Now that we are in the heart of the budget season for 2023, it has been more difficult this year trying to keep assessment increases down. The effects of the pandemic, supply chain issues, and employee shortages with vendors have resulted in inflation hitting our association budgets. Boards always want to try and keep budgets tight and increases to a minimum, but the last few years have been unusual and tough on everyone, including your association. Unfortunately, inflation hits not only individual households but also the association. Costs are up across the board, from trash and landscaping adding fuel surcharges to utilities and all vendor services.
At Advantage Management, we take pride in our budget process. When you see an increase in assessments, it is carefully thought out and based on what it takes to operate your association. We build our budgets by first filling in all the expenses and measuring what it takes to operate the association. We make sure there is enough dedicated to reserves, and then those numbers help create the basis for how much your assessments need to be. So, if you see your assessments rise, remember that your property manager and board have done what they can to ensure the building operates as you are accustomed to, even with the rising costs.
Part of your budget is to help you prepare for the future by building the association’s reserve fund. The association’s reserve fund is a savings vehicle to allow the association to have the funds available for future projects like roofs, masonry projects, elevator upgrades, or any large project. Advantage Management ensures that each budget is prepared with a sufficient amount of money being transferred to reserves. Not only does this ensure your association’s financial health, it also shows lenders for sales and re-financing that your association is on the right financial footing. Another major reason to have a healthy reserve is to have funds available for projects which helps associations avoid special assessments.
There are other concepts we keep in mind in preparing the annual budget: Be realistic. It is generally challenging to keep maintenance assessments at last year’s levels. The role of an association’s board is to run the association’s business. The board has a fiduciary duty to review and pass a budget that keeps the association in good financial standing.
The budgeting process doesn’t end with the adoption of the annual budget. Careful and routine monitoring of budget-to-actual results of operations is a vital part of effective community association management.
Please feel free to reach out to your property manager for any questions about your budget and the process of passing your upcoming budget.