Q I am on the board of our condominium association and we have almost $150,000 in reserves. The holdings are in certificates of deposit at a local bank, earning about 7.5 percent in interest a year.

Several board members have suggested that we could earn a lot more interest if we invested these funds in other ways, such as tax-free municipals, or at some other bank that is offering a higher rate of return.

What is the propriety of such alternative investments?

A Under normal circumstances, managing reserve accounts is a major concern to every member of a condominium board.

In today's uncertain financial conditions, in which a number of banks and savings and loans have failed, this matter must be placed on your board's agenda for immediate action.

You have indicated that you have more than $100,000 in bank CDs. If these funds are in the same bank, you are unprotected as to every penny above $100,000. I am assuming that this bank is under the protection of the Federal Deposit Insurance Corp.

If you have such FDIC coverage, then a maximum of $100,000 is insured. If the bank goes into receivership or is taken over by the federal government, then there is a strong possibility that any amount above the $100,000 will be lost.

You should keep in mind that when we say that $100,000 is insured, this does not mean that you can just put in $100,000 and be protected. You have indicated that you are getting 7.5 percent interest per year on your investment.

At the end of one year, even under simple interest calculations, your $100,000 will grow by $7,500, and since this additional money is above the $100,000 limit, you can clearly see that you are unprotected for the interest.

Thus, I recommend that you invest no more than $90,000 in any one bank, and when this grows to about $95,000 or $96,000, then it is time to transfer some funds to another bank.

You certainly have the right to place your $150,000 into two different banks so both accounts will be separately insured by the FDIC. FDIC coverage goes to the bank account, rather than to individual depositor.

In other words, you can have coverage for more than one FDIC account if your funds are in different banks.

You also asked whether the board should invest these funds to obtain greater yield. Unless the funds are totally insured, I must tell you immediately that you do not have the right to make this investment.

Keep in mind that as a member of the board you have a fiduciary obligation to the rest of the unit owners in your complex.

This obligation does not require you to make the highest and best investment of the funds, but rather it puts a legal requirement on you to insure the security and safety of those funds.

Tax-free municipals may be a good investment for you personally.

However, unless each member of the association votes unanimously to invest the funds in an uninsured account, you may be challenged by other association members if your board takes that action.

I would also be quite concerned about those banks that are currently promoting higher interest rates.

Often, these banks and savings and loans are in effect telling you that they need deposits, because they may very well be in trouble.

Statistics have indicated that many banks and savings and loans that offer higher than normal rates of return are the first ones that are taken over by the government.

And even if your funds are insured by the FDIC, you still may have a significant problem getting the funds out when you need them.

We have all heard of cases where people have had difficulty obtaining immediate access to their deposits -- even though insured -- when the bank was taken over by the FDIC, or a savings and loan taken over by the Resolution Trust Corp.

In the final analysis, there is one theme that should be remembered at all times.

What you do with your money is your business. If you want to spend it, waste it, or even throw it away, that is your choice.

But since you are a member of the board of directors of your condominium association, you are charged with the responsibility of safeguarding other people's money.

This is a very serious duty, and there will be no excuses if the funds are not properly -- and securely -- invested.

Benny L. Kass is a Washington lawyer. For a free copy of the booklet "A Guide to Settlement on Your New Home," send a self-addressed stamped envelope to Benny L. Kass, Suite 1100, 1050 17th St. NW, Washington, D.C. 20036.