Amending Annual Budgets
— By Ila Kane, CMCA, AMS and Karen McDonald, CMCA, AMS, PCAM, RS — W
hat should we do with extra funds? How can we fix an imbalanced budget? When should we toss it out and start
over? Budgets come with some big questions when you get in the weeds of the numbers. Those answers only get more complicated in tricky financial times when owners might push to see a greater return on their funds and seek nuanced answers.
Sometimes allocated money doesn’t get used in exactly the way we planned.
At the base level, the budget you ratify every year is a plan to spend a certain amount of funds in a specific way. We spend months pouring over historical data and pushing boards and owners to set priorities so that the plan we develop, conveyed by funds allocated to categories and GL codes, can be as close to actual spending as possible.
We spend months pouring over historical data so boards and owners can set priorities.
However, sometimes allocated money doesn’t get used in exactly the way we planned. Perhaps the rain lasts much later than in previous years and irrigation budgets get shifted, or a war starts on the other side of the world and impacts fuel prices, and suddenly the trickle down shows up in every GL on your income statement.
When Needs Are Unpredicatable
Let’s say you ratify a budget in October for your Jan- Dec fiscal year. Good job! That’s early! Then you get to December and your available funds for the new fiscal year are higher than you anticipated. We had a really wet spring and saved ourselves a few months of water bills, but you budgeted for turning irrigation on in early April. Maybe you over-budgeted for insurance because of covid and wildfires, and those costs were lower at renewal than anticipated, so now you have a surplus.
An unusually wet spring saved a few months of water bills, but you budgeted for turning irrigation on in early April.
How To Handle A Surplus
Amending an already ratified budget is tricky because it’s confusing to owners, and it’s often expensive because it Continued On Page 26
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