DRAFT BUDGETS

Started by CariB1 • 12 replies • 1817 views

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CariB1 (California)
Posts: 8

Posted:

Hi all -
Question:

Small HOA, 10 homeowners - 3 on the board. Usually it is 2 board members at the meeting and the 3rd via phone - no other homeowners in attendance.
We had a board meeting this past week and one of the agenda items was working on the budget.
That item was listed on the agenda which is (a) posted for all homeowners to see and (b) emailed to those who are not here (we live in a seasonal desert location

One homeowner said he wanted to see the DRAFT budget. The Management Co. Rep. said no - their policy was not to send it out to anyone other than the board members. If he wanted to attend the meeting - he could and make suggestions then and there for the final budget.

Two of the three board members said they didn't have a problem showing him the DRAFT budget. The third felt it unfair to show one, but not all homeowners.

Note: previous management company used to send out draft budget for all homeowners to see ('06 - '08), but this new management company (as of 1/1/09) does not. I am not clear if this is a company policy or a new STATE policy (California????).

Your input would be much appreciated as it has caused a LARGE rift amongst us!

Thanks -

Cari

RobertR1 (South Carolina)
Posts: 5,164

Posted:

CanB,
I think I asked this before. Why are you paying a management co with ten home owners. If you all can't do books, hire a bookkeeper. Keep every thing under Board control including meetings when to send out budget information, when or if to send out a draft. I see nothing wrong with the draft and I also see nothing wrong with putting a budget discussion on BOD agenda meeting. Anyone having a problem, let them come to meeting. They can teleconference if necessary.

I think your board should communicate more with homeowners. If you have friction it could well be that each and every owner doesn't understand that all you do as a board or as a member HAS to be for the good of the association. I expect if you can convince each one they are part of the team to protect the whole, there would be no friction. Unless you run into the rare individuals that won't accept the goal of all. If you do, do what the large associations do........outvote him.

KirkW1 (Texas)
Posts: 1,665

Posted:

If you have previously offered to allow people to see the draft budget then you should continue to due so unless you have good reason to stop.

I think many people would like to see the draft to know if they have any comments. But I would also expect that most HOA budgets remain pretty close to the same from year to year.

SusanW1 (Michigan)
Posts: 5,202

Posted:

Who is the final approver of the budget?

The members or the board?

If the board approves the budget, then I don't think it should be sending out "drafts" - if the membership approves the budget, then they should be in on all stages of the budget approval, including seeing the proposals and in on the steps in developing a final version. In fact there should be several budget presentation to allow for member input.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

I don't think the question is who approves the budget.

Should the members be a allowed to see the Draft budget?

I would think the Board would welcome interest on how the budget

is resolved.
You say there should be several budget presentations, isn't that in
effect drawing up drafts?

MicheleD (Kentucky)
Posts: 4,491

Posted:

Possibly, Robert, but I still think it's a bad idea to send out a random "draft" budget that the board has not had an opportunity to review and prepare for membership input.

That would mean, to me, to send to all members, and not just the random one or two that call, email, or "drop by" the management company's office.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Michele, I don't think anyone suggested that a random budget be sent out to anyone. A draft budget is prepared for Board scrutiny, usually at a Board meeting. Since Board meetings are normally (exceptions of course) are open and any member can attend and see a copy of draft, how does this harm? Are you saying because someone attended a Board meeting and another member did not, the one that didn't is entitled to a copy of the draft. I fail to see the reasoning behind this. If a draft budget is included in the minutes, it would be available for all to see. If the Board says they are not going to put it in minutes, then what was discussed and perused at meeting (draft) is public info. A paper marked draft don't have to be sent and it can be allowed to stand or it can be changed a lot or a little, BUT, it is still a draft, that's all.

MicheleD (Kentucky)
Posts: 4,491

Posted:

Quote:

Posted By RobertR1 on 10/11/2009 5:04 PM
Michele, I don't think anyone suggested that a random budget be sent out to anyone. A draft budget is prepared for Board scrutiny, usually at a Board meeting. Since Board meetings are normally (exceptions of course) are open and any member can attend and see a copy of draft, how does this harm? Are you saying because someone attended a Board meeting and another member did not, the one that didn't is entitled to a copy of the draft. I fail to see the reasoning behind this. If a draft budget is included in the minutes, it would be available for all to see. If the Board says they are not going to put it in minutes, then what was discussed and perused at meeting (draft) is public info. A paper marked draft don't have to be sent and it can be allowed to stand or it can be changed a lot or a little, BUT, it is still a draft, that's all.

Robert, I called it a "random" draft budget because until the board provides all the input, it's still just too early to send out for anyone to look at. Who knows at what stage the draft even is in. It takes us several "passes" before the board even comes up with a working draft.

That's why I called it a "random" draft, because it still may have to go through several iterations before it's even considered a good working draft.

And at that point, it will still need a lot of review before it can go to the homeowners for additional input.

Because by that time, the board had better have a good understanding of each and every line item and why it is what it is so that it can be discussed intelligently.

I'm saying regarding homeowners, until it is in any condition for ALL homeowners to see, it would be very ill advised to let individual homeowners take a look at it, especially if it is an early-stage draft.

For example, one year, our first-pass at a budget had $9,500 in capital expenditures for the lake. That was the year after we had installed our fence around it. We would be removing that line item because the fence was built the previous year. But it was still on the very first pass because of how we process our budget. If a single homeowner had gotten hold of that first draft, she would have gone nuts that we were going to be spending another $9,500 on the lake again this year and by the time we could have done any information damage control, the grapevine could have been filled with all sorts of false information and speculation.

I'm just saying that all homeowners should get an appropriate "draft" (if the homeowners have the opportunity to provide input anyway), only after it is at a stage that the entire board is prepared to offer to the homeowners for discussion.

If there was a meeting where the "draft" was distributed, and a homeowner didn't attend, then that's a different story and if everyone else has already gotten one, of course it would be silly to not give it to someone who didn't attend.

But that wouldn't be a "random" draft, then, would it? It would already be a working draft that everyone has the opportunity to provide input to.

RickW (Illinois)
Posts: 169

Posted:

In our association, it is the responsibility of the board of directors for establishing and approviing the budget. We as a board, review first cut of the budget, or draft, and revise as many times as it takes for the b oard to be comfortable approving.

It is only after the board has approved the budget that it is sent to homeowners. We send th approved budget to all owners with the explanation that it will be formally adopted at the next open meeting. Welcome questions and comments, but require the be put in writing and sent to the management company prior to the meeting being held to adopt the budget.

This process has worked well for us for many years. Yet, if I were a homeowner and not on the board, I would prefer more say in the formulation of the budget. Of course, that also means every one of the owners commenting and pushing their topic of choice.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

I'm interested....How much does the management company cost you for 10 homeowners?

CariB1 (California)
Posts: 8

Posted:

It wouldn't be fair for me to answer that questions because (a) we are in California, so might be different
(b) we worked a deal whereby we moved from one company to another with a total of 59 units to get a better price.

Still - when asked earlier why we WANTED to be managed rather than self-managed? (a) legal ramifications IF something were to occur and (b) price we couldn't pass up!

I WILL say this - depending on what issues your particular group has ahead of you - from simple to difficult - self managing MIGHT be the way to go! If you can find someone you can count on and GUIDANCE you trust - then it isn't a bad deal.

I'm also a homeowner of a 51 condo unit in LA and we are self managed. IT IS A DISASTER. The board has no clue as to what the rules are, no interest in knowing and no desire to spend money. No one wants to be on the board, yet they will not step aside to allow others to replace them (and they are the old guard).

So - do the best you can!

'Nuf said!

GlenL (Ohio)
Posts: 5,491

Posted:

Cari while D-S does require you to send the final budget to H/O it is silent as to draft budgets but I wouldn't do it. And while a good Board should welcome reasonable member input ultimately it's the BOD's responsibility.

Studies show that 5 out of 4 people have problems with fractions

CariB1 (California)
Posts: 8

Posted:

I wanted to thank all of you for your feedback this past week.
You confirmed everything that I believe and will continue to represent to my homeowners and fellow board members.

Cari

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