ASSOCIATION BUDGETING
TO BUDGET OR NOT TO
Tracy Wolin, CMCA, AMS, PCAM
Getting an early start on your budget is essential for any HOA Manager. One never knows what emergency might occur, so if you begin thinking about your budget early, you will be that much more prepared when the time comes to enter actual numbers. I begin preparing for budget season four months in advance, reviewing past budgets/history, verifying when the last budget increase was and amount of the increase, and creating my budgeting template. Some Boards believe in increasing the budget yearly which makes a Manager’s job so much simpler, but these Boards are rare. In my experience, those types of Boards will provide directive at the beginning of budget season by proactively divulging the increased amount for the upcoming fiscal year. Then there are those Boards who will not increase a budget so as Managers we start shifting money from line item to line item hopeful that there will be no large unforeseen expenses on the horizon.
how much of an increase? This could be a perfect opportunity to negotiate with the vendor or even go out to bid to confirm your vendor is competitive in their pricing. I have been able to negotiate some contract reductions at budget time so this could be a great opportunity for you to decrease a line item or two or three.
There are many approaches to preparing a budget but you must find your own style. A Management Company typically uses a custom template and provides a timeline to complete the pro forma budget. With self-managed Associations, there may be a template already in existence or perhaps you may have your own worksheet. The narrative should be embedded in your When preparing a budget with no instructions, I create three data on how you arrived at the figure in any line item. columns for different increase amounts, typically 2%, 4% and 6%, using a calculation to average the expenses for the What will vary this year and make budgeting problematic are remainder of the year for each line item. Budget increase material delays, costs and COVID supplies. I am sure many amounts are typically stated in the governing documents of us have signed contracts and now months later, the vendor of each Association. This language will let you know if the wants to add an addendum to the contract as compensation for Board has the authority to raise dues without a vote of the the unforeseen increase in materials. Problems such as being able to schedule a project and have it come to completion, membership or if there is a cap on any increase amounts. but budgeting for COVID materials such as hand sanitizer, Firstly, figure out the financial objectives of the Association disinfectant, masks. Another issue is employees, not only for the next budget year. The reoccurring expenses are the finding them but at what cost? With the pandemic making easiest to get started on, utilities, management fees, insurance supplies scarce as manufacturers cut production on top of the premiums, landscaping, annual audit, security, and contracts. cost of lumber, copper, steel, glass, etc., plus inflation, how can When was the last time the vendor received an increase and we make the budget balance? There will certainly be a major 40 • CONTACT | FALL 2021
