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Think Progress New Budget Planning

The annual operating budget is much more than a number crunching exercise. It’s an information and communication tool that provides homeowners and management with insight into the board’s plan for the coming year. Developing and implementing the annual budget is one of the most important functions of a community association. As you begin to prepare for the 2011 budget process there are a few questions to be asked. You should ask yourself these questions throughout the year as well. Why? Because things change.

First Question: What are your community’s needs, policies, goals, and objectives for the coming year and beyond?

What goals do you or the residents have for the community in the coming year(s)? In most communities, the basics usually include a safe, comfortable living environment and policies that promote a proper balance between individuality and a sense of belonging within the community.

Second Question: What services do you require and which services do you desire?

Places to look for required services are in your governing documents, city codes, and state and federal laws. Your documents will mandate things such as the required insurances, maintenance, etc.

Be sure you don’t rely merely on your governing documents. For example, the governing documents may require you to properly maintain an item however; a state code may require you to test the item two times annually. You have to make sure funds are available to satisfy both requirements, it’s not an option.

Desired services are considered discretionary. Such line items might include funds allocated for a social committee or money in the landscaping budget for the planting of annual flowers. While these types of services are not dictated within the governing documents your residents probably have an opinion on them, they might have to be factored into your budget.

Third Question: What have your operating costs been over the years, and are there any patterns of extraordinary costs?

Depending on the age of your community and the number of budget cycles it’s seen, historical operating costs can be very relevant. This doesn’t mean that you can’t control costs by doing things differently. But whatever policies you enact, the level of service desired shouldn’t suffer–especially if demand remains high among residents.

Fourth Question: What cost changes do you know about for services and utilities?

Check with your contract service vendors if there is going to be any increases in their contracts. Utilities increase every year and are usually not effected by a down economy. Has the economy had any impact for materials that may affect the budget?

Fifth Question – What have property inspections revealed?

Continual inspections will help you determine if your common area elements are performing as anticipated. If they’re not, and their life cycles are diminished due to extraordinary wear and tear or deferred maintenance, then you may need to adjust the repair and replacement schedules.

A budget is a plan. It is your roadmap for the future and a plan for saving and spending. Budgeting serves as the foundation for your financial success. It is important that you are consistently concentrating on the future and the needs of the community. If you implement these tips and ask the right questions, you are sure to have success with the financial stability of your community.

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