Budget Presentation You and Your Manager - What You Should Expect

Question: What is one of the primary responsibilities of the board of directors?

Answer: To maintain and/or enhance the market value for each unit within the community.

The community’s market value is maintained and/or enhanced through:

1. Properly maintaining the buildings, roads, sidewalks, etc.
   
   
2. Addressing the community’s landscaping in a manner that keeps it not only attractive, but controlled throughout the years.
   
   
3. Appropriately insuring the association’s assets from natural or other disasters.
   
   
4. Accurately foreseeing the future replacement needs of the community’s infrastructure and funding reserves accordingly.
   
   
5. Establish the means to successfully administer the above with the appropriate management and supervisory levels.

Knowing this, the budget is the first and most valuable tool available to the board of directors in successfully performing these functions. The draft budget that your manager presents to you should be detailed, but it should also be a simple and non-complicated reflection of the community’s needs and expectations. It should be historically accurate and echo the Association’s current contractual obligations. The draft budget should also highlight any line items in the previous year’s budget that failed to meet the community’s needs, as well as successes that should be continued. This will allow you to stay focused on making only those changes that are needed without having to question each line item presented to you.

Most managers and their boards have a very good sense of the community’s fiscal needs and can usually predetermine their impact on the coming year’s maintenance fee. Nevertheless, it is important that your draft budget encompass ALL of the possible scenarios that were presented during the previous fiscal year. As a member of the board, it is your duty to determine which expectation level is best for the community. Your manager’s duty is to provide you with alternatives, not to decide it for you.

Your manager’s preparation for the coming year’s draft budget began on the first day of the current fiscal year. During the year, he/she will have made note of all anomalies that occurred outside of the scope of the current budget, and will present alternatives to address each of them for the following year’s draft budget. For your manager, this is an opportune time to demonstrate an intimate familiarity with all operational aspects of your association. Undoubtedly there are many times throughout the year that your manager’s knowledge and familiarity of the community is tested, but as a board member, the budget process allows you to observe these competencies as the manager works with you to substantiate every number in the draft budget.

Coming together as a team, manager and board of directors, to ensure that the new budget meets the community’s expectations is the ultimate goal. Evaluating each individual’s perception of the past events, while considering the members’ expectations of service levels, will bring out those intangible results that are not so easily determined by just using a calculator. The result? A budget process that is a group effort, without bias or inclusion of personal agendas, that will ultimately prove optimal for the successful operations of the community association.

Question: What is the single most important decision a community association board member has to routinely make each year?

Answer: The approval of the association’s fiscal budget.

Lance Govang, CMCA®, AMS®, PCAM®, GRI®
Community Association Manager
Kramer Triad Management Group
Ann Arbor, MI