Community Associations

Reserve Funds: A Crucial Component for Community Association Financial Futures

    • gjylameti-kris-headshot.jpg
    • Kris Gjylameti

      Director, Community Association Banking
      May 30 2024

Reserve Funds: A Crucial Component for Community Association Financial Futures

Authors: Kris Gjylameti, FNBO Director, Community Association Banking, and Hilary Bublitz, Association Director at the Mill Creek Community Association.

Reserve funds are an essential aspect of a community association's financial planning, specifically earmarked for major repairs, replacements, and unforeseen emergencies. Common items covered by reserve funds include roof replacements, exterior painting, elevator repairs, and other significant projects that impact the community.

The first step to ensuring adequate reserves are available is to conduct a reserve study and update it regularly. This provides the board with critical data for determining reserve funding levels and future investment needs. The study data should be used to guide the reserve investment strategy. Board members have more financial options than ever, so it is crucial that they understand the details of each reserve product being considered or used. Lack of familiarity with a specific product can jeopardize the association's reserves, leading to inadequate insurance coverage or fund availability when needed. The goal of this article is to provide board members a useful guide with information to consider when implementing their reserve investment strategy.

Importance of Adequate Reserves

Insufficient reserve funds can lead to financial strain and challenges when unexpected expenses arise. Community associations must balance keeping monthly assessments reasonable for homeowners while ensuring reserves are adequately funded. Managers should advise their boards about the pitfalls of underfunding reserves to keep assessments artificially low. A well-funded reserve allows associations to address issues promptly, maintain property values, and avoid special assessments that can cause financial strain on homeowners.

Types of Deposit Insurance

With the many investment products available, boards should understand the various ways to protect reserve funds, most commonly:

  • Government Backed: Treasury Securities are debt instruments issued by the United States Department of the Treasury. They are considered safe and secure investment options because the full faith and credit of the government guarantees timely interest and principal payments.
  • FDIC Insurance: The Federal Deposit Insurance Corporation (FDIC) insures deposits at FDIC-insured banks. The standard deposit insurance amount is $250,000 per depositor per FDIC-insured bank, per ownership category. The FDIC also examines and supervises its subject depository institutions for safety, soundness, and consumer protection.
  • NCUA Insurance: The National Credit Union Administration insures member share accounts at federally insured credit unions. The standard share insurance amount is $250,000 per share owner, per insured credit union, for each account ownership category.
  • SIPC: The Securities Investor Protection Corporation protects against the loss of cash and securities held by a customer at a financially troubled SIPC-member brokerage firm. The limit of SIPC protection is $500,000, which includes a $250,000 limit for cash.

Understanding the differences and limitations of these options to protect funds should help guide the board's investment strategy.

Types of Reserve Investments

Choosing where to invest reserve funds is a critical decision that requires careful consideration. Managers should consider scheduling a meeting with their banker and the board to ensure all board members can ask questions and become comfortable with each option used by their community association. To balance liquidity, protection, and return, community associations can choose from common investment options including Certificates of Deposit (CDs) and Money Market Deposit Accounts. There are also insured deposit accounts such as CDARS®, the Certificate of Deposit Account Registry Service®, and ICS®, the IntraFi Cash Service®. With a CDARS® account, reserve funds can access an aggregate amount of FDIC insurance on CDs in the millions of dollars across participating network banks. Similarly, with ICS®, the IntraFi Cash Service®, aggregate FDIC insurance across network banks can exceed the amount available at any one bank.

  • Certificates of Deposit (CDs): CDs offer a low-risk option with a fixed interest rate. While returns may be modest, they provide stability and easy access to funds. This is especially true when CDs are used in a CD ladder strategy to make funds available to the association as needed.
  • Money Market Deposit Accounts: These accounts provide another liquid investment option with a focus on capital preservation. Money market deposit accounts typically offer a slightly higher interest rate than regular savings accounts, and they are still subject to the standard $250,000 FDIC insurance amount.
  • CDARS, the Certificate of Deposit Account Registry Service: CDARS is a service provided by IntraFi and offered through participating network institutions. With CDARS, community associations can enjoy the safety and simplicity that comes with access to millions of dollars in aggregate FDIC insurance across network banks through a single bank relationship. When a bank places a deposit through CDARS, that deposit is divided into increments under the standard FDIC insurance maximum of $250,000 and placed into CDs issued by other participating network banks. As a result, community associations can access FDIC coverage from many institutions while working directly with just one bank.
  • ICS, the IntraFi Cash Service: ICS is also provided by IntraFi and offered by participating network institutions. With ICS, community associations can also obtain access to millions of dollars in aggregate FDIC insurance across network banks. Unlike CDARS, funds placed using ICS are placed in demand deposit accounts, money market deposit accounts, or both. It is possible to use a combination of CDARS and ICS depending on the liquidity needs of the depositor. 

A list identifying IntraFi network banks appears at Certain conditions must be satisfied for “pass-through” FDIC deposit insurance coverage to apply. To meet the conditions for pass-through FDIC deposit insurance, deposit accounts at FDIC-insured banks in IntraFi’s network that hold deposits placed using an IntraFi service are titled, and deposit account records are maintained, in accordance with FDIC regulations for pass-through coverage.

Financial Portfolio Management

Community associations should consider starting a reserve investment committee to ensure their reserve funds meet the following four pillars:

  • Protecting the principal of the investment.
  • Ensuring funds are liquid as needed for future repairs.
  • Receiving a competitive rate of return in the market.
  • Providing board member knowledge and comfort with the products/institutions.

Training is a constant need for boards and committees due to ownership changes. To preserve institutional knowledge, there must be a plan in place for transferring information. A trusted banker can be a key partner for the community association manager and board in fulfilling that goal.

Regular Review and Adjustments

Financial markets and economic conditions can change over time. Community associations should regularly review their investment strategy, adjusting as needed. This may involve consulting their financial professional to ensure the reserve fund aligns with the association's long-term goals. Depending on the needs of the association and the size of the reserves, meetings may need to happen as often as monthly. However, most communities seem to prefer a quarterly or semi-annual review cadence.

The board should review the reserve investments current performance and compare it to current market rates. If the reserves are underperforming, it may be advantageous to break the current investments, pay the fees, and reinvest in higher-rate options. Let math be your guide and, if needed, include the board’s banker to help with this consideration.

Communication with Homeowners

Transparency is essential when it comes to reserve funds. Community associations should communicate clearly and regularly with homeowners, providing updates on the status of reserves, planned projects, and the overall financial health of the community. This helps build trust and ensures residents are aware of the association's commitment to financial responsibility. Publish audit results and investment policies and share them with homeowners.


Reserve investments are a crucial aspect of financial planning for community associations. By understanding the importance of adequate reserve funds, exploring investment options, and maintaining a diversified portfolio, associations can enhance their financial stability and better serve their communities. Regular reviews and transparent communication with homeowners further contribute to a successful and financially resilient community association.


This article was collaboratively written by Kris Gjylameti, FNBO Director, Community Association Banking, and Hilary Bublitz, Association Director at the Mill Creek Community Association. Their expertise and insights greatly contributed to the creation of this comprehensive guide to reserve investments for community associations.

Deposit placement through an IntraFi service is subject to the terms, conditions, and disclosures in applicable agreements. Deposits that are placed through an IntraFi service at FDIC-insured banks in IntraFi’s network are eligible for FDIC deposit insurance coverage at the network banks. The depositor may exclude banks from eligibility to receive its funds. Although deposits are placed in increments that do not exceed the FDIC standard maximum deposit insurance amount (“SMDIA”) at any one bank, a depositor’s balances at the institution that places deposits may exceed the SMDIA before settlement for deposits or after settlement for withdrawals. The depositor must make any necessary arrangements to protect such balances consistent with applicable law and must determine whether placement through an IntraFi service satisfies any restrictions on its deposits.

IntraFi, ICS, IntraFi Cash Service, CDARS, and Certificate of Deposit Account Registry Service are registered service marks of IntraFi LLC.

The articles in this blog are for informational purposes only and not intended to provide specific advice or recommendations. When making decisions about your financial situation, consult a financial professional for advice. Articles are not regularly updated, and information may become outdated.