reserve fund

Started by GuyT • 4 replies • 649 views

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GuyT (Texas)
Posts: 1

Posted:

We are a small HOA with a management co. handling most of our business. We are not satisfied with the investing of our reserve funds in the CD's. Can the board of directors take control of the CD's only and if so what are the legal and tax implications of doing this. The interest would be paid back directly into the monthly account of our HOA reserve fund

AugustinD
Posts: 5,144

Posted:

If your HOA is member-controlled, then chances are not only can the Board of Directors "take control" of the investment of reserve funds; the Board has a duty to do so. However, in my experience, to invest in anything other than CDs and money market funds would be a breach of the Board's fiduciary duty. Where else do you want to invest the money?

The interest is reportable as income. Who does your taxes right now? Ask this person for the details.

MarkM19 (Texas)
Posts: 1,459

Posted:

Augustin is exactly right. The boards job is not to invest the HOA's money and make the most interest from it. It is to protect the reserves and earn a modest and safe interest on that money. If boards had the ability to do with reserves what they wanted it would be a disaster. It is other peoples money. If I were you I would look up the definition of Fiduciary.

There are hundreds of other ways to safe HOA funds by watching expenses.

DouglasK1 (Florida)
Posts: 2,046

Posted:

The MC works at the direction of the board and the board can even fire/replace the MC if desired. I agree with other posters that I would stick with investments where the principal is safe, like CDs, but if the board can improve on the current yields they should either direct the MC to invest the association's money elsewhere, or do it themselves.

Escaped former treasurer and director of a self managed association.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

We are not satisfied with the investing of our reserve funds in the CD's.

Stocks are the highest they have ever been. What direction is next? Dooooooowwwwwwnnnnn.

Your kidding yourself if you think otherwise.

Think of loosing 28% of the HOA's money. What would that do to your finances....

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