By Joel Yust AMS, CAM, CMCA, All Property Services, Inc.
As fall approaches, many directors find the topic of budgets haunting them. Some community association managers can find this a bit of a laborious task as well. As long as proper preparation takes place, it doesn't have to be that difficult. If associations have a good reserve study done that fulfills the requirements of the Reserve Study Policy written up by the association’s attorneys, it lays the groundwork for the budget to fall into place. While some of the items on the study may not be annual budgetary items, it does allow the directors to formulate a plan for items outside of the annual needs.
The first step I usually take is meeting with the board of directors, and their association accountant that sees all of the regular bills that come to the association. This offers a great resource for unexpected things that the board of directors may not always be aware of. As managers advise the directors of the process set forth in CCIOA (make sure directors are aware of HB 18-1342) and the association’s governing documents, it can be helpful to figure in the increases to utilities, services, insurance and other annual costs that have escalating fees, hence having the association’s accountant present for the budget meeting. It is a common question as to why items such as asphalt, landscaping improvements, monuments, roofing, concrete work, and other large expensive repairs are not listed in the budget line items. The simplest answer to this is those expenses don't normally happen each year, therefore, they should not be on an annual budget. I usually let the directors know that it is a good practice to list the large expenditures (capital expenses) under the budget so that the membership is aware of exactly what is happening with their money.
Eliminating the question of transparency can be a huge deal with some associations. If the board of directors can stop the question of "where does my money go" before it is asked, it could allow the budget ratification and annual meeting to be much more productive. Once the budget items have been reviewed, the directors can adopt the budget and the notice to the membership can be sent within the 90 days of adoption.
I would imagine that all managers in the industry have a few associations that like to create their own budgets without the outside influence of a third party. That's okay to do, but never hesitate to help them review it to see if there are any additions or changes that they may be interested in, or other legislative changes that they may not be aware of.
When possible, I normally try to schedule the budget ratification meeting and annual meeting at the same time. This seems to be more efficient to me, and let's face it, not every member finds all the HOA meetings as enjoyable as I do. Often times directors and members feel that it is necessary for the membership to approve the budget. Unless the governing documents state otherwise, the board approves the budget and the membership has the ability to veto it. With appropriate budgeting practices, there is not normally a need or desire for the membership to veto a budget. If there is a need for a veto, according to the CCIOA budget ratification process, the membership is able to reject the proposed budget if the majority of all owners in good standing veto the proposed budget. To date, I have not had this happen.
If you plan ahead and help directors follow the process, things don't need to be so scary. Keep it simple, follow the guidelines set forth in the documents and statutes, and let Halloween do the haunting!
Joel Yust has been in business ownership/management for the last 24 years, but in the last 6 years, he has really enjoyed managing communities and helping memberships with their needs. Most people find it bizarre, but he can't seem to get enough HOA edification. Although it's normally a thankless job, Joel LOVES what he does.