Board Of Directors
INDUSTRY JOURNAL Vol . 8
Board Of Directors
Practical thoughts on budget preparation
“
Community association managers are responsible for the preparation of an annual operating budget with the final approval coming from the association ’ s board of directors .
The fact that the residents are also the owners creates unique budgeting issues because there is technically no income in a non-profit organisation . An effective way to properly budget is to understand that even in a period of relatively low inflation , costs do go up . It is reasonable to assume that some elements of cost will go up faster than others .
For example , if interest rates start to creep upward , you can expect electrical costs to rise disproportional to other costs . This is because the utility industry is very sensitive to interest rates , and rising interest rates result in higher electrical costs . Some items that need a more penetrating evaluation include utilities , as mentioned , as well as insurance , maintenance and repairs , and general repairs , particularly for older buildings . Today , because of the tight labour market , it is nearly impossible to hire a repair person for the same hourly rate as just one or two years ago .
It is a disservice to the entire community to create a budget that does not represent the real needs of the community and adjust the cost projections to reflect conditions of the economy . Frequently , the manager is under pressure from the board and community residents to keep the draft budget and the resultant levies unrealistically low . While the board ’ s and the residents ’ desires are honorable , it is not realistic .
Managing the finances of the association is usually the toughest job board members have . Despite the importance of the budget , when it is brought before the board for review , most board
66