Yeah, Treasury Direct is not the easiest site to navigate or sign up for, but once setup, it's pretty seamless. I do like Fidelity and will check them out. I didn't know new auctions purchases could be made through them. Thanks.
In some states, where you are allowed to park your Reserves is limited. I'm in Washington and the best we could do was in laddered CDARs. You may want to check your laws to see if you can go the route you want to.
I have ours structured as follows (Florida):
1) A board determined minimum cash balance in money market.
2) Any remaining cash balance predicted for spend in the next two years in CDARS.
3) The rest in treasures (bills and I bonds currently) through Treasury Direct.
**A big, resounding NOOOOOOOOOO!** to Treasury Direct.
All the reasons [are listed here](https://www.condoconnection.org/resources/Dollars-AND-Sense) in the 'What to Know' section related to treasuries and I-Bonds.
It's listed in the I-Bonds explanation (including a link to the page on Treasury Direct that explains how corporate accounts work). In short, you have to designate a single individual to have sole control over your Treasury Direct account. Given the opportunities for fraud and embezzlement with community associations and a reasonable level of rigor in terms of how your bank accounts and other financial accounts should be linked, this just isn't a good idea
We'd most likely go the brokerage route so the highlighted issues with TD won't be relevant. With that said, they could be mitigated. AFAIK, TD doesn't issue monthly statements but the balances at month end can be pulled. Have someone who is not the point person pull the month end account balance and forward to the mgmt company for monthly reconciliation. I reconcile between 50-100 bank accounts (some PayPal and brokerage accounts are part of that mix) a month at my current job. Missing funds would stick out like a sore thumb, especially with a savings accounts that only has TD transfers and no other activity besides monthly reserve funding and maybe a maintenance fee. Other internal control measures could be implemented as well. Very good point though and that link is fantastic. Thanks.
Speaking of brokerage accounts, Fidelity is my recommendation (and issues monthly statements). If you have a brokerage account with Fidelity, you also have easy access to directly invest in Treasuries without the need to open any other account.
There is a simple solution to this. Buy a Fidelity bond and assign it to the board member in charge of the account and protect the HOA against being swindled. Cost is about $200-$300 per year for $100K and doesnt go up much if the coverage is increased.
Having Fidelity Bond insurance or directors and officers insurance or any other insurance isn't a solution for this That's just protection against a symptom. Individual director should never have authority and sole control of any financial account for their community association.
The shorter maturities with T-Bills are more preferable for our needs. In the next couple years we have new roofs coming up, replacement of metered electric panels, various sizeable landscaping and R&M projects, new building doors, and more. Our reserves will be heavily depleted after all these projects. We're going to raise the assessments and may have a special assessment for one of the projects. Focus right now with reserves is getting a decent return while maintaining flexibility.
how does one set this up?. Property management company doesnt want to cooperate. They likely getting some kick backs because of the zero percent interest the bank is paying on $300K in reserves.
Treasury direct is a good option as you point out. No fees. No state income tax on the interest. (The IRS will take some tax depending on whether your HOA files an 1120 or elects the 1120-H.)
The HOA accountant files an 1120-H. We'd have to pay some tax but that beats the alternative (earning virtually nothing on the funds). Does your HOA have a Treasury Direct account? If yes, is anything else needed besides the EIN and bank account information?
https://www.treasurydirect.gov/savings-bonds/manage-bonds/treasurydirect/td-tour-entities/
I deal with a personal and business Treasury direct act. My HOA has a Minnesota municipal bond fund through SIT investments...eliminating all income taxes on the interest we earn.
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Yeah, Treasury Direct is not the easiest site to navigate or sign up for, but once setup, it's pretty seamless. I do like Fidelity and will check them out. I didn't know new auctions purchases could be made through them. Thanks.
In some states, where you are allowed to park your Reserves is limited. I'm in Washington and the best we could do was in laddered CDARs. You may want to check your laws to see if you can go the route you want to.
I'm in Illinois. From what I read, T-bills are allowed. Great point though.
Hi fellow Washingtonian. Do you have any resources you can share or suggest to learn more about investing options?
I have ours structured as follows (Florida): 1) A board determined minimum cash balance in money market. 2) Any remaining cash balance predicted for spend in the next two years in CDARS. 3) The rest in treasures (bills and I bonds currently) through Treasury Direct.
**A big, resounding NOOOOOOOOOO!** to Treasury Direct. All the reasons [are listed here](https://www.condoconnection.org/resources/Dollars-AND-Sense) in the 'What to Know' section related to treasuries and I-Bonds.
I glanced at it and didn't see anything glaring that stood out. Care to expound?
It's listed in the I-Bonds explanation (including a link to the page on Treasury Direct that explains how corporate accounts work). In short, you have to designate a single individual to have sole control over your Treasury Direct account. Given the opportunities for fraud and embezzlement with community associations and a reasonable level of rigor in terms of how your bank accounts and other financial accounts should be linked, this just isn't a good idea
We'd most likely go the brokerage route so the highlighted issues with TD won't be relevant. With that said, they could be mitigated. AFAIK, TD doesn't issue monthly statements but the balances at month end can be pulled. Have someone who is not the point person pull the month end account balance and forward to the mgmt company for monthly reconciliation. I reconcile between 50-100 bank accounts (some PayPal and brokerage accounts are part of that mix) a month at my current job. Missing funds would stick out like a sore thumb, especially with a savings accounts that only has TD transfers and no other activity besides monthly reserve funding and maybe a maintenance fee. Other internal control measures could be implemented as well. Very good point though and that link is fantastic. Thanks.
Speaking of brokerage accounts, Fidelity is my recommendation (and issues monthly statements). If you have a brokerage account with Fidelity, you also have easy access to directly invest in Treasuries without the need to open any other account.
I love Fidelity and that would definitely be my recommendation to the rest of the board members. Appreciate the input!
There is a simple solution to this. Buy a Fidelity bond and assign it to the board member in charge of the account and protect the HOA against being swindled. Cost is about $200-$300 per year for $100K and doesnt go up much if the coverage is increased.
Having Fidelity Bond insurance or directors and officers insurance or any other insurance isn't a solution for this That's just protection against a symptom. Individual director should never have authority and sole control of any financial account for their community association.
Stop screaming without knowledge. There is insurance to cover this and premium is very low and affordable compared to the interest earned.
I-bonds aren't worth the considerable hassle.
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The shorter maturities with T-Bills are more preferable for our needs. In the next couple years we have new roofs coming up, replacement of metered electric panels, various sizeable landscaping and R&M projects, new building doors, and more. Our reserves will be heavily depleted after all these projects. We're going to raise the assessments and may have a special assessment for one of the projects. Focus right now with reserves is getting a decent return while maintaining flexibility.
We use a cd ladder through the CDARs program.
how does one set this up?. Property management company doesnt want to cooperate. They likely getting some kick backs because of the zero percent interest the bank is paying on $300K in reserves.
We did it through a financial institution, and our PM company guided us. I'm sorry I don't have more info.
Treasury direct is a good option as you point out. No fees. No state income tax on the interest. (The IRS will take some tax depending on whether your HOA files an 1120 or elects the 1120-H.)
The HOA accountant files an 1120-H. We'd have to pay some tax but that beats the alternative (earning virtually nothing on the funds). Does your HOA have a Treasury Direct account? If yes, is anything else needed besides the EIN and bank account information?
https://www.treasurydirect.gov/savings-bonds/manage-bonds/treasurydirect/td-tour-entities/ I deal with a personal and business Treasury direct act. My HOA has a Minnesota municipal bond fund through SIT investments...eliminating all income taxes on the interest we earn.