cash resources to expand, with just 8 per cent expecting to use debt to finance their growth.

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Low-risk investors

Perhaps not surprisingly, almost eight out of 10 respondents categorised themselves as low-risk investors. Of those with investment assets, 69 per cent ranked capital security as their top priority.

Some 42 per cent of respondents have cash holdings only despite the current low interest rates on offer. The average return achieved by those who replied to the survey was 3.5 per cent.

The report also cited a strong governance structure and culture within the sector, which has been rocked by various scandals in recent years. In 93 per cent of cases, the board meets more than four times a year, while 70 per cent of boards have more than nine members.

The research suggests that boards could be made effective through the greater use of committees. However, rotation rules should be examined to ensure that they do not compromise the boards’ ability to make long-term investment decisions.

Online responses

The data was compiled by

PwC

last year and was based on online responses from 175 nonprofit groups who provide a wide range of services such as education, healthcare and disability services.

The report included a case study involving the Salesians of Don Bosco, which provides care services to young people who can't live in their own homes.

Fr Paddy Hennessy, provincial economer with the congregation, said it had become increasingly challenging to fund its mission while providing for the growing number of retired Salesians.

“We now recognise that a charity is a business that is nonprofit and has to be run professionally,” he said. “We were afraid of being a business, now we recognise that it is a business. We have to balance this with the care of our members and our purpose.”

Investment approach

Commenting on the findings, AIB’s chief executive

Bernard Byrne

said: “With interest rates at historically low levels and forecast to remain so in the short to medium term, nonprofits are beginning to alter their investment approach in order to fund expansion plans. This has led to increased methods of portfolio diversification, which brings with it increased complexity and sophistication.”

Mr Byrne said more than 50 per cent of Irish nonprofits bank with AIB, and it provides investment advice to help them develop investment plans, with Irish Life providing its customers with a range of investment and savings products.

There are an estimated 19,317 nonprofits in Ireland employing 132,069 people. In 2014, the combined income of all nonprofit organisations was €9.59 billion.