LESSONS LEARNED For this issue’s “Lessons Learned” section of the Journal, we are looking
at appropriate budgeting and funding. We asked four experts from across the Community Association Management industry to weigh in.
Adequate Funding
A board should never assume their constituents want lower monthly or annual assessments. Very recently I was guiding an association through their regular budget process, which revealed the need to raise their funding for the current budget year by 30% or so. The Board, gasping for air, went down two treacherous paths. the increase and second, that no one else could or would be able to pay the cost of what it takes to run their community.
Much to their surprise, upon reviewing the budget with owner attendees listening in, they were given lots of support in raising assessments to make sure the regular operation of the association was smooth and to standard, and that their ailing reserves should be replenished (and better funded overall). Maintaining the value of their commonly owned most neighbors.
Sadly, the Board voted with their own pocketbooks (a rather large no-no when it comes to making reasonable business decisions) and slashed the budget to a very meager increase. Within weeks, they were meeting once more to address shortfalls for key operating items affecting ALL owners. Remembering the ownership who elects a board to lead is expecting its leaders to do their duty to adequately fund the association and care about the future viability of the community’s operation and value.
Budgeting…Too Much?
Association’s overbudgeting is a rare issue that occurs, but it does happen, and it can create problems for a community and more work for the board. There are some communities that overestimate how many times they will have a service done in a year or how much it will cost. This can lead to an association having too much money at the end of a year.
and services listed, should be completed in that they may not be able to be completed in the one year time frame. This could lead to disgruntled owners who were counting on those services to be done and used that to justify the continued assessment increases.
with excess funds, they can demand the board return the excess funds to the owners. This leads to additional work for the board to hold a meeting, decide whether to return the funds, how much and how much each person is getting back based on percentages of ownership.
It is important for boards to budget for actual services they are getting done, the amount of times that service is being completed and for the actual cost of that service. A good resource for this information would be to look at the previous years to see the actual amount of services completed in the year time frame.
By Jackie Cleveland, CMCA
By Stephanie Slone, CMCA, AMS
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