Annual Budget: Changing the Adopted $ Amounts?

My HOA formally adopts an annual budget at each AMOM in January. At the monthly board meetings, a "Profit & Loss" statement is presented. The P&L statement has dollar figures for three columns: Most recent month completed; year-to-date; and Annual Budget. In recent months, dollar figures in the Annual Budget column have been changed. For example:

July's P&L statement shows a line item:
pool deck re-surfacing.... Annual Budget dollar figure = $10,334
(The original January proposed and then adopted annual budget shows this too.)

October's P&L statement deleted the above line item and instead shows
pool pump replacement.... Annual Budget dollar figure = $10,334.

This has happened for a few other, large ticket (for my HOA) line items. To several members here, the appearance given is that someone thought it would make the board look better if the P&L statement did not show wide discrepancies between the planning the Annual Budget represents and what actually happened.

What do people here think?

Hi Richard, I am not sure I was clear. What has several members' attention is the change to the annual budget line item and figure as presented in the monthly P&L statement. The accounting-educated HOA members say a corporation never drops a line item. But it can add a line item. They say this part of the latest P&L statement should look like:

pool deck re-surfacing YTD = $0, Annual Budget dollar figure = $10,334
pool pump replacement YTD = $9500, Annual Budget dollar figure = 0

Then the board would perhaps explain at some point that this emergency situation with the pool pump (or similar) arose and they decided not to re-surface the pool deck, so as to help ensure that the overall yearly expenses do not exceed the original budgeted overall figure. But importantly, the only way to know if a specific line item was under- or overbudgeted is to keep the "annual budget" numbers fixed on each month's P&L statement.

My line items are fictional, to protect the innocent. The board retaliates at my HOA. The real life situation is similar but in the operating account. Some other new faces and I are running for the new board.

I would appreciate your further thoughts on this, assuming you understand my concern.

If you & others want to replace some board members, I think it's best you give us examples that actually are operating budget line times. Instead you, as Richard points out, presented reserves items.

I'd like to see an example of an true operating budget line item that could be dropped.

The next thing is: doesn't your Board have to approved the expenditure if it's not in the budget?? and wouldn't that be in the minutes. I think I'm confused....

Budgets are a guideline and not an absolute.
Sometimes funds need to be switched around to cover unexpected expenses.

Those who feel the budget is an absolute, are simply fooling themselves.

My Association shows the budgeted amount, the actual amount spent to date and the amount left over.
This year we have two line items that are way over budget (by the thousands) and many that have come in under budget.

Tim and others: What I am saying is that the Board is often not presenting the actual original, budgeted amount on the HOA's monthly P&L statements. Say the annual budget was approved in January for, in part, $30,000 of landscaping services. For the first few months of the years, the budgeted amount of $30,000 is presented alongside the actual amounts spent to date. Then suddenly in July, the P&L statements show $35k budgeted for landscaping services, presented alongside the actual amounts spent. Is this weird? Somewhat fraudulent?

Tim, thank you for the response. For [1], It sounds like what you did the one year is exactly what I am trying to query about here. For [2], I believe the totals are unchanged. I get your point with [2].

A fellow member (a CPA) did ask the board about this the other day. The board insisted what it was doing was fine. The CPA insisted it was not. Your take in [1] is my take. Don't do what you did the one year and what my board is doing now, since first, this practice casts aside information that is useful for future planning and second, annual budget planning is never spot on. It's purpose is to guide spending as accurately as possible. Reasonable people get this. No big deal if a HOA had to overspend on one item, all to ensure the big picture of property values.

The budget as adopted is the budget and should NEVER be changed on monthly reports. This has nothing to do with whether funds budgeted for one line item can or cannot be used for something else. If the board decides to spend funds budgeted for one purpose on something else, the monthly reports should show a favorable variance in the line item where the funds were originally budgeted and an unfavorable variance in the line item where the expense is incurred. The variance explanation should indicate that funds intended for the first item were redirected to the second item.

Thank you for your input SueW6, DavidW5 and DouglasK1. With TimB4, you all have the picture of what is going on at my HOA. David and Douglas, yes, what you say is how several of us feel here. It really helps to see your thoughts reinforce my take. It's not hair splitting at all to me, though one of my neighbors suggested otherwise. We are really trying to study any issue before bothering anyone about it. One of my HOA's members (the CPA) is pursuing this further as best he can with the HOA accountant.

For the record, my HOA's Bylaws are clear that a duty of the Board is to "adopt pursuant to the Declaration an annual budget among other things establishing each owner's assessment." My HOA's Declaration requires the coming year's annual budget to be mailed out to all members prior to the AMOM, and has procedures for disapproving it and fairly demanding requirements for changing the annual budget during the year. In other words, generally speaking, it is a big deal to just spontaneously change the adopted, approved, much published figures for the annual budget, whatever the motivation (naivete, intent to deceive, whatever it was).

Kerry, yes, the board is supposed to vote on and approve expenses, and yes, this is supposed to be in the Minutes. But no, at my HOA, this past year there were some major contracts on which the board did not document votes. Instead, eventually the board would reveal that so-and-co company was going to be doing repairs on such-and-such instead. Sometimes this had to be extracted from them at meetings, by questioning. Some times the board members refused to answer. We now have a security guard at meetings, because members have been getting increasingly loud about the stonewalling.

There have been no votes to amend the budget, and even if there were, it takes more than a board vote to do so. Plus it's foolish to amend. Like I think people here agree, the board presents the actual expenses. If they do not match the budget, no big deal, and importantly, people can do planning better for the next year.

Update: The member who is a CPA showed the HOA CPA what the governing docs said. After seeing what the gov docs said, the HOA CPA agreed to put the correct numbers in for the approved annual budget line items. The HOA CPA had been instructed by the board to make the changes, not knowing that the gov docs did not allow this. I expect the HOA CPA will send the board a tactful letter on the point. I am glad it is resolved and grateful to this particular member for both catching the problem and being able to fix it.

Tim, thanks for the additional comment. What you did seems reasonable to me.