DOs
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Consider whether the budget should include any projected shortfall, or whether there should be a special assessment.
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Consider the current expected delinquencies, and be conservative. Otherwise it could be painful when subsequent years budgets are prepared.
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Consider special projects that cannot be fully funded from reserves.
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Consider increases in expenses, and be realistic about reduction of costs.
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Anticipate contracts that expire, and contracts that automatically renew.
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Include in every annual meeting a membership vote to approve a resolution for tax purposes (Revenue Ruling 70-604, allowing carryover of excess membership income, if any, to next year).
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Be sure that the financial statements include the prior year’s audit adjustments.
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Be sure that all reserve expenditures are ratified by the Board.
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Follow the statutory procedures for budget approval.
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Determine if the Association’s net worth (operating fund balance) is adequate. Consider an assessment for additional working capital.
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Review basic financial controls to minimize waste and any possibility of misappropriation of Association funds.
DON’Ts
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Don’t post any current year expenditures to the beginning fund balance.
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Don’t just annualize every expense when preparing the budget. Understand every category, and what needs to be included in next year’s budget.
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Don’t be political in the budget process. Sound fiduciary responsibility dictates working for the best interest of all owners.
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Don’t let payables get delinquent. Otherwise, this could result in a poor credit rating, and jeopardize basic services as well as insurable interests.
WHEN IN DOUBT, CALL KANE & COMPANY, P.A. !
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