Financial Governance & Sustainability · 8 September 2026
An association that has built the reserves discussed in the previous article eventually faces a follow-on question: what happens to that money while it sits there. Leaving a meaningful reserve in a zero-interest transaction account is itself a decision, and not obviously the safest one. Investing it prudently is not a departure from an association's mission. Done properly, it is part of protecting the mission's long-term capacity to continue.
Why The Regulator Felt The Need To Speak Directly On This
The ACNC has published dedicated guidance specifically addressing charities investing money for financial return, prompted by a genuine, common dilemma: an organisation that has responsibly built reserves now needs to decide what to do with them. An ACNC Commissioner addressed the reasoning directly, noting that a poor investment decision could lead to unexpected losses that impact an organisation's ability to fulfil its purpose, and that trust, the foundation the entire charity and not-for-profit sector is built on, cannot be taken for granted. Directors, the Commissioner stated plainly, need to demonstrate they have crafted an investment strategy with reasonable care and diligence, so that decisions are made in the best interests of the charity and support its purpose.
The Same Duty, Applied To A Different Decision
Investment decisions sit inside exactly the same ACNC Governance Standard 5 framework this series has returned to repeatedly: Responsible People must manage financial affairs responsibly, act with reasonable care and diligence, and ensure decisions serve the organisation's purpose rather than drifting from it. The ACNC deliberately does not prescribe specific rules about what a charity must do when investing, leaving the appropriate approach to each organisation's own circumstances, the same non-prescriptive pattern this series noted in the reserves policy discussion. What the regulator does expect is evidence of a genuine, reasoned process behind the decision, not a specific asset allocation. The absence of a prescribed rulebook is not the same as an absence of scrutiny. A board asked to explain an investment decision after the fact needs a documented process to point to, not simply a result that happened to work out.
A Genuine Structural Distinction Most Boards Do Not Know
Here is a nuance worth understanding, connecting directly back to the legal structure discussion at the very start of this series. Most associations, structured as companies limited by guarantee or incorporated associations, sit under the general Governance Standard 5 duty just described, care and diligence, but no legally mandated formal investment policy document. Organisations structured differently, most notably Private Ancillary Funds and similar charitable trusts, sit under a meaningfully stricter regime. Trustees of these structures must exercise the specific care, diligence and skill a prudent person would exercise managing the financial affairs of others, and are required to hold a formal, documented Investment Policy setting out the fund's objectives. An association considering setting up a related trust or foundation structure to hold reserves should understand this distinction before assuming the same lighter-touch obligation carries across.
Building A Genuine Investment Approach, Even Without A Mandated Document
- Document the investment approach in writing even where no formal Investment Policy is legally mandated, since a documented, reasoned process is what the general duty of care and diligence is testing for.
- Connect the investment approach directly to the reserves policy discussed in the previous article, since the two decisions, how much to hold in reserve and what to do with it, are one continuous financial governance question, not two separate ones.
- Set an explicit risk tolerance for invested funds, connecting to the risk appetite statement discussed earlier in this series, since a conservative reserve serving a solvency-protection purpose calls for a different risk tolerance than a longer-term growth fund.
- Confirm whether any related trust, foundation, or Private Ancillary Fund structure connected to the organisation is subject to the stricter, formally mandated Investment Policy requirement, rather than assuming the association's own lighter obligation extends across the whole structure.
- Review the investment approach on a cycle, since market conditions, the organisation's own risk capacity, and the purpose the funds are held for can all shift meaningfully over time.
Investing reserves prudently is not a distraction from an association's mission. Left idle in a low-yield account, or invested without any documented reasoning behind the choice, reserves quietly fail to do the job they were built for in the first place, protecting the organisation's capacity to keep delivering its purpose well into the future.
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— Annie