Issue link: https://hub.associaonline.com/i/1422548
How is the Budget Prepared? Budget preparation is a long and tedious process that should never be rushed. Ideally, start budgeting about six months in advance of the fiscal year so you have plenty of time to think through each step. Risking a budgetary shortfall can put a financial burden on the association and lead to increased dues, special assessments, and overall discontent in the community. Here are steps board members can take to maintain a healthy budget and secure a stable future for the association. Step 1: Refer to your community's governing documents. Because every action taken by the board must be within its legal authority and responsibility, you should consult your community's governing documents before any major undertaking. Step 2: Review your previous budget and current financial position. Review past financial statements and compare your actual financial activity to the budgeted activity for the current year and make note of any discrepancies. Step 3: Assess contracts and utility costs. Assess all contracts to make sure the association is getting what it wants and is paying the correct price for the services rendered. Also, contact all utilities to see if they can give you an idea of how much their services are anticipated to increase in pricing for the coming year. Step 4: Analyze your reserve fund. It's necessary to ensure your association's reserves are properly funded, so when a reserve component requires maintenance, there's money on hand to perform the work. Allocate monthly reserve expenses as directed by the reserve analyst. Step 5: Plug in the numbers and calculate other income. After compiling expenses from contractors, utilities, reserve contributions, and any other miscellaneous payments, enter those numbers into a spreadsheet. Then, calculate all other income sources, like earned interest on bank accounts or homeowner late fees, to determine assessment fees for the year. Step 6: Approve and distribute. After completing these steps and considering the unique elements of each association, you can prepare the budget for the board to review. If the board is in agreement, they can approve the budget and distribute it to homeowners for perusal.