An annual budget is the lifeblood of any financially healthy associa on . A properly cra ed budget guides the associa on in financial decisions throughout the fiscal year and helps minimize unexpected costs . Generally , the membership of your community will recognize the budget as a way of determining assessment amounts . While this is an integral part of the budget , it also provides for the con nuity of community services , helps the community maintain its desired quality of life , plans for ac v- i es , and provides an opportunity for the community to balance its needs versus wants . Working in tandem with financial reports , the budget is a means of controlling the en rety of the community ’ s financial opera ons .
There are a lot of things an associa on should consider when preparing their budget , not the least of which is ming . Some associa ons have accounted for this ques on by designa ng a specific meline for budget prepara on in their documents . If your community does not have a designated meframe , aim for early in the third quarter ( usually early July ) to start dra ing your budget for the following year . Schedule a date for the budget mee ng as soon as possible and no fy the residents within the required me frame listed in the Florida statutes . Keep in mind the budget should be finalized with plenty of me le to send out the mailing to the membership and order coupon booklets for the community . It can be helpful to follow a reverse meline when scheduling the different parts of prepara on , star ng with the date you want to finalize the budget and fill in dates working backwards .
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The budget cannot simply annualize in many cases due to special projects that have either already occurred or will occur in the future . U lize the most current year-to-date figures to make adjustments to the budget including : the general ledger , most recent income statement , reserve studies if applicable , and a current A / R ( accounts receivable ) report .
Like any budget you need to allot for income and expenses . First , consider your poten al sources of income . The primary source of income for any community will be derived from assessments . There are very few restric ons on how assessment income can be applied and it is nontaxable . The frequency of assessments is generally set during development in the Associa on ’ s Declara on . Rental income from associa on owned units should be considered an addi onal source of income . Take cau on when accoun ng for these funds due to the unreliable nature of rental units and keep in mind that these dollars are taxable . Interest on Opera ng and Reserve accounts as well as delinquent accounts can also be added to an associa on ’ s total income . Remember to look for other revenue sources that are contracted such as : cell tower , signage , and bulk services contracts ; and non-contracted sources such as : clubhouse rentals , laundry machines , parking permits , etc . Always be conserva ve when budge ng non-contracted revenue sources . Finally , if your associa on is in need of another source of income you can turn to the prior year ’ s opera ng surplus as a last resort . This ac on requires full Board approval and the vote should be recorded in the budget mee ng minutes .
A er calcula ng your total income take a look at your expenses . The budgeted expenses are either an Opera ng or Reserve Expense . Opera ng Expenses cover your daily , weekly , monthly and yearly expenses . Restric ons are minimal in regards to the usage ; the goal is to stay within your budgeted limit . Reserve Expenses are set aside for major capital expenditure repairs / replacements . The items that are being reserved for are required by Florida Law or the Associaon ’ s Declara on and are established by the Declarant / Developer or by a membership vote . Reserves are highly restricted and can only be used for their respec ve categories . For example , road reserve funds can only be used for roads . Any other use of those funds would require a membership vote . All of the associa on ’ s expenses are paid from reserve funds , therefore , the budgeted expenses should reflect the amount the Associaon is funding the reserves for that budget year .