Legacy Haven Academy Investment Policy Statement

Article I: Introduction and Purpose

The Legacy Haven Academy Foundation (the "Academy") is dedicated to providing educational opportunities, mentorship, and support for orphaned or homeless youth aged 10-18, fostering lifelong learning through curiosity-driven academics, STEAM programs, outdoor adventures, and character development. As the Academy pursues 501(c)(3) tax-exempt status under the Internal Revenue Code, this Investment Policy Statement (IPS) establishes guidelines for the prudent management of its financial assets to support its charitable mission.

This IPS ensures compliance with federal regulations under the Internal Revenue Service (IRS), including avoidance of kindizing investments that could endanger the Academy's charitable purposes (Internal Revenue Service, 2024a). It aligns with Arizona's adoption of the Uniform Prudent Management of Institutional Funds Act (UPMIFA) in Arizona Revised Statutes (A.R.S.) Title 10, Chapter 41, which mandates consideration of the Academy's charitable purposes and long-term sustainability in investment decisions (Arizona Legislature, 2024a). No specific investment regulations were identified at the Mohave County level; thus, state and federal standards govern (Harbor Compliance, 2024).

The purpose of this IPS is to: (a) define investment objectives; (b) outline asset allocation and permissible investments; (c) establish spending and monitoring procedures; and (d) promote fiduciary responsibility among Board members and advisors. This policy reflects best practices for non-profit investment management, emphasizing diversification, risk tolerance aligned with mission needs, and periodic review (National Council of Nonprofits, n.d.; CliftonLarsonAllen, 2023).

Article II: Scope

This IPS applies to all investable assets of the Academy exceeding $50,000 in liquid reserves, including endowments, unrestricted funds, and donor-restricted investments, but excludes operational cash holdings for day-to-day expenses (e.g., payroll, program costs). Upon receipt of 501(c)(3) status, all investments must further exempt purposes under Internal Revenue Code § 501(c)(3) (Internal Revenue Service, 2024b). Assets under management shall be held in accounts with qualified custodians, such as federally insured banks or registered broker-dealers.

Article III: Responsibilities

• Board of Directors: Ultimate fiduciary responsibility for oversight, approval of the IPS, and annual review. The Board shall delegate day-to-day management but retain authority to hire/dismiss investment advisors (A.R.S. § 10-11802; National Council of Nonprofits, n.d.).
• Investment Committee: A subcommittee of the Board, comprising at least three members with relevant expertise, responsible for implementing the IPS, selecting managers, and quarterly reporting. If no committee exists, the full Board assumes these duties.
• Investment Advisor/Manager: External fiduciary (e.g., registered investment advisor) selected via competitive process, bound by the prudent investor rule under A.R.S. § 14-10901 et seq., to manage assets without conflicts (Arizona Legislature, 2024b; Internal Revenue Service, 2008).
• Compliance Officer: Designated staff or Board member to monitor adherence to IRS, Arizona, and UPMIFA standards, including annual audits for kindizing investments (Internal Revenue Service, 2024c).

All parties must adhere to the duty of care, loyalty, and obedience, avoiding self-dealing per IRS governance guidelines (Internal Revenue Service, 2008).

Article IV: Investment Objectives

Investments shall prioritize preservation of capital while generating income to support the Academy's mission of youth education and development. Specific objectives include:

• Total Return: Achieve a real (inflation-adjusted) return of 4-6% annually over a 5-year rolling period, balancing growth and income (Arizona Community Foundation, 2024; Manning & Napier, 2021).
• Risk Tolerance: Moderate, with volatility not exceeding 8% standard deviation annually, to protect against mission-impairing losses. Diversification across asset classes mitigates risk (A.R.S. § 10-11802; National Council of Nonprofits, n.d.).
• Liquidity: Maintain 10-20% in liquid assets to cover 12-18 months of operating expenses.

Objectives shall be reviewed annually to reflect changes in economic conditions or Academy needs.

Article V: Asset Allocation

The strategic asset allocation shall be diversified to achieve objectives while complying with UPMIFA's prudence standards. The target allocation is:

• Equities (U.S./International): 40-60%, for growth potential; diversified via index funds/ETFs (National Council of Nonprofits, n.d.).
• Fixed Income (Bonds/Cash Equivalents): 30-50%, for income and stability; investment-grade only (A.R.S. § 10-11802).
• Alternatives (Real Assets, e.g., REITs): 0-20%, for inflation hedge; limited to low-volatility options (Arizona Community Foundation, 2024).
• Cash/Short-Term: 5-10%, for liquidity buffer.

Rebalancing shall occur semi-annually or when deviations exceed 5%. Tactical adjustments require Committee approval (Manning & Napier, 2021).

Article VI: Permissible and Prohibited Investments

Investments must demonstrate reasonable care and prudence, considering factors such as economic conditions, tax consequences, and expected total return (A.R.S. § 10-11802).

Permissible:

• Publicly traded equities, bonds, and mutual funds/ETFs from reputable managers.
• U.S. Treasury securities, agency bonds, and high-quality corporate/municipal bonds (BBB rating or higher).
• Alternatives limited to 20% (e.g., timber, infrastructure via funds).
• Program-related investments (PRIs) advancing mission (e.g., loans to educational partners), exempt from kindizing investment taxes (Internal Revenue Service, 2024d).

Prohibited:

• Speculative derivatives, commodities futures, or private placements exceeding 5%.
• Investments in for-profit entities conflicting with mission (e.g., tobacco, weapons).
• Jeopardizing investments lacking business prudence, such as highly leveraged or illiquid holdings (Internal Revenue Service, 2024c).
• Margin trading or short-selling.

Article VII: Spending Policy

For endowed or quasi-endowed funds, annual spending shall not exceed 4-5% of the prior year's average market value (3-year rolling average), adjusted for inflation, per A.R.S. § 10-11803 (Arizona Legislature, 2024c). Unrestricted funds may distribute up to 5% annually for programs. Excess spending requires donor consent for restricted funds. This policy preserves purchasing power while funding operations (Infinite Giving, 2021).

Article VIII: Monitoring, Reporting, and Review

• Performance Monitoring: Quarterly reports on returns, risk metrics, and compliance, benchmarked against policy targets (e.g., 60/40 equity/bond index).
• Manager Evaluation: Annual review of advisors; termination if underperformance persists over 12 months.
• Policy Review: Annually by the Investment Committee, with Board approval. Amendments require majority vote.
• Conflicts of Interest: Annual disclosures; transactions with related parties prohibited without Board approval (Internal Revenue Service, 2008).

This IPS ensures the Academy's assets support its enduring mission of empowering youth, in compliance with all applicable laws.