Financial Mgmt of Associations | Budgets & Replacement Reserves Part 3

Part 3 : Budgetary Roles and Responsibilities & Budget Presentation

Part 1 | Part 2 | Part 3 | Part 4

The roles and responsibilities with regards to the budget at your community association can be varied. The manager, board of directors, treasurer, and even the owners all have different roles in planning and maintaining the budget. We will take a detailed look at those roles as well as the best ways to present a budget.

• Budgetary roles and responsibilities of the Manager: The manager is typically responsible for preparing the draft budget, reviewing the draft budget with the Board, revising it after any changes are made, and providing a summary of the budget to the owners after board approval (unless stated otherwise in your governing documents or state statute).
• Budgetary roles and responsibilities of the Board of Directors: Most boards of directors are responsible for establishing, approving, and monitoring the community’s budget.  Although they have the power to establish a budget, most will delegate preparation authority to their manager.  When the board of directors reviews a proposed budget, they should consider:
  • Legal requirements of state statutes and governing documents
  • Owners needs and desires (balancing mandatory and discretionary items)
  • Committee and owner feedback
  • The need to reconcile revenue and expenses
  • Any financial forecasts and analyses of past financial activity prepared by the manager
• Budgetary roles and responsibilities of the Treasurer: The community treasurer is responsible for ensuring that the draft budget is prepared and approved.  He or she will usually delegate initial preparation of the budget to the manager, and work with the manager to get the budget to an state where the board can approve it.  The treasurer may review the draft budget with a finance committee if available.  If the association has a finance committee, t is important that the treasurer consult all committee chairpersons and invite owner input to ensure support of the planned revenue and expenses.  Their participation and support would be especially important where a vote of owners is required or recommended for:
  • An increase in assessments
  • Special assessments
  • Major improvements
  • Funding replacement reserves
• Budgetary roles and responsibilities of the Owners: Some states and some community governing documents require that the budget be passed by a vote of the owners.  The preceding discussion explains when and why owners should be involved in reviewing the proposed budget - even when the board is responsible for its adoption.

BUDGET PRESENTATION

There are two questions to ask yourself when you are preparing to present a budget.  Consider these factors when presenting the community association budget to the homeowners:

• What information will help my audience understand and accept my estimates of revenue and expenses?
• How can I present that information in an easy to understand format?

There are two common mistakes to avoid when presenting a budget:

• Neglecting to present any information on how estimates were developed. The RealManage budget program allows the manager to enter detailed notes that explain the reasoning behind the budgeted numbers.
• Presenting so much information that people are overwhelmed and confused. The RealManage budget program offers the manager various reporting methods to suit a variety of needs.

When you are preparing to present your budget:

• Identify the line items that your audience is likely to be interested in or question
• Identify any comparisons or trends that would help your audience understand why your estimate is what it is
• Decide whether a table or visual presentation such as a pie chart or bar graph will most clearly demonstrate what is happening with the numbers

In our last articles we looked at the introduction to budgets and the basics of the budget, future articles will include more a more in depth look at reserve funding and allocation.