In New York, local government is restricted to how general and reserve funds can be invested. In general, they are restricted to typical bank accounts (checking, savings, and NOW accounts), certificates of deposit and very limited types of obligations, like US Treasury Bills. For more information there is a helpful guide issued by the Office of the State Comptroller called "Investing and Protecting Public Funds", which can be found easily using a Google search.
For the service award programs, Section 217(k) of the General Municipal Law contains the following language regarding the investing of the assets:
Every fiduciary of a service award program will be required to act solely in the interest of the program’s participants and beneficiaries. Subject only to the provisions of the program document, a fiduciary may accept, hold, invest in and retain any investment if purchased or retained in the exercise of the degree of judgment and care, under the circumstances then prevailing, which persons of prudence and intelligence exercise in the management of their own affairs, not in regard to speculation, but in regard to permanent disposition of their funds, considering the probable income to be derived therefrom as well as the probable safety of their capital.
This key points of this language is known as the Prudent Man Rule, or the Prudent Investor Rule. If we turn to Wikipedia and search for the "prudent man rule" the following article appears: https://en.wikipedia.org/wiki/Prudent_man_rule
In this article, a reference is made to a Massachusetts court case where Justice Samuel Putnam wrote that trustees should "observe how men of prudence, discretion and intelligence manage their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income, as well as the probable safety of the capital to be invested."
The Prudent Man Rule provides a lot more flexibility in investing LOSAP assets than local governments have in investing general funds. This allows LOSAP sponsors to take risk in order to achieve greater returns over time. The type of risk and investments used should be formalized in an Investment Policy. A draft policy is often provided by the asset manager, but ultimately the document should be is adopted by the sponsor and provided to the asset manager as a guideline for investing.
We suggest reviewing this with your attorney and the asset manager assisting the Board with investing the LOSAP assets.