How do we invest our HOA reserve funds in CDs or Treasury bills?

By OurHOA · General information · Revised November 3, 2026

How an HOA board invests reserve funds in CDs and Treasury bills: a ladder built from the reserve study, state rules, a sample policy and motion, and mistakes to avoid.

Part of the HOA board handbook: treasurer and money.

The short answer

Let the reserve study set the maturity dates, and let the rate come second. Keep the next 12 months of planned reserve spending in an insured money market account or in Treasury bills that mature before the bills come due, and keep a cushion for a surprise repair in cash. Put the rest in bank CDs or Treasury bills that mature a month or two before each big project in the study comes due. Write the rules down in an investment policy, adopt it by motion, and follow it every time something matures. Stocks, bond funds and anything else that can be worth less on the day the roofer needs a deposit stay out of reserves. Your declaration or bylaws may be stricter than that, and some limit reserves to insured deposits, so read them first. Rules also vary by state. This guide is education, not legal or investment advice.

What Texas, Florida and Colorado require

Texas. Property Code chapter 209 says nothing about how reserves are invested, so your governing documents control. Directors of a Texas nonprofit corporation are held to Business Organizations Code section 22.221: good faith, ordinary care, and a reasonable belief that the decision is in the corporation's best interest. A director who meets that standard is not liable for the decision. A written policy and minutes that show the board compared options are how you prove it later. Florida. For homeowners associations, section 720.303(6)(h) says reserve funds and the interest they earn stay in the reserve account and pay only for authorized reserve expenses, unless a majority vote at a meeting with a quorum approves another use in advance. So the interest belongs to reserves, not the operating budget. Condominium boards have more specific rules. Section 718.111(16) tells the board to use best efforts to make prudent investment decisions that weigh risk and return, and lets it put reserves in CDs or deposit accounts at a community bank, savings bank, commercial bank, savings and loan or credit union without a vote of the owners. Treasury bills are not on that list, so a condominium board that wants them should ask the association's attorney first. Colorado. Section 38-33.3-209.5(1)(b)(VI) requires every association to adopt a policy on investment of reserve funds. Section 38-33.3-303(2.5) then holds the board to the nonprofit director standard in section 7-128-401 for reserve investments: good faith, the care an ordinarily prudent person in a like position would use, and a reasonable belief that it serves the association. That is a higher bar than the willful-and-wanton shield Colorado directors get for most other decisions.

Build the ladder from the reserve study

Here is a worked example. A 90-home association holds $310,000 in reserves in November 2026. Its reserve study shows four big expenses in the next five years: pool resurfacing in 2027 at $38,000, asphalt crack seal and seal coat in 2028 at $24,000, the clubhouse roof in 2029 at $66,000, and an asphalt overlay in 2031 at $145,000. The treasurer builds the ladder in four steps. First, $38,000 for the pool goes into a 26-week Treasury bill that matures in May 2027, and a $25,000 cushion stays in the money market account. Second, $24,000 goes into a 15-month CD that matures in February 2028, before the paving season. Third, $66,000 goes into a two-year CD that matures in November 2028, ahead of the 2029 roof. Fourth, the remaining $157,000 is split between a three-year and a four-year CD, so one rung matures in 2029 and one in 2030 and both roll into the overlay money. Each rung should land 30 to 90 days before the contract payment, not the day of it. When a rung matures and nothing is due that year, roll it to the far end of the ladder. Redo the ladder every time the reserve study is updated, because project years move. Keep each bank's total, including the operating account, at or under the FDIC limit. Our guide on how to choose a bank for HOA accounts covers that limit and the ways around it.

Bank CDs, brokered CDs or Treasury bills

A CD bought straight from your own bank is the simplest choice. It sits next to the operating account and shows up on the same statement. Ask for the early withdrawal penalty in writing before you sign, and turn off automatic renewal unless the policy allows it. Brokered CDs are bought through a brokerage account. They let one account hold CDs from many banks, which helps a board with more than $250,000 to place. The SEC warns that if you need the money early you can't simply cash a brokered CD in. The broker has to find a buyer, and if rates have gone up you may lose some principal. Only the issuing bank can call a CD early, and some long brokered CDs carry call features. Always confirm which bank issued each one, because it counts against the same $250,000 limit as any deposits you already hold there. The brokerage cash and securities are covered by SIPC up to $500,000, including $250,000 for cash, but SIPC covers missing assets at a failed firm, not a drop in value. Treasury bills are sold for 4, 6, 8, 13, 17, 26 and 52 weeks, in $100 amounts. You pay less than face value and get face value at maturity, and the difference is the interest. They are backed by the federal government, so the $250,000 cap doesn't apply. The interest is taxed federally but not by states or localities. An association can buy them in a TreasuryDirect entity account, which needs the association's EIN, an account manager with authority to act for it, a U.S. address, a linked bank account, an email address and the IRS name control. Bills longer than 52 weeks don't exist, so use CDs for the far rungs.

A one-page investment policy you can adapt

Copy and edit this, then have the association's attorney check it against your documents: 'Purpose. Reserve funds are held to pay for the repair and replacement of components listed in the current reserve study. The goals, in order, are safety of principal, money available when the study says it is needed, and then return. Allowed investments. Deposit accounts and certificates of deposit at federally insured banks and credit unions, and U.S. Treasury bills. No stocks, bond funds, cryptocurrency or callable instruments. Insurance. The association's total deposits at any one institution will not exceed the federal insurance limit. Maturities. Each investment will mature no later than 90 days before the year the reserve study shows the money is needed, and no later than five years from purchase. Liquidity. The money market account and Treasury bills maturing in time will together hold at least the next 12 months of planned reserve spending. Authority. The treasurer may buy, renew or redeem investments within this policy with the written approval of one other officer. Any purchase outside it needs a board vote. Reporting. The treasurer will report each holding, its rate and its maturity date at every regular board meeting. Review. The board will review this policy every year with the budget.'

The motion and the paperwork

Sample motion: 'Move to adopt the reserve investment policy attached to these minutes, and to authorize the treasurer, with the president's written approval, to purchase a 15-month certificate of deposit of $24,000 at First County Bank, a two-year certificate of deposit of $66,000 at Lakeside Credit Union, and a 26-week Treasury bill of $38,000 through the association's TreasuryDirect entity account, all funded from the reserve account.' Keep a one-page maturity calendar with the bank, amount, rate, purchase date, maturity date and the project each rung pays for. Put each maturity date on the board's shared calendar 30 days ahead. File the confirmation for every purchase with the reserve records, and reconcile the holdings every month along with the bank statements. Interest is not free money for tax purposes. The IRS instructions for Form 1120-H list interest on a sinking fund as income that isn't exempt function income, and the association pays a flat 30 percent on that income after a $100 specific deduction and related expenses. Our guide on preparing Form 1120-H for a small HOA walks through the return.

Mistakes boards make

Chasing the top rate at a bank where the association already keeps $200,000, which pushes part of the CD over the insurance limit. Letting a CD renew itself into a five-year term nobody voted on. Buying a long callable brokered CD because the headline rate looked good, then learning it matures in 2041. Giving one volunteer the only TreasuryDirect login with nobody else seeing the statements. Fix that by having a second officer review every statement and keeping the login with the association's records, not on a personal laptop. Moving reserve interest into the operating budget to avoid a dues increase, which Florida's statute forbids without an owner vote and which quietly underfunds the next roof everywhere else. Setting the ladder once and never touching it after the reserve study moves the overlay from 2031 to 2029. Last, waiting for rates to peak. Nobody times that well. Buy on the schedule the study gives you and let the ladder do the averaging.

Sources

These guides are general education for HOA boards and residents, not legal, tax, or financial advice. Rules vary by state and by your community's governing documents - check with a professional for your situation.

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