Budget Variations

After approval of a yearly budget at an annual meeting of homeowners, is the board allowed to spent more than the budgeted amounts on any particular area? Can the board incur expences for items in categories not listed in the budget?

Charlotte,

As Mary said, the budget is essentially an estimate of anticipated expenses, based on prior history and experience. Just like your home budget, you expect to spend a certain amount each month for electricity, so much for water, so much for food, etc. etc. When the bills come in, they may be for more or for less than you budgeted and you make adjustments and spend more or less in each area as needed.

The same is true with your association budget. Some items can be budgeted rather closely. You might know exactly how much some items are going to cost because you've already negotiated the contracts for them. Other items may need to be more flexible. Of course, substantial variations should be identified to improve the accuracy of future budgets and to avoid the potential of either requiring special assessments or of setting regular assessments higher than they need to be.

It's the bottom line that's most important, and that you want to try to maintain as close as possible to your target. IMO, that's what your homeowners should expect of you.

I think I see where Edie is going with this. Since the budget is the plan for the year, once it has been set the plan shouldn't be changed, even though reality doesn't quite meet the plan. If we budget for $X for a project, but we end up spending $X+Y, the budget is still $X. We just report that the project went over budget by $Y.

I suppose there isn't anything "wrong" with adjusting the budget numbers to meet reality, but it would sure make it hard to do a budget review at the end of the year.

So, there are three parts: the budget, the forecast, and the actual expenses. At the beginning of the year the forecast equals the budget. At the end of the year, the forecast equals the actuals (moot, since at year-end a forecast is meaningless). In between, the forcast is what we believe the actual expenses to be compared to the budget. It is in the forecast that we can make the decision to spend less on one or more line items to offset greater anticipated expenses on one or more other line items. Otherwise, we must forecast a variance on the bottom line. If total actuals exceed total budget, we must either: 1) borrow, 2) special assess, 3) carry forward to the following year and adjust regular assessments accordingly.

In terms of changing the budget, the ability to do so mid stream could be quite different from association to association. For instance, if your bylaws state that the budget is to approved by the membership, then logic would dictate a change would require the same. On the other hand, if the Board is the final approval, then a change could be made by the Board. (Following the same notifications that a budget receives in the first place.)

As to the appropriateness of changing the budget, that is a huge debate. Personally, I believe that if you are making an ongoing departure, then the budget should be revised. (Though I understand if that becomes problematic because of a need to have another general meeting or similar.) But that is one man's opinion. As I see it, a budget is a statement of intent. And if the intent changes, then restating the intent seems quite appropriate to me. As a note, I don't know at what point I would feel the need to revise a budget.

We ( Me) I do the budget in july-august for presentation to the boar in Oct voted on and appproved or changed at that meeting then it is printed out and mailed to all members are docs state we the BOD do the budget spend the money etc.

Question to all how do you expect a BOD to operate by mutual approval thats why people are electred to positions to get things done. Let them do there job if you don't like what they do vote them out period. Thats the way America works period inspite of what some foolish person told you. It is one of the founding principles of America and the entire HOAs follow that rules its universal. Any BOD that has to put up with 307 familes argueing about how to spen d the funds is a exact example of what happens when the patients take over the samatorium.

Thats why you non-members have to learn we the treasurers of long term use the TOPS software for ever part of the financial dealings of the association we get a monthly package of the TOPS resuts and try very hard for the useage of the program it gives us a dead accurate picture of our expenses and exactly where we get funds from to pay for unexpected problems like the pool pumps fail, the irragation pumps fail the citys refusal to repir the sewers and the list go on forever. Use tops religiously and you will have a good sound budget basis and keeping an eye on your financial dealings it can be tweaked for your own individual circumstances

Good Luck with the new BOD make your MC understand you are in charge not them that after TOPS is life and death

IMHO of 21 years on BODs