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SidneyP
(Florida)

Posts:290

11/23/2006 7:43 AM
Is it the BOD's place to make out the yearly budget or the Management Company's? I am assuming the treasure works it out and gives it to the MC to give notice...To those of you that have so much knowledge please bare with me on some of the questions I may ask...I am reading and trying so hard to learn all I can. Thanks

BrianB
(California)

Posts:1742

11/23/2006 8:19 AM
the responsibility lies with the board. if they trust the MC to do it, that's fine... they still approve it. And, if it's wrong, they still are accountable. "You can delegate authority, but you cannot delegate accountability"

DonN
(Michigan)

Posts:240

11/24/2006 5:31 AM
SidneyP Often too much emphasis is given to an annual budget and assigned to the treasurer when the consideration should first be given to the annual operating plan from which the budget is then derived. The operating plan should be the responsibility of the entire board in consultation with the members (they pay the bills). Iterations between the operating plan and budget are typically required to bring them into agreement. Having the members involved is one way to build trust between the board and the members. RogerB described a simple method for involving all the members (or at least giving members the opportunity to be involved) in his post at http://www.hoatalk.com/Forum/tabid/55/view/topic/forumid/1/postid/8419/Default.aspx. If the board is recommending a dues or assessment increase with the proposed operating plan and budget, that can be part of the approval by members. If the members don't approve the increase, then the Board's Plan B (operating plan and budget with no increase in dues or assessments) is approved by default. This is simple in concept but difficult to implement. The saying is "Planning is easy; implementation is a b......" But POAs are not likely successful if they don't do both the operating plan and budget.

Don Nordeen Governance of Property Owners Associations

CharlesW1
(Georgia)

Posts:818

11/24/2006 7:51 AM
SidneyP, The information BrianB has stated is true to my knowledge. Our MC will and does the budget. We (the board) will create a budget as well. We compare the two before approving it and mailing it to members of the community. We then schedule a meeting to discuss any questions the members may have concerning the budget. This seems to work well for us. I continue to learn with every post and response written. Best of luck, Chuck W.

Charles E. Wafer Jr.

SidneyP
(Florida)

Posts:290

11/24/2006 8:24 AM
Don...So I am understanding that we can't raise the association fees (only the 10% allowed w/o HO vote) until after the annual budget has been presented, which isn't until Jan 16th. (dues are due Jan.1st)..Roger had stated in another post that we could make it retro active, how could this be done?...You don't know how hard I have tried to get the other 2 Board members to have meetings, get the HO's involved, let them meet us. I had suggested a newsletter right from the start. I even wrote one, introducing us and trying to convey what we had planned. I sent it to the President(because she requested she check it for spelling, etc. I thought it was good and I had even gone to our entrance and took a photo of the logo for attachment to the letter. Well, she didn't correct or suggest any changes, she rewrote the whole thing and sent it back to me and ask me to add my logo. This peed me off and I told her she could take care of it herself, I was through w/newletters. A newsletter has never been sent except I sent mine to the 4/5 HO's that attended the meeting (each of them has thanks me). I have ask the other 2 Board members to follow the CC&R's but all I ever hear is they work full time and have other dememtions to their lives also. I had crunched the figures I wanted (treasurers job) to show that we didn't have enough money even to last out the year. Our old MC had low balled just about everything. Our manager had our utilities at $2000. for the year, at the end of the 2nd quarter it was already 2100 <$2600 now>. and to boot our fountain had broken in Apr. and hasn't worked since, so the cost has been even lower then normal. General maintenance budgeted for $2890., end of 2nd quarter was $4769.(our MC used their own maintenance co), postage and printing budget $250., end of 2nd quarter $380. and so on and so on. The 2006 Budget was given to us at take over and we had not done any transition investigation and just excepted what was presented. As you can see this was way below budget or they padded our out go. I have tried to get the (remaining board-2 missing) to do something but it has done no good. If the HO's need to be notified about the 2007 budget 30 days in advance of annual meeting(Jan 16th), looks like we will not make the dead line. Can the annual meeting be changed to when ever the BOD's want it?...This is long and I hope it makes sense. Again any help is appreciated.

PatrickH
(California)

Posts:197

11/24/2006 9:29 AM
Hi Sidney, I was the Treasurer for six years for my HOA, so let me share some of my insights with you. When I joined my BOD, I had only owned my home for three months, so I had no idea how an HOA operates. For the first budget I made, I worked with our property manager to see what we had been spending on various items over the past three years. I started building a spreadsheet with the annual costs of everything in our budget over the past three years. With those figures as a guideline, I could make a reasonable estimate as to how much money to allocate to each item. By looking at the spreadsheet, I could see where costs fluctuated on a year to year basis. For example, one year we spent $ 800 or irrigation repairs, the next year $ 400, the next year $ 1,200. Using those numbers, I would allocate $ 800 for irrigation repairs. As the spreadsheet grew with each year's numbers, it became easier to figure out the allocations for the following year. By the time I left the Board, I had a spreadsheet that stretched back ten years that I gave to the new Treasurer. I helped him work on the first budget that he built so I could answer any questions that he had. The transition went smoothly since he had so much data to work with. We don't use our property manager to make our budget. The Treasuser makes a sample budget, meets with the other Board members or emails copies of it to them, they make their suggestions until everyone is comfortable with it and the first time the manager sees it is when the Treasurer presents it at the Board meeting for official approval by the Board. Keep in mind that you'll never come up with a "perfect" budget. There will always be some expense that ends up costing more than was budgeted for it. You do the best you can and hope it all comes out as close to perfect as possible. Regarding the newsletter, you should always try to send out a few every year. If your HOA is like most, probably 95% of the members never attend a Board meeting, so a newsletter is a great way to keep them informed as to how things are going. It can be sent with the billings to save on postage. Keep it to one page, giving an update on how the budget is doing, any major problems that people are complaining about and what's being discussed to handle them, and any major projects, improvements or repairs that the Board is considering. Good luck

DonN
(Michigan)

Posts:240

11/24/2006 12:06 PM
SidneyP No, I am not saying that a proposal to raise the annual assessments can't be made until the budget is prepared. I am saying that it is good practice to link the operating plan, budget, and annual assessments. Since the members are paying the bill and receive the benefits, it is also good practice to involve the members. The authority to increase annual assessments is defined in your governing documents. That authority should be exercised with good governance. Members shouldn't be taken for granted.

Don Nordeen Governance of Property Owners Associations

RonN
(Pennsylvania)

Posts:1

04/22/2007 1:44 PM
I am looking to locate a policy and/or procedure on budget planning and preparation,that I may refer to for guidance in developing one for my HOA.Any and all information is appreciated. Thanks Ron N

RogerB
(Colorado)

Posts:3704

04/22/2007 8:31 PM
Ron, first I would summarize available historical income and expenses for the operating account. Review any existing reserve fund studies. Then develop your annual operating and reserve fund budgets. I prefer to include minimum anticipated income and anticipated maximum expenditures for the operating budget. For the reserve fund it depends on numerous factors but a rule of thumb is to add 25% to 35% of total annual income.

Roger Borcherding Official HOATalk.com Sponsor DARCO Property Management (Colorado) (303) 925-0150 *See legal notice below (end of page) or go to www.hoatalk.com/legal

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