Just as no household can function without a good, sound budget, neither can a homeowner's association. Creating and maintaining a budget that can guide a condo community through an entire year's worth of finances is one of the most important keys to effective management. Residents put their trust in their board members to plan ahead, plan responsibly and consider all sides of the financial equation so that unexpected—and sometimes expensive—emergencies do not crop up.
Certainly, that can be a lot of pressure on any association board. With that in mind, what is the best way for well-intentioned board members to go about setting a budget? What are some common pitfalls, and what are the best ways to avoid them? As with anything, being realistic, listening to good advice and having a willingness to make the tough choices all will come in handy when it comes to making the budgeting process work well.
Getting the Ball Rolling
Starting early can help make the budgeting process a bit less painful. Getting things going three or four months before the current budget expires should leave enough time to get the job done right.
The entire budgeting process should involve the board and the association's managing agent with advice from the accountant thrown in as needed. The first step always involves "[Taking a look] at the year-to-date actuals and then projecting what you're going to spend for the rest of the year," says Jules Frankel, CPA, of the accounting firm of Wilkin & Guttenplan in East Brunswick.
It's only by looking at current and past budgets that agents and board members will be able to track financial trends, both within the association itself and in the outside world. Predicting where items like the cost of fuel or lawn care may be heading also falls under the realm of the managing agent, who has the benefit of overseeing the financials for dozens or perhaps hundreds of condo associations facing similar financial situations.