July2016

CONFIDENCE! By Cathy Perrone, Regional Manager Wilkin Management Group

“Getting a good head start is essential for preparing your board for review and ultimately voting on a proper budget.”

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T here is no greater feeling in the world than walking into a meeting prepared to tackle the most challeng- ing issues. It is by far the key ingredient to a success- ful management relationship with your board and members of your community. How to get there can be daunting if you do not prepare and review all issues in a timely fashion. Budgets are probably one of the most important responsibilities boards are faced with each year. Guiding your board through the budget preparation process with the proper tools in place will provide everyone involved with the confidence that the financial needs of the associa- tion are being met. Getting a good head start is essential for preparing your board for review and ultimately voting on a proper budget. The budget process should start no later than 90 days prior to the end of the fiscal year. Understanding how your association is performing financially throughout the year is a requirement for the budget process. Has the association received their prior year-end audit? Making sure the financial report for the prior year is com- pleted and more importantly, reviewed by your board will

assist with determining if your prior budget was adequate. Was there a surplus? Was there a deficit? The final audit provides all you need to know. While the audit is not completed until after the next fiscal year budget is due, the need to understand the finances throughout the year cannot be emphasized enough. Not recognizing deficits has an immediate effect on cash flow. The capital reserve study is another important tool you will need to help guide your board in approving a fiscally responsible budget. Making sure the capital reserve study is up-to-date and the budget contributions reflect the asso- ciation’s obligations is extremely important. The reserve contribution often represents the largest line item in the budget. Unfortunately, many associations find themselves underfunded in their reserves. When determining the annu- al reserve contribution in the budget, boards should not “short change” the reserve by completely ignoring the cap- ital reserve study. While in most cases, proper reserve fund balances can be obtained over time, ignoring the proper contributions will only result in assessments that always turn out to be surprises to the owners. CONT I NU E S ON PAGE 18

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