Chapter 1: Budget Fundamentals 3 CE Hours
Expiration Date : January 21, 2028 Course overview
The essential elements of a budget are described. The budget provides a basis to make necessary changes to ensure, as much as possible, that the association is staying within budgetary limits while working toward achieving the community association’s long-term goals and short-term objectives.
In this course we discuss fundamentals of the budget and financial management process for community associations. When used properly, the budget serves the association as a guide to compare, throughout the fiscal year, its actual revenue and expenses to its budgeted revenue and expenses. Good financial management practices are a responsibility of a board of directors as well as that of a CAM, management firm, and/or managing entity. Learning objectives After completing this course, the learner will be able to: Understand some of the primary elements of a budget. Identify the roles of those who develop an annual budget. Understand the role of a CAM, management firm or managing entity. Know the statutory requirements for condominiums, cooperatives, HOAs, and timeshares.
Understand the processes of budget preparation and development. Identify the components of the operating section of a budget. Understand the reserves, their functions, processes, and characteristics. Discuss statutory reserve requirements. Understand insurance statutory requirements as it applies to budget preparation.
INTRODUCTION
A community association is a legal entity (corporation) established to operate and maintain common property for the benefit of its members. The board of directors must have a financial plan (budget) to serve the goals, objectives, and legal requirements of the association. The budget provides a projection of income and expenses for a fiscal year and serves as the basis for determining the financial obligations of its members, whether through regular assessments or other fees and obligations to the association. This course is divided into four parts: PART 1 : Elements of the budget process. PART 2 : The operating section of the budget.
It is common for a CAM to play a significant role in the development and preparation of a community association’s annual budget. Times have changed! If you, as a CAM, have been engaged in budget preparation over a number or years, you can’t ignore the fact that statutory requirements, and economic and environmental concerns have had an impact. As a result of such changes, CAMs and management firms have had to evolve their business relationships and responsibilities with the community associations they serve. With the help of a fictional CAM, Mike, we will discuss many of the basic components of a budget and explore the ways in which a CAM might find themselves assisting a board or budget committee to prepare a budget that meets the criteria of a fair and balanced financial system of the community association.
PART 3 : Reserves. PART 4 : Insurance.
Introducing Mike Hello, I’m Mike and I’ve been an on-site CAM for the same community association for more than seven years. I’ve been involved in preparing and developing the budget for five of those years. During the first year, the board treasurer prepared the budget. The board appointed a budget committee in year two. From year three the board recognized the value of the CAM playing a major role in the development and preparation of the budget. They still appoint a budget committee each year, but we now work together on this important function in the life of their community association. PART 1: ELEMENTS OF THE BUDGET PROCESS
What is important is that the total of actual revenue and expenses be within budgetary limits, so as not to produce a budget deficit. In the event of a budgetary deficit, the board will need to either reduce expenses, increase revenue, or expend surplus monies accumulated in its cash accounts, if legally permitted. The documents should be checked to determine what are common elements, limited common elements, and unit components. At this stage of budget preparation, the board and management are confirming what the association is and
Regardless of the effectiveness of the budgetary process, unanticipated events will occur (such as hurricanes or other catastrophic events, or an unexpected breakdown of a major piece of equipment, such as an elevator or generator), resulting in variances from the budgeted amounts of both revenue and expenses. Sometimes those variances are favorable, less money expended than budgeted in a specific account or more revenue generated. Other times they are unfavorable, more money spent or less revenue realized.
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Book Code: CAMFL1526
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