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(425) 562-1200
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The primary responsibility of an HOA or condo association board is to protect the association's assets – its buildings and property improvements. As the value of your association's assets continues to rise, so do the costs to preserve them. It's crucial for your board to have a realistic budget and solid financial plan.
The number one mistake most self-managed boards make when creating their budget is to underestimate and underfund their reserves - the pool of money set aside to maintain their buildings, parking lots, etc. The most common result of an unrealistic budget is that expenses exceed income; for example, annual income of $100,000 and annual expenses of $110,000. The typical response is to defer maintenance. When roof replacement, parking lot paving, and other maintenance is deferred, breakdowns occur and repairs become necessary. Under mounting pressure, most boards make the tough decision to impose a special assessment on their homeowners to fund the maintenance and repairs. Few self-managed boards recognize the source of the problem (underfunded reserves) or how to fix it.
With a realistic budget, your association will have the funds to pay your bills on-time and complete property maintenance on-schedule and to current standards. Your association assets will be protected, your association will avoid unnecessary expenses, your homeowners will be happy, and your board will have peace-of-mind.
Creating a realistic budget and supporting documents is no small task. Your team at Condominium Management is ready to help your HOA / condo board to develop a realistic budget and a comprehensive financial plan to support it, including the following.
A twenty-year reserve study identifies each building component, remaining useful life, present cost to replace, future cost to replace, and includes a schedule showing the recommended reserve contribution and projected reserve expense for each of the 20 years. We will recommend a company which specializes in preparing reserve studies.
An operating budget lists all operating expenses planned for the current year. Operating expenses are those expenses that accrue each year and remain fairly constant from year to year. The operating budget should not increase significantly from year to year unless the association adds a new service or utilities increase significantly.
Compares annual expenses with budgeted expenses and explains the reason for any significant variances.
An annual calendar that lists all the important maintenance or administrative items planned for the year with vendor information, when the work will be scheduled, and costs.
Each line item is broken down and listed by month, not spread evenly throughout the year. This allows you to take into account seasonal variances and match up billing frequencies – monthly, bi-monthly, and annual expenses. The net result is that your "Year to Date" numbers will be accurate and variances between "Budget" and "Actual" expenses are reduced.
Learn about our other services, get a management proposal or contact us today for more information about budgeting services to help ensure your HOA / condo association can protect its assets and operate on a solid financial foundation.
12729 Northup Way, Suite #20, Bellevue, WA 98005