|The Intrinsic Value of a Well-Prepared Association Budget
by Evelyn Dufford, PCAM, CEO
There is no doubt that some people who live in a condominium or homeowner association would consider their association budget topic as a yawn fest! Even so, the members of the association board will often spend a considerable amount of time working out the smallest of details in order to devise a workable annual budget. That’s because a budget is basically a financial plan — it’s not sexy, yet it is essential to the wise and effective management of the association.
Budgeting is so important that State law requires all associations – which are essentially non-profit corporations – to maintain an operating budget as well as a prepared reserve study for the repair and replacement of major components.
Indeed, that is why it is a large responsibility (and a lot of work) for the Association board to prepare the annual association budget…and residents often don’t realize it’s a complex activity that has to start early so the budget can be finalized and approved prior to the beginning of the new fiscal year.
The funds for the budget come from the assessments paid by each owner in the community. These funds pay for services like building maintenance, landscaping, and amenity upkeep. In fact, it’s important to remember that these are items every owner would pay for no matter where they live, either as direct out-of-pocket expenses or if they were a renter, indirectly in a higher rent payment. In reality, an association has the benefit of collective buying power – so when all services and utilities for everyone in the community are passed along to owners as a monthly assessment, they’re actually getting a bargain.
As the budget is being devised, the Board works closely with our professional managers to gather all of the financial information needed to project expenses for the coming year, such as a reserve analysis, bids for contracts, projections for utility or service increases, comparisons of past years’ budget trends, and so forth.
As a professional management company, we provide expert assistance and insights to the boards we serve throughout the budgeting process. Together with each board, our singular goal is to minimize expenses and maximize the efficiency of the association to preserve, protect, and maintain the common areas in the best interests of the owners who share the privilege of living together in the community.