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Medical Services Nonprofit Addresses Vulnerabilities


For nonprofit boards and senior staff, fulfilling their fiduciary responsibility is critical to the success of the organization. In an effort to stay informed and conduct their own due diligence on their financial planning and fiduciary obligations, a nonprofit that offers medical-related services in Western Pennsylvania came to Fragasso Financial Advisors. Our process always begins with a review or creation of an investment policy statement (IPS). For this organization, we found that the IPS limited the diversity of investments and so a proper asset allocation was not in place. The finance committee approved our suggestions and adopted a new IPS that protected their endowment to the extent possible.

The organization felt that the level of communication they were receiving from their previous investment manager was not sufficient to keep them well informed. They were unclear on whether their investments were fully in compliance with their IPS, or how they were tracking versus their spending needs. Our in-person participation in board and finance committee meetings along with our reporting process, including investment performance, IPS benchmarking, risk/return analysis and customized cash flow, all helped the board and finance committee stay well informed and confident.

The board of directors was under the impression that their fiduciary obligation was covered by their director’s and officer’s liability insurance policy. While that can be true if an organization has a specific rider in place, this organization did not, which left its directors, officers and senior staff vulnerable as a result of their fiduciary responsibility. As a Registered Investment Advisor (RIA), Fragasso was able to stand with the organization as a co-fiduciary and help ensure that the directors, officers and senior staff were indeed meeting their fiduciary obligations.

We recognize the value of nonprofits to the betterment of our communities, which is why we offer a 25 percent fee discount to nonprofits and structure nonprofit investments in shares with lower inception costs. As a result of our review and recommendations, we were able to lower this client’s costs of management.