CAI-NJ July.2016

J U L Y , 2 0 1 6

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

CONFIDENCE!

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

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.”