Reserve Study

Q

Do you know of any literature, white papers, etc. that talks about best practices for investing association reserve funds? I have been to CAI’s website. Has anyone written about this? It is quite a dilemma given the interest rate environment we are in at the moment. My associations where I am a member are in CO

A

Your question involves a subject that is important for all community association board members and owners.  While there is not a single publication that addresses investment of reserve funds, the Best Practices Reports published by the Foundation for Community Association reserves, and the education materials offered by CAI are consistent in their advice.

1)      Due the fiduciary responsibilities of the Board of Directors the primary objective of the investment should be safety, followed by liquidity, then yield.

2)      The Board should adopt an Investment Policy to assure they make consistent choices and have appropriate controls in place

3)      The Board should rely on the advice on an investment advisor to assure they meet their responsibilities.

You can download a copy of the Best Practices Report on Reserves on the Foundation website :

http://www.cairf.org/publications/default.aspx

Q

How can we owners convince the board of directors of our condo association to have a reserve done of our building? Our reserve fund is now $471,000.00 for a 100 unit complex and dues are increased yearly but very little has been done for our improvements and condo repairs. Thank you.

A

Providing articles from the Community Associations Institute, or an Internet search engine, that detail the need for a reserve study may be all it takes to persuade a formerly-recalcitrant board to spend the necessary money on a reserve study. Sometimes, however board members may serve for such a long time on that they no longer are in touch with new best practices in community association operations. It may take a shake-up in board composition, with the infusion of new leaders who better understand the need for a reserve study and frequent updates, to ensure that the association is on a better financial foundation.

 

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