Budget preparation The board, with the manager’s input, should determine the date it intends to hold the budget meeting. The board should set a date that permits sufficient time for development of the budget, review it with the president, treasurer, and/or board members, and allow for the required minimum 14-day notice to members (unless the documents require a longer notice). As part of a CAM’s role, once the budget is adopted, management needs to notify members of the assessment for the new fiscal year. Some members will need time to inform their financial institutions of changes in the assessment amount. If an association prints and distributes coupons or invoices it will need sufficient time to perform these functions. It is also important to remember that condominium and cooperative associations are required to adopt the annual budget at least 14 days before the start of the association’s fiscal year. The amount of time needed to prepare a budget depends on its complexity, the workload of the manager, and the involvement of directors, officers, committees, and others. For many associations, it is common to begin the process four or five months prior to the date of the budget meeting. Ultimately, each association must make its own determination when to begin the process. Part 1 summary There is neither statute, rule, regulation, nor document that states, “Keep assessments low.” An association that focuses on maintaining unreasonably low assessments may be neglecting its property and, at some point, may face special assessments to repair and replace components that may have been accomplished through better budgeting. A board that does not properly maintain the property of
Budget development Consideration of the primary goals and objectives of the community association are key to budget development. They should be described in terms of actions that need to be accomplished. For example: To preserve, protect and enhance the value of the community and its assets, the objectives to consider may be issues, such as: ● Annual HVAC (heating, ventilation and air conditioning) inspection or maintenance ● Adequate insurance coverage With the objective of enhancing the lifestyle of the community, considerations similar to these may be warranted: ● Renegotiating the cable and internet bulk contracts ● Replacing lobby furniture Related to providing to the extent possible a harmonious community, objects may include: ● The annual budget fairly considers the income and expenses of the association. ● Proper notice of meeting to consider the budget
the association is not fulfilling its fiduciary responsibility. When sufficient funds are expended to accomplish the association’s budgetary objectives, it results in compliance with Florida statutes and maintains the property so that it stays comparable to its condition when transferred by the developer.
PART 2: THE OPERATING SECTION OF A BUDGET
Required documentation To estimate revenue and expenses accurately and properly develop the operating section, the following documentation is required: ● Current year’s most recent financial reports including the income and expense statement and balance sheets ● End of year financial reports for the past three years ● Invoices for the past 12 months ● Aged balance reports for the past 12 months ● All current contracts and retainer agreements ● Contract summary chart (see the example on the next page) ● All current insurance policies ● Insurance policies summary chart (see the example on the next page) ● Most recent property appraisal ● Manager’s reports for the past 12 months ● Most recent legal status report ● Records of equipment maintenance ● Minutes and any resolution of board related planned capital projects, other budget related issues ● Warranties
Condominium, cooperative, timeshare, and homeowners’ association budgets have two major sections, operating and reserves. The operating section typically identifies routine, regularly occurring income and expenses of the association. It effectively functions as the association’s annual financial plan. The reserve section appears on the budget as a single account or line item that shows the cost of funding the reserves for the next fiscal year. It is based on a schedule attached to the budget that estimates expenses for capital expenditures and deferred maintenance over a multi-year, long-term period. The reserve section functions as the long-
term financial plan for the association. We’ll discuss the operating section first.
The operating section of a budget reports and reflects the income and expense items that occur at least annually and are associated with day-to-day operations of the association.
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