If an association depends on a community management company to develop the budget, associations must allow more time for these products to be developed. Managers have “n” number of communities they conduct this process for annually. A proactive and knowledgeable treasurer’s involvement can make the process work more efficiently and effectively by partnering with the management team.


Data such as utility actual consumption versus planned consumption can be


used to project the next fiscal


year’s utility costs by capturing the utility rate increases approved by the Public Utility Commission. Requests to business partners regarding the following year’s service contract costs are transmitted with an end of August requested return date.


The community manager provides six month actual reserve expenditure data to the reserve study analyst along with planned reserve work projected costs for the next


six


months. Accurate reserve fund expenditure reporting impacts the quality of the reserve study development process through quality and accuracy of data provided by an association. This data will help to project an accurate starting reserve balance as well as create an accurate cost history in the component list.


During July the reserve analyst develops a draft study for the board to review. Optimally, the draft is provided to the board as soon as it is available for review and comment or questions back to the analyst. The final version of the study is normally revised and finalized once the September financials provide nine months of data for review and adjustments to operating and reserve study cost estimates. This provides the best understanding of actual expenditures and a shorter projected three months of cost data to yield the best estimate budget for board review, discussion, and approval in October.


September is an important month to capture annual cost inflation increase data. Understanding CPI, PPI, and CPE data is important to assess contract cost increases requested from business partners. The Bureau of Labor Statistics provides Consumer Price Index (CPI) and Producer Price Index (PPI) data in the middle of each month. The Bureau of Economic Analysis provides the Personal Consumption Expenditures Price Index (PCE) at the end of the month. Many people grab the first number published and use it to talk about inflation. However, for association budgeting, a deeper look into the numbers is important. One area of inflation – services – impacts service contracts fairly accurately based on actual experience. It also provides a baseline number to use to determine if a business partner’s contract cost


increase may be too high and the contract should be negotiated.


“A well established plan of actions and milestones will make the annual budgeting process run smoother for your association.”


Unfortunately, for the reserve analyst, projecting 30-year cost increases is not so simple. Most of the reserve study projected costs are informed by multiple construction cost inflation indices (CCII) which have a very wide range of cost increases annually. The best CCII tools estimate construction cost inflation by building trade for two years with any degree of confidence. To project out over a 30-year component lifecycle, historical data is used to develop the best approximate estimates across the building trades.


The board needs to hit its milestone of October 30th budget approval and adoption to enable the community management team to produce and transmit the next fiscal year’s budget, reserve study, and state-required disclosures to the association membership. Some associations


may have governing


documents requiring more than California’s minimum 30-day prior to end of current fiscal year notification requirement which need to be factored into the budget development timeline. For the community management company, November 15th to 29th is an “All Hands On Deck” event which takes priority over almost all other management actions. Boards that delay budget approvals past November 1st risk extra costs to the association to produce the budget and disclosure package on time, or risk losing the ability to use the new budget and assessment without a vote of the membership due to logistical challenges involved with distributing the budget to the membership on time.


www.caioc.org


29


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36