How Intermediate Cash Fund Pools Support Long-Term Investment Portfolios [SUBSCRIBERS-ONLY]

Nonprofit organizations should expand their cash management policies and procedures to include provisions for establishing and maintaining intermediate cash fund pools. This will not only enhance protection and management of operating (short-term) cash funds, but also act as a conservative buffer for long-term investment strategies, allocation targets, and portfolio risk management.

Intermediate cash fund pools (typically set at 2 to 4 months of the annual operating budget) sit between operating (short-term) fund pools (often set at 1 to 2 months of the annual operating budget) and long-term investment portfolios.

In our article on The Importance of Operating and Intermediate Cash Management Target Policies, we explored the key internal control benefits of adding intermediate cash management fund pools to run alongside short-term cash funds that most often reside in business checking accounts. As we discussed in that piece and in our 5-Minute Lesson on Establishing a Cash Management Target Policy, intermediate cash fund pools allow an organization to better protect and manage short-term cash fund pools.

What may be less obvious is how intermediate cash management fund pools can provide synergistic support for long-term investment portfolios. These benefits would not be present without intermediate cash fund pools. The three main benefits are: