association against which to compare or judge
the adequacy of the initial proposed budget, and
often a lack of appreciation of the costs involved
in maintaining, upgrading and replacing
association assets. The replacement of major
facilities involves considerable cost that must
come from existing cash resources, operating
levies, special levies or loans at the time such
replacement or repairs are needed. Concern
exists about the ability of the association and its
owners to meet those costs exclusively through
levies, special levies or loans, and to adequately
plan and budget for such commitments.
The policy
RCC supports zero-based budgeting performed
by a budget committee and management, in
order to determine the annual operating budget
and the levy. RCC supports the provision for
an operating levy to cover annual operating
expenses, and a capital reserve levy which
is invested in a separate capital reserve fund
for planned or unplanned expenditures of a
capital nature. RCC opposes the inclusion of
cash reserves into the operating income stream
as a way of reducing levies. RCC supports
the adoption of a financial control policy that
includes delegated lines of authority for all
directors and management.
RCC encourages all associations to consider
and adopt a formal policy for meeting substantial
future repair and replacement obligations.
Associations should fund, in whole or in part,
reserve accounts based upon replacement cost
estimates and annual contributions necessary
to assure that all or a substantial portion of
those funds are available when needed. While
all associations should plan for meeting their
substantial future repair and replacement
financial obligations, the form of any plan should
be tailored to the individual association and its
members.
Different methods of reserve funding analysis
will be appropriate for different associations.
The amount th ]Y[X