• The issue of bond ratings is very interesting and a little unfair. Ratings services like Fitch and Moody’s place great emphasis on the number of days of cash on hand an issuer has available to meet obligations. The more cash on hand, the higher the rating. High ratings lower the interest rate on bonds and make bonds more attractive to more risk-averse investors.

    For nonprofits, the problem is that hoarding cash to enhance bond ratings can harm mission fulfillment and restrict strategic investment. Sometimes the prudent course for a nonprofit hospital hospital or university is to hold less cash on hand, pay a lightly higher interest rate on bonds, and use more cash for services, professional development, expansion, renovation, innovation, etc.