For most associations, fall is the center of annual budget activity, and at times it can feel like a swirl of details. Adopting the budget is one crucial job of the board of directors to ensure the finances are properly accounted for and to serve as the basis for owner assessments. Much more goes into creating the budget than the average homeowner may imagine; here is the process that associations follow to prepare and ratify the annual budget.
- The board and property manager, and possibly an appointed budget committee, work together to gather all financial information needed to project expenses for the coming year. This could be a reserve analysis, bids for contracts, projections for utility or service increases, comparisons of past years’ budget trends and many other details. Lieberman property managers, regional directors and accounting staff work closely with the board to ensure that an appropriate budget is created.
- The board reviews all income streams—reserves, assessments, interest on investments and other types of miscellaneous income.
- The goal of an association budget is for a zero based budget, meaning every dollar of income is slated for an expenditure, thus leaving no residual income at the end of the year. To achieve this, the board will review contracts and related expenditures so that assessment increases are minimized or prevented.
- When the board has developed the best possible draft budget, the association sends it to every member for review and comment. One of the reasons we start the process early is to allow owners plenty of time to study the budget, ask questions and offer comments.
- Based on member comments, the board revises the draft budget as needed.
- At a budget ratification meeting, the budget is adopted unless the majority of owners vote to reject it.
An informed homeowner will make the best possible budget reviewer, so be sure you understand the details of your association’s budget. If a condo board communicates well with residents, and has provided strong, transparent leadership, the annual budget ratification should be simple.