Condo Media - July 2011 - 26

Insight
Budgeting

Board Member

by Geri Matraia

Operating Expenses
When and How?
example, there may be a need for specific repairs that are required immediately, as well as those that are just starting to make themselves known. Also, there are certain costs that are less predictable than others and it is important to identify these and take specific steps to try and avoid surprises that can negatively affect your budget. This year was a great example because of the excessive snow-related costs. I don’t think there is anyone, whether a single-family homeowner or condo owner, who has not been affected by the significant snowfall this past winter. In fact, we all got hit at least three times — the owner budget, the town budget and the state budget — and the excess charges affect everyone in one way or another. Obviously we can’t control the weather, but we need to try and plan for what may happen. Don’t get fooled into thinking that if we had a huge expense over budget last year that it won’t happen again because it will — we just don’t know when. People may have different views about the best way to prepare for snow removal costs. Some think that having a contract for a certain number of inches is better, while others think a contract that covers unlimited snowfall is the way to go and yet others think a per storm cost is best. It is a difficult decision to make and one that many boards deliberate at length. These are some of the questions we ask in deciding which approach to take. Look at what has been your past experience. How often have you had to pay extra costs for snow removal because of greater than anticipated snowfall?

t is the middle of summer, who is thinking about next year’s budget? If your association is on a fiscal calendar year, you should be. This is the time to start focusing on the budget planning process. It can be stressful for a new trustee and especially for someone who hasn’t been involved with condominium budgets before, but this is the best time to observe and review any maintenance or repair issues. After seven years, I know that budgeting is one of the most important responsibilities of a board. The association essentially has a fixed income — your fees. Part of that income must go into a reserve fund for long-term expenses and the remainder is your operating budget. That operating budget is the focus of this month’s column, and the bottom line is that there has to be enough budgeted to take care of the operating needs of the association. In most cases, the association management company will provide the board with a budget they believe is necessary based on the experiences of the current year. That is a helpful

starting point as the association manager is on the front lines and knows what the communities’ needs are. However, it is the board’s responsibility to understand and approve the budget. Unlike national or local budgets, your budget has to be balanced every year and the association looks to you as a board member to maintain that fiscal responsibility.

Predicting the Un-Predictable
You might think that looking at last year’s budget and increasing it by a certain percentage will work, but in my experience it is just one possible step in the process. The board is certainly guided by its past experience and may assume that some costs will go up from year-to-year. However, you can use the budget as an active tool in containing costs to the fullest extent, possibly by challenging the need for cost increases. Additionally, the board must be aware of what issues developed during the year (or those they think may develop) that require more detailed attention in the budget. For

CONDO MEDIA • JULY 2011

Condo Media - July 2011

Table of Contents for the Digital Edition of Condo Media - July 2011