Delinquency line item on budget

Started by SetenaN • 7 replies • 1566 views

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SetenaN (Georgia)
Posts: 23

Posted:

We are in the process of doing our budget. I have been researching, looking at other budgets done by other HOA's but dont see any line items for delinquencies. We stopped working with a property manager and are doing it ourselves but was advised to always add a delinquency line item to account for everyone not paying. Thoughts?

Setena

SusanW1 (Michigan)
Posts: 5,202

Posted:

Well, I think it should be shown as "Accounts Receiveable" but was told by our Treasurer that since we report on a "cash basis", we don't have to show it.

I'll be watching this thread to see what others do. Glad to see your question.

GloriaM (North Carolina)
Posts: 829

Posted:

Whether you perform your financials on an accrual or cash you should always show a write-off for bad-debt. If the HOA's income budget is $10,000.00 and your foreclosures and bankruptcies are high then it would be right to say you will not collect the entire $10,000.00.

By showing this line item as a negative your budget will be more realistic. Therefore IMHO place the uncollectible line item in your budget.

IanP1 (Alabama)
Posts: 1

Posted:

When preparing a budget, the majority of the information you use is based on past experience and what you know or reasonably expect to occur in the future. In terms of collecting dues and projecting the collection of dues, it is reasonable to come to the conclusion that you expect to collect all dues. Regardless of when the dues are collected, do you expect to collect 100% of them for the year. We do not use our accounts receivable in the budget but we do estimate cash on hand based on what we expect our income and expenses to be. We fully expect to collect on all dues but since it is a budget and not the actual numbers (since it is in the future) of when we will expect to receive the actual cash will be different because of timing differences. Therefore we do not budget for delinquencies because they generally are a wash from one month to the next.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Correct me please,

Aren't most budgets and books kept by a Program like "Quick Books?"

I belive you can make this a detailed as you want. I am of the opinion nothing is hidden from the ownership, it does not require any great effort to print out a statement listing what the books show completely. This statement should be either send as e-mail to owners twice yearly or posted on a Web site. I also believe most boards tend to somehow decide what they are going to report to the owners, in effect, not allowing the detailed information to be printed. I would like to know why the Board makes these decisions.
I understand some personal information should not be reported but if money is owned the amounts should be reported without reference to names.

Also, someone please comment on this budget reporting in regard to money owded.

Let me try this: Any monies owed to regimes for fees by the owners is at some point found to be uncollectable, has to be made up by assessing the owners.

SetenaN (Georgia)
Posts: 23

Posted:

Robert. I understand what you are saying. Ok check this out everyone-

Last year our delinquencies were added in the budget therefore, yes our dues went up all around because it was up to the other owners to foot the bill. This year we pow-wowed ( we are small-only 122 homes) and just said realistically this is what we need in order to run efficiently ( Budget came to only 19,000). We got rid of propety mgmt and some other things on our budget that went way too high and 19000 was it. It basically brings us down to about 155-160 per household which since it was 240 last year, that is a significant drop. Our delinquencies were about 4000.00 total last year and I was told we should add that to the 19000 and then that should be the amount the homeowners should pay. I have no problem telling the owners that they have to pay but in the end I would almost rather say like how we do in a house- if youdont have it in the end, you dont get it. Thats me though and I know we are a business- it just seemed simpler that way.

Thanks for the help on this one.
Setena

SusanW1 (Michigan)
Posts: 5,202

Posted:

Is this $4,000 really uncollectable?

What services do you provide for your members?

You are a very small association, but don't under capitalize yourself!!
You should be figuring out an annual budget (for yearly operational and administrative), establish a reserved emergency fund, & establish a Reserve fund (after a Reserve fund study.)

That could result in a number that could be a basis for dues.

If people don't pay, then you cannot provide services, but the others should not be punished because their neighbor won't contribute.

Also, your Board should do a Strategic Planning. What do you want to look like in 5, 10 or 20 years?

Be careful about decreasing dues. Fine for today, but can really backfire when you have to raise them, tomorrow!

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Setena and Susan,
I liked both your posts. Susan is probably more correct but you can argue with the figures Setena posted. I really think all Regimes would benefit from some formal report to the owner every couple of years stating the entire organization has be reviewed and here is where we can save some money if we do (whatever). I know I hear the boards saying they are constantly looking for ways to save money. I also know organixations can get it a rut.

Both posts thought provoking when viewed side by side.

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