THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Saturday, July 23, 1994 TAG: 9407210408
SECTION: REAL ESTATE WEEKLY PAGE: 28 EDITION: FINAL
COLUMN: Common Ground
SOURCE: G. Robert Kirkland and Michael A. Inman
LENGTH: Medium: 63 lines
The board of directors of our community association is starting to consider the budget for next year. The panel has just gained control of the association from the developer and wants to do the right thing.
Are there any steps the board needs to follow to make sure it has enough money to run the association next year?
Your community association's board of directors has already taken the first step: planning the budget well in advance of its approval. In the budgeting process, nothing is more dangerous than having too little time to consider all the issues.
Here are the steps to prepare a budget:
Review the association's legal documents to find the items the budget should cover. These usually include insurance, maintenance of the common grounds and a replacement reserve.
Prepare a letter of instruction for the appointment of a budget committee. This should include a schedule of events, such as committee hearings, public hearings and final approval dates.
Have the budget committee prepare the budget's first draft. To do this, the committee should review the community's goals, as well as its required levels of service.
The committee should also consider requests for new or modified programs and services. Records from the association, management and contractors can also provide useful information.
Another factor to consider is the reserve schedule of future expenses. The schedule should be compiled by an engineer or architect familiar with the life expectancy and replacement costs of various items in the community.
Hold a public hearing to allow the community to discuss the budget and the goals it reflects. The board should mail copies of the draft budget, as well as notices of the meeting, to every homeowner.
Take the time to review the budget completely. Most boards have the final authority to approve the budget. Thus, board members should make sure the numbers reflect adequate research and appropriate input from the committees and the community.
Hold an open board meeting, giving all owners the chance to see the final budget before it is approved.
Mail every owner a copy of the approved budget, with a written explanation of each line item, before the start of the fiscal year. Informed homeowners will be less likely to complain about the budget.
Remember, no budget is carved in stone. Provide some room for flexibility in case of unexpected events.
But once the board adopts the budget, members should not revise it during the fiscal year. Repeatedly changing the budget will not give the board a clear picture of how the community is meeting its financial goals. MEMO: G. Robert Kirkland, president of a Virginia Beach property-management
consulting firm, and attorney Michael A. Inman specialize in Virginia
community-association issues and are affiliated with the Southeastern
Virginia chapter of Community Associations Institute. Send comments and
questions to them at Real Estate Weekly, 150 W. Brambleton Ave.,
Norfolk, Va. 23510. To submit questions by phone, call 446-2033; fax:
446-2531. by CNB