Amending Annual Budgets  Continued From Page 25


involves unanticipated mailing and meeting costs with a mid-year change in assessments. This is not the path I would recommend unless your surplus would drastically reduce assessments and the board has made it clear that the money it would cost to re-ratify the budget is money they want to spend.


Amending a ratified budget is expensive because it involves unanticipated mailing and meeting costs.


My recommendation is to use surplus data to adjust calculations for the next fiscal year and allocate money owners already paid to improve the association—which is the general assumption for the use of the funds when owners pay assessments.


Surplus funds can go a few places. The first, most obvious place to check is reserves.


Surplus funds can go a few places. The first, most obvious place to check is reserves. Most reserve consultants will attest that most of their clients are less than 70% funded in reserves. Your board can always vote to move surplus funds into reserves, which would then be included in your next annual reserve study update and incorporated into the next budget cycle. This is also a good idea if you’re holding more than 3-4 months of funds to pay operating expenses in your operating account. Operating cash on hand needs to be incorporated into your crime insurance policy, so keep that in mind if you have a surplus and those extra dollars are sitting in your operating account.


Outstanding Maintenance Items


A budget surplus can be a sign that you had outstanding maintenance items that didn’t get tended to because of an assumption that there would be a lack of funds due to the financial climate. Walk the property with your board


26 Community Associations Journal | October 2022


or your landscape committee. Are there trees that need to be trimmed that have been neglected or fence repairs that need a maintenance tech to show up and handle? Are there projects that seem too small to bring someone out for specifically, but might be grouped into a larger project that a general contractor would consider?


Are there small projects that might be grouped together for a general contractor?


Smaller maintenance projects, like pressure washing under mailboxes, cleaning outdoor lamp covers, or re- rocking pathways can make a big difference in how your community looks and feels, but may not necessitate their own service call. They’re also the kind of projects that result from gradual aging and often don’t get noticed until the need to be taken care of becomes a major project.


Pressure washing under mailboxes, cleaning outdoor lamp covers, or re-rocking pathways can make a big difference in appearance.


An Educated Guess


A budget is a best guess and every effort should be made to stick to the plan. But, if you have extra funds at the end of the year, it is your responsibility to use them for the betterment of the association in the following fiscal year.


If your planning was wrong, figure out why and fix it in the next ratification cycle.


Look at the property and the reserve study and make a recommendation based on your data. Always make sure to use the information gained when creating your next budget. If your planning was wrong, you need to figure out why and fix it during the next ratification cycle.


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