Budgets
Best Practices for a Smooth Budget Process
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Does your association have a budget? If it does, how is it prepared? Is it even followed? Here, we provide tips for creating a budget process that works well for nearly all associations.
Know fundamentals first
Start your budget process by understanding why budgeting is important. Aside from the obvious benefit of creating a well-run association, having a solid budgeting process helps protect the value and marketability of your association's units. Without it, lenders may be unwilling to lend for the purchase of a unit or to the association, and buyers may feel burdened and walk away because they don't want to assume the fallout of bad decision-making in prior years.
Reserve Study Service Levels
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It is just beginning to be that reserve study time of year. Why? It takes a little while to select a reserve professional and get the reserve study scheduled. And, you need to have the reserve study completed before you can complete your budget for next year.
Although state statutes generally permit anyone to perform the reserve study, asso-ciations should consider engaging a qualified, independent reserve professional. There are two professional designations available; the PRA (Professional Reserve Analyst) conferred by APRA, the Association of Professional Reserve Analysts, and the RS (Reserve Specialist) designation conferred by CAI (Community Associ-ations Institute). Both of these designations require the reserve professional to have completed at least 50 reserve studies and have at least one year of reserve study experience.
Foreclosures - A Rocky Road
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The HOUSING CRISIS has been a turbulent ride, as we enter year four, experts predict we may hit rock bottom. That'd be welcome news for homeowners and associations alike. Though the economy has challenged association budgets, many communities have shown the ability to persevere. In hard-hit Florida, one Boca Raton association fares better than most thanks to good luck and a few smart changes. Boca Pointe Community Association, a 30-year-old, 1,000-acre mega-association, can thank its many longstanding residents who have either paid off their mortgages or refinanced prior to the boom of bad loans for a lower foreclosure rate than the 9.54 percent national average. Meridiana, one of Boca Pointe's 28 independently run villages, boasts around a 3 percent rate for its 174 townhouses. The association became proactive in dealing with foreclosures. It began initiatives like slightly increasing assessments, creating a bad debt reserve, becoming more aggressive in collection efforts and even renting out a foreclosed home to help cover costs. Despite those changes, the community manages to provide the same standard of living of more prosperous times.
Association Finances:
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Understanding Your Community’s Financial Position in a Tough Economy
While it is always important to know where your community stands financially, it is especially important to understand the community’s financial status in an economy riddled with increasing expenses, higher delinquencies, and more bad debt write-offs. Following are several recommendations and standards for analyzing a community’s financial health:
Can You Sell Common Areas To Generate Revenue?
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Your HOA has a great Olympic-sized pool that you can‟t afford to maintain. You‟ve also got a parking lot that the growing business next to your property might like a piece of. Can you sell them to generate revenue for your homeowners association? It depends on who actually owns them and how hard you‟re willing to work to complete the sale.
Let‟s get our terms clear first. There‟s a difference between association-owned property and common areas. For instance, your HOA may own a strip of land as part of your grounds that‟s not designated as common area. In that case, a sale would be relatively simple. But those types of property are rare. Most areas that aren‟t owned by individuals in your association are likely designated as common areas, which are much more difficult to sell.
