In our discussions with boards, Heritage constantly emphasizes the need to build the appropriate level of reserve funds. One question that comes up frequently is how best to invest the reserve funds. The three main goals of investment for associations should be to minimize risk, make sure funds are liquid, and to earn a decent rate of return. Associations can minimize risk by taking the appropriate steps.
First all funds must be placed in a federally insured institution. The Association’s main goal should be the protection of its principle while earning some interest on that principle. For the vast majority of Associations this means investing in money market accounts and CDs. Another major goal of the investment strategy should be liquidity, i.e. having access to your money when you need it. Investing in money market accounts and CDs where appropriate will help accomplish this goal, while also earning interest on the money invested.
The BOD is responsible for choosing its investments. Heritage can provide a list of institutions we deal with frequently and their current rates, but the ultimate decision lies with the board. Once the board makes a decision on investing money, this decision should be communicated in writing to Heritage. Heritage will attempt to do as much of the leg work in getting the account set up as possible. Once an account is set up, the statements should always be addressed to Heritage so that we can properly record all transactions in your financials.