Substitute Budget

Started by AnnJ1 • 5 replies • 1361 views

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AnnJ1 (Florida)
Posts: 122

Posted:

Has anyone had experience with their members/owners petitioning for a substitute budget? The petitioning members have complied with our state statutes and documents as far as obtaining the necessary signatures (10%)and our newly adopted budget DOES have an increase in monthly assessments of an amount over 115%. Since we are a fairly new (1-1/2 yrs) association, we have scoured the docs and cannot find a source as to the "process" we must follow when petitioners desire to introduce a substitute budget.

We know to call the meeting and give the proper notice BUT... do they (the petitioners) send out their new budget? What about proxy forms, are we responsible for sending them with the call to meeting?

It would be soooo great if anyone could help me here.

Ann

DonnaS (Tennessee)
Posts: 5,671

Posted:

Ann,
It sounds to me like the cart went before the horse here. Why did not anyone know that the proposed budget was so high with a 115% increase? Did you have a required Budget meeting when the BOD approved this budget? Do you have a Budget or Finance committee? Are you a condo or stand alone home association?

Is there a true reason for this high increase? Because your association is so new, Developers are notorious for greatly UNDERFUNDING the associations cash flow and Reserves. Usually the first 2 years after a turnover is called catching up and correcting.

Yes, your membership did the petition correctly according to the Statutes but the membership does not vote or approve the Budget. The BOD does and they have all of the numbers and facts in front of them. They need to reply to the membership as to why they approved the high budget amount. You can have a "revised budget if indeed the Board finds fault with what they have approved but I am sure that much of this problem with accepting the new high fees is due to lack of understanding to what it costs to operate an association by the members.

DonnaS (Tennessee)
Posts: 5,671

Posted:

Ann,
I forgot, what would you need Proxies for? There is no voting and the petitioners cannot send out their new Budget as they have no right to create a new one. They can suggest and spread it around on their own but it is not an official budget.

AnnJ1 (Florida)
Posts: 122

Posted:

Thanks for your reply, Donna.

Everything was done correctly. The membership knew full well that the budget was over 115% and yes, it is understood that the developers low-balled maint fees at the onset. This is not a "cart before the horse" situation. We expected a lot of questions/concerns. No one wants that kind of an increase, including me. However, the original budget was carefully designed and considered at an open meeting of the BODs with a 14 day notice. We have 2 CPA's on our board.

The membership (FL Statutes Chap 718 for condo associations) does have the right to adopt a substitute budget. BUT my problem isn't any of the above... My problem is the "PROCESS" we must follow. We beieve we can easily give the necessary rationale as to the needs of the increase.

I have gone to the Division's website for clues as to who sends what in the call to meeting etc. We haven't a clue as to what "their" budget contains and I shudder at the thought of it!

I understand about revising budgets. I also understand about justifying the adopted budget and that will occur again. However, being a loyal girl scout, I want to be certain we are "prepared".... see the budget before the night of the meeting and follow a process which is unknown to us at the moment.

Ann

AnnJ1 (Florida)
Posts: 122

Posted:

Thanks, again, Donna.

Regarding your question about proxies... They, indeed are needed because the "membership" has the opportunity to vote on the "substitute" budget prepared by the petitioners.

FL Statutes - Chap 718 (excerpt): Read last 2 sentencesplease....

2.a. If a board adopts in any fiscal year an annual budget which requires assessments against unit owners which exceed 115 percent of assessments for the preceding fiscal year, the board shall conduct a special meeting of the unit owners to consider a substitute budget if the board receives, within 21 days after adoption of the annual budget, a written request for a special meeting from at least 10 percent of all voting interests. The special meeting shall be conducted within 60 days after adoption of the annual budget. At least 14 days prior to such special meeting, the board shall hand deliver to each unit owner, or mail to each unit owner at the address last furnished to the association, a notice of the meeting. An officer or manager of the association, or other person providing notice of such meeting shall execute an affidavit evidencing compliance with this notice requirement, and such affidavit shall be filed among the official records of the association. Unit owners may consider and adopt a substitute budget at the special meeting. A substitute budget is adopted if approved by a majority of all voting interests unless the bylaws require adoption by a greater percentage of voting interests. If there is not a quorum at the special meeting or a substitute budget is not adopted, the annual budget previously adopted by the board shall take effect as scheduled.

DonnaS (Tennessee)
Posts: 5,671

Posted:

Ann,
It sounds like you have done all of the homework and are prepaired. What I am not digesting is to why you are concerned as to "what their budget contains"?

Their Budget is just that--their Budget. They can present it to the Board, the Board can make a motion to have time to study, review and make an adjustment if they so desire. The Board still has the final say-so on this Budget. You have 2 CPA'S on your Board. Boy, I'd give an arm to have that on mine. So you have to do the right thing and make sure that your association is properly funded for the fiscal year.

If your Board does see that there can be some areas adjusted, then you will have the time to do so. YOU DO NOT HAVE TO MAKE ANY DECISIONS AT THE MEETING WHERE THEY PRESENT THIS NEW BUDGET. There is no urgency to do any voting for change at the exact moment. Do not be bullied into a rash decision.

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