approved budget item - actual expense 4x more!

Lori:

This is how we operate and maybe it isn't right. I look at the total budget of what we have and view that as the amount we can't go over. Obviously it is broken down into several categories and sometimes you can't help but go over because it is a necessary expense. The question then becomes, where does this extra money come from. Any bugdget should have a contingency. I guess my question to your board would be, how do they plan on balancing the budget given this category is $5,000 over. They may come back and say we are going to cut x, y and z and that will make up the money and to me that would be fine. If they look at you funny, then become worried!

You probably should have gotten the estimate before you created the budget. That's a pretty serious difference in cost.

I think I would try to find a way to lower the cost or else put it off untill next year. If the rest of the board members want to go ahead with the project, you can vote "no".

This may depend on what your controlling documents state. Often they are silent on such matters in which case the Board is usually given the authority via the By-laws to make decisions on expenditures. A budget provides a financial framework of income and expenditures. It is not set in stone. For example if you have a personal budget for annual electricity expenditures, do you not pay the electric bill when you go over budget? No, you shift funds around.

Obviously whomever estimated the expense for monument lighting and the Board who approved the budget didn't know what they were doing. But if the members want the lighting and/or the extra amount will not drastically impair the annual budget I see no other problem with the expenditure.

Hi Lori:

A few questions:
1) Does your HOA have any money left over from previous years, i.e. excess income over expenses? The board may choose to spend from that, although a lot of HOA's use it for a contingency fund.
2) Do your documents and/or state laws allow for borrowing from reserves? In Oregon, the law states that you can borrow from reserves but have to put it into a resolution of the board and include a repayment plan within a specified period of time.
3) Is the monument lighting of great importance, or something that can be delayed?
4) Does the monument area get a lot of sunshine? If so, you might be able to get some solar-powered floodlights (for example, I saw some for about $15 at our local Walgreens, although that's not where I would choose to shop for them. It might be a good stop-gap measure until next year's budget kicks in; in the meantime, you could save the balance of the budget line for spending next year.
5)Has the board considered a special assessment to cover the difference in cost?

Whatever you do, I would encourage your board to clearly put whatever expense they choose to use into its proper category, rather than to "hide" the expense in other categories. Good luck!

J. Patrick Moore, CMCA
Compliance Coordinator
Forest Heights Homeowners Association
Portland, Oregon