Announcement

FAQ on cash investments rate of return

Tuesday, February 28, 2023

The following is the latest in a series of FAQ columns planned for the Ocean Pines website and newsletter:

Everything You Need To Know About Life In Ocean Pines, From A To Z

Looking for answers? Submit question ideas to [email protected].

Q. How do I get an estimate of OPA's market yield or rate of return for the month on OPA’s overall cash balance?

A. Calculate the difference in interest income between respective months that is documented on the monthly financial report (Reserve Summary page). Divide this difference by the total value of investments on hand as listed on OPA’s listing of “Cash and Investments” page within the monthly financial report.

Q. Why will OPA never be able to invest all cash in short-term or long-term investments?

A. Simply stated, OPA needs to maintain a fully liquid cash balance for operations. Since the majority of OPA’s cash inflows occur early in the fiscal year from assessment payments and membership purchases, there will be the need to fund operations (i.e. full-time payroll, bulkhead, and capital expenditures) typically done in the offseason.

Q. Why does OPA not always get the best rate that one sees advertised through the multitude of other bank rates listed online?

A. OPA does get very competitive rates through their banking providers. Banks will vary their rates offered to the markets based on promotions and their need for cash on their balance sheet. It is also very common for banks rates of return to lag slightly behind increases in federal treasury rates. OPA is not in the business of “bank hopping” to chase rates. Instead, the principal goal is capital preservation. Further, any new banking institutions should be reviewed and vetted by the Budget and Finance Committee and then approved to the Board of Directors, prior to transferring any funds.

Q. Does OPA invest in high-risk securities or other financial instruments that are not insured?

A. No. Investments shall be placed in securities guaranteed by the U.S. government or other federal agencies. Certificates of Deposit Account Registry Service (CDARS) are considered in every case when comparing the relative value of investment options.

Also, OPA insures that there are various terms that are “staggered” on their CD investment options. This allows for the liquidity of cash in order to meet operational needs as described above.

Announcement

FAQ on cash investments rate of return

Everything You Need To Know About Life In Ocean Pines, From A To Z

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