The FY 2022 Budget Process

By Robert Lee, Board of Directors

Each June witnesses the beginning of an intensive three-month process of fashioning a new fiscal year budget for the Association. This is a collaborative effort involving multiple players including WAL Management, the Budget Committee, the Board of Directors, WAL committees and Association staff.

The first formal step in the process is Management’s preparation of a draft budget which, by contract, must be completed by June 1. That draft document is then presented to the Budget Committee which begins a systematic analysis of each line item in the proposed budget. Typically, the Chair of Budget appoints subcommittees – or, in the parlance of the Committee, “working groups” – to conduct indepth reviews of various categories of anticipated income and expenses such as supplies, repairs and maintenance or utilities. Some of the numbers can be relatively easy to determine, such as pre-negotiated and fixed-price contracts. Others can be devilishly tricky.

Utilities, for example – a very large and growing component of the Association’s budget – are heavily influenced by factors no one can reasonably predict, including weather, volatile energy markets, and unique circumstances such as the Covid pandemic which wasn’t on anyone’s radar when the Association’s 2020 budget was formally adopted in August 2019, but which had a significant impact on costs resulting from school closures, residents working from home and additional demands on Management to enhance health and safety measures throughout the community. The pandemic also depressed income among a broad range of Watergate activities and services such as Arts & Entertainment shuttle trips and Party Room rentals that supplement monthly unit assessments.

A somewhat related set of circumstances impacted work on the Association’s FY-2021 budget. Committee members faced the challenge of anticipating if, or when, schools might reopen, residents might return to their workplaces and WAL-sponsored services and activities might be reactivated. What is most remarkable about the two most recent budget cycles is how well the Budget Committee accurately forecast aggregate income and expenses. Once working groups complete their assignments, their work product is scrutinized by the Budget Committee as a whole. This is a valuable exercise in that the perspectives and insights of all 12 members are added to the mix, usually validating the conclusions of the working groups, but occasionally refining and improving those forecasts.

The FY 2022 Budget process is a collaborative effort involving multiple [groups].

When all the individual components of the budget have been reviewed and a relatively small number of problematic items resolved, the Chair presents the proposed Operational Budget, along with a Five- year Capital Repair and Replacement Plan (CRRP), to the full Committee to review and determine the specific budget plan and proposed unit assessment schedule to be recommended to the Board of Directors. The CRRP is a critical part of the overall process because it identifies and prioritizes all capital projects that are contemplated for the coming fiscal year and four additional out-years. Many of these projects are based upon the most recent Reserve Study, which, by law, must be performed every five years. Numerous parties contribute to the final CRRP, including the General Manager, Facilities Director, specific WAL committees such as Infrastructure and Project Review, and a working group of the Budget Committee consisting of the Chair, one board-appointed member, and one non-board member.

Near the end of the process, the Budget Committee recommends revisions to the new fiscal year’s Schedule of Fees that is appended to the Operational Budget. These fees govern such facilities and activities as the Racquet Club, party rooms and gazebos, move-in and move-out charges and Handyman services.

All the work referenced above is accomplished in less than 2 months, a tribute to the professionalism and hard work of the Budget Committee, which during budget season may meet two or three times a week.

At its July meeting, the Board of Directors conducts a First Reading of the budget and may make revisions to the proposed budget. A Town Hall meeting is held in early to mid- August to inform the community of the proposed new budget and elicit comments and suggestions from unit owners. At its August meeting, the Board of Directors formally adopts the Association’s new Operational Budget, Reserve Plan and Fee Schedule which take effect on October 1.

The creation of any budget is an arduous and difficult proposition requiring the balancing of different, sometimes conflicting values and priorities. Over the years, I think it can be said that the principal players in this annual ritual have done a conscientious and commendable job in fairly balancing those interests.