INDUSTRY JOURNAL Vol . 8 birth of a child , a marriage , a confirmation or bar mitzvah , board meeting costs to include renting the hall and any meal brought in for the board members , or holiday celebrations like Christmas parties that the entire community is invited to attend .
Now that all the categories have an expense and a rationale assigned , it is time to total everything up . If an increase in monthly levy is needed , so be it , if the projected budget is not just a wish list . Multiply the total by each resident ’ s percentage of ownership , divide by twelve , and that results in the new monthly levy for the year . This is what is presented by the manager to the board .
The real test of the manager comes now . The draft budget must be presented to the board for final approval . Each board approaches this responsibility differently . Some will go over each line item and discuss the issues that were considered in developing that estimated cost , and others will ask for questions , and , there being none , approve the budget as submitted . Irrespective of the board ’ s approach , the manager should be prepared for the probing questions they will get from an interactive board and not slack up on the preparation of the draft budget .
It may take more than one meeting to approve a budget . Many associations set up an ad hoc committee just to deal with the budget ; when the budget is approved , the committee folds . However , at some point the budget must get approval . If the approval takes place in December or later , there is not enough time to properly notify the residents . If the budget results in a levy increase , residents become very upset if they simply get a letter and are directed to just send in the new amount . A nicely worded letter explaining the need for the increase and how it will benefit the resident is very important . This letter should precede the letter with the new levy and the coupons . This approach provides a little sugar to make the medicine go down easier .
Once the budget is approved , some governing documents require it to be distributed to all residents . This can be by a separate mailing or with one of the letters referred to above . It is critical , if the financial year starts on 1 January , that the budget is approved and in place to be fully operational . Some managers and boards believe that once they have completed the budget process , they can go on to other things . However , the budget is a living document , not in the sense that it should be changed ( don ’ t change the budget during the year , only note and understand the differences ), but that it should be consulted for most or all of the decisions a board makes during the year . A manager is responsible for advice to their board as to whether the action they want to take is within the budget or whether they need to switch monies from somewhere else or , in general , what the board ’ s options are .
As a general comment , a board needs to look realistically at the companies it hires , including the security or landscaping company . A professional company , earning a reasonable fee , can avoid or solve many of the problems that boards often deal with . Getting a company at the lowest price is not usually in the best interest of the community . The same can be said for any of the companies the association contracts with . It is often best to obtain quotes from companies with a reputation for long experience and dedication than from ‘ Fly by Night Construction ’. The board can compare quotes from top companies and select on cost but also on other related factors . Remember , the emphasis must be on managing for value rather than profit . These thoughts are important considerations during the budget process .
There is an adage that ’ s been used by accountants for years : ‘ Debits by the windows , credits by the door ’. Just remember not to move your desk !
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