Budget Chess
Formulating a Strategic Plan for your Association
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/statements, we can breathe that sigh of relief and look forward to the new year. Hopefully in preparing your budgets you reviewed your association’s reserve study and all contracts in place. Before we enter the next season, now is a good time to review the plans for the coming years.
We all remember planning to move from our parents’ homes to our own places. We may have had a car and bills, like everyone else. We may have prepared a monthly breakdown of what our bills would be at the encouragement of our parents, to prepare for the road ahead. What happens next is a learning experience that I would hazard to guess everyone has experienced in some form or another. All that is important to YOU, funds you had saved for, had to be spent for that “set of new tires” or that “insurance deductible from the hit and run.” At that age, who would have thought?
Having a Plan – Preparing for the long haul isnot only necessary, it is also important to account for the uncertainty of the future. As in the game of chess, your opponent may make a move that doesn’t fit with your next planned intentions. You ask “who is the opponent in preparing a budget
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Getting Started - Reviewing an association’s reserve study and the life expectancy of capital expenses is foremost inpreparing for the future. The reserve study notes the capital expenses, typically listed in the association’s Declaration for which
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hh the association is required to set aside funds. Alll
too often boards and community members provide excuses and reasons for not funding the reserves in the manner for which the reserve study calls. Historical Moves - While reserve studies are very important, it is also imperative that we understand where funds were spent in the past and if those elements were included in the reserve study. In the game of chess, once a player takes his finger off the game piece the move is over and the turn is up. You may have thought long and hard about that move but as soon as your opponent made his next move, you realize your strategy has been foiled. Many boards assume that when they are low on funds, they can “bust” into their reserves, however they fail to realize that these funds might have to be paid back. Be sure to review governing documents regarding reserve expenditures and reach out to your association’s CPA for advice on the possible tax implications involving the use of reserve funds. Reviewing costs from similar past projects will help the board understand the costs of future projects.
A Publication of CAI-Illinois Chapter
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