By Jennifer Olson, CAM / Published August 2023
Summertime conjures up thoughts of vacations and sunshine for most, but for community association managers, it also includes the looming feeling of knowing budget season is knocking on their door. Late summer is an ideal time to start preparing for the budgeting process, which can be filled with challenging conversations with board members and business partners alike. Now more than ever, it is important to establish a well-thought-out budget to prepare your association for cost increases and other changes in the upcoming year. The following are helpful tips to assist managers and board members in making this budget season a smooth one.
Avoid the status quo and take time to shop the current cost of maintaining your community. Some maintenance items persist throughout the year, and others are seasonal. Make a list of all the expense items that have come up in the past few years and any anticipated changes.
Budget season is a good time to revisit contracts/agreements with all the business partners involved with your association. Is it possible that their prices will be increasing? Are there new services they may offer that might be a better fit than the current contract? Have the needs of the property changed since the original contract was executed? Is there a different provider that offers a better-valued contract? Is it possible your current provider merged with another provider and things have changed? It is also always good to remember that the cheapest contract is not always the best one for your association. The bottom-line number should not be the only deciding factor when contracting with business partners.
It is also time to review contracts and relationships with the association’s financial partners. Even though it is not mandatory to shop advisors, it is prudent to ensure the association is getting the most value out of these relationships.
After reviewing these items, it may be time to put out a request for proposal. Be sure to include current business partners along with a few new ones.
Reserve funding has always been a hot topic, especially since the Champlain Towers’ tragedy last year. Review the most recent reserve study (within three years) to ensure that the level of contributions required to keep the association’s reserves are on track. Be sure to keep up with current legislation in your area that impacts reserve requirements and SIRS (structural integrity reserve study) requirements.
Once the review has been completed, there will be hard numbers to work with to complete the other operating expense lines in the budget.
Once the expense side is mapped out, determine if the current income is sufficient to cover everything. Remember—good budgeting is driven by the expenses you expect to incur, not by where you want your income to be. Cost increases may catalyze a need to recommend an increase in general assessments. Don’t forget to include any reliable “other income” such as late fees, clubhouse rental, cell tower rental, etc.
It is time to finalize the proposed budget. Be sure to include the previous year’s approved budget for comparison purposes and clearly show any changes. Include footnotes with brief explanations of any significant changes. Bring all supporting documentation, including requests for proposals, reserve study, quotes, etc. to the budget meeting.
You are almost to the finish line! It may be helpful to distribute a draft budget ahead of time to field questions and constructive feedback, making for a streamlined budget meeting. Although it is a lot of work, checking these boxes will enable you to confidently present the budget to the board to pass and have another successful budgeting season in the books.
Jennifer Olson
VP of Association Banking Group, Centennial Bank
Jennifer Olson is a vice president of association banking group for Centennial Bank. Jennifer has also held her FL community association manager’s license since 2014 and is a member of CAI’s national Business Partners Council. Centennial Bank’s association banking group provides specialized banking for community associations. All funds remain in the local community with local management and local decision-making. For more information, call 561-236-3378 or email jolson@my100bank.com. You can also visit www.my100bank.com/association-banking.