reseve fund theft

Who had authority to write a check or move funds from one account to another? Is this authority documented at the bank? If so, and the bank violated its own rules, I imagine you could get the CD cashed in without penalty. If not, the rest of the board could tell the bank what happened and make an argument that the CD should be cashed in without penalty on legal grounds.

If the bank refuses to cash in the CD without penalty, then get through the 15 months and let this side of the matter go.

If I were on this HOA's board, I would motion for removal of the President; announcement of this unlawful action at a meeting; and discuss a possible Special Meeting for removal of the director.

I have heard of Compass Bank, so it is not like it is un-reputable. But the rate of interest underwhelms, based on the latest rates shown at bankrate.com, so this is troubling.

While this may not have been done properly (the board should have voted on placement of the CD) it is certainly NOT correct to characterize this as theft.

There are some questions I have regarding this situation.

Rex,

Are you on the board? Did the board as a whole vote on this or did the president act unilaterally? What exactly do your governing docs say about where reserves are held? Many people feel that reserves should not be invested in the stock market, or anywhere where the principal is at risk. Some governing docs mandate this, and some might also require funds to kept in insured accounts. A CD should meet those requirements. Obviously, it makes sense to shop for the best deal. While 1.39 might not match the best rates found at bankrate nationwide, it is still not bad. I checked local banks and the best rate offered around here is 0.70, and the banks that we bank with are more like 0.10 if we were to transfer to a CD.

I find it a little odd that this Board Pres would approve a CD that large without discussion. On our board we would have the Treasurer work with a Financial advisor that the board agreed on earlier. That person would at the next meeting make the suggestion to the board and a vote would be taken and recorded.The rates on CDs are low but they have very low risk which is the boards responsibility.

We have no idea from Rex's note how much total assets the board has in other CDs. It is important to make sure that the HOA has cash on hand to handle any reserve items that may need to be funded without having to pay a penalty to cash a CD prematurely.

I always have suggested using smaller CDs that can be purchase and need to renewed every month or 2 so that the HOA funds can be managed properly. This is normally called laddering and if it is not already in place can be done by taking the 140K and buying a 3 month 40K CD and a 6 month 50K and a 1 year 50K CD. As new funds come available to be invested you fill in the months that have no CD expiring. The rates on short term CDs are lower but you are managing the HOA funds properly.

Our board pretty much follows what MarkM lays out. We have an officer who is constantly on the lookout for good rates. The Board approves shifts to other accounts, etc. Our CC&Rs required the funds be in insured accounts. Our reserves funds are in about 6 accounts.

I'd like to know, if a CD is considered "investment", what form of money storage would be secure but not an "investment"?

1.39% WOW!!! that's lowball, you could have shopped that to a Credit Union and gotten almost 2.5