CAI-NJ Aug.2018 (w)

Are you Hitting Your BUDGETING MARKS? By Joseph Chorba, CPA CFE Principal, Wilkin and Guttenplan, P.C.

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B udgeting is one of the most important responsibilities of the board of directors. The budget is critical to the short and long-term success of an association. It is the foundation for all financial decisions made by the Board. The annual budget plays an important role in how boards manage the maintenance of the common elements and the services provided by an association. All have a direct impact on the quality of life within that association. It should be a direct reflection of the association’s short and long-term goals. The theme of this month’s issue of Community Trends is “Are you hitting your marks?”. That is a question that should be asked often when evaluating the accuracy of the budget and when making decisions on future budgeting periods. Budgeting can be very tricky for associations. Many boards struggle with how to balance the amount of main- tenance fees being charged to their neighbors and friends while maintaining an adequate level of service. It can also be a delicate balance for a board that is sensitive to the unit owners’ ability to pay the monthly maintenance fees

with the ongoing financial needs of an association. Much like in our personal lives, it can be difficult to decide on the best use of a limited amount of funds. Earlier this year I wrote an article for Community Trends ® that talked about staying competitive in an ever-changing real estate market. The theme of that article was associ- ations that plan ahead, stay ahead. This is a key point when preparing a budget in the short term as well as the long term. But what happens when the plan goes awry? Budgeting and reacting to unexpected needs is another struggle for many boards for the same reasons mentioned above. Unexpected expenses could have an impact on the amount of maintenance fees being charged, and some boards also fear that special assessments have a negative impact on home values. To those boards, I argue that not properly responding to those changing events through the budget process could have a far greater negative long- term impact. The longer an issue goes unresolved, the higher the likelihood it could lead to more serious financial problems.

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