Creating a budget for a condominium association is a crucial task that requires careful planning
and financial foresight. Here’s a step-by-step guide on how a condominium association can
prepare its budget:
- Gather Financial Information:
● Collect financial statements, income and expense reports, and historical data
from the previous year(s).
● Review the association’s governing documents to understand any financial
requirements or limitations. - Identify Revenue Sources:
● Determine all sources of income, which typically include:
● Monthly or annual assessments from unit owners.
● Interest from reserve funds or investments.
● Rental income from common areas (e.g., clubhouse rentals).
● Any other sources specific to your association. - Determine Expenses:
● Categorize expenses into operating and reserve expenses. Operating expenses
include day-to-day costs like utilities, landscaping, and maintenance. Reserve
expenses are for future significant repairs or replacements.
● Consider variable and fixed expenses.
● Account for insurance premiums, legal fees, property management fees, and
administrative costs.
● Estimate discretionary expenses, such as social events or additional services. - Assess Reserve Fund Needs:
● Conduct a reserve study to identify long-term capital expenses, such as roof
replacement, exterior painting, or elevator maintenance.
● Determine the required annual contributions to the reserve fund to cover these
expenses. - Prioritize Projects:
● Consider the criticality of projects and their impact on the community.
● Allocate funds to the most urgent projects first. - Account for Inflation and Contingencies:
● Include an allowance for inflation in your budget.
● Create a contingency fund for unexpected expenses. - Involve the Community:
● Share draft budgets with the condo association members and hold meetings to
gather input and address concerns. - Approve the Budget:
● Once the budget is finalized, present it to the board of directors for approval. - Communicate with Residents:
● Inform unit owners about the approved budget, its impact on assessments, and
any fee changes. - Implement and Monitor:
● Execute the budget as planned.
● Continuously monitor expenses and income throughout the year to ensure compliance
with the budget. - Review and Adjust:
● Periodically review the budget, especially if there are unexpected financial changes or
significant deviations from the original plan.
● Adjust the budget as needed to reflect the evolving financial situation. - Seek Professional Guidance:
● Consider consulting with financial experts, accountants, or property management firms
with experience in condominium budgeting.
Remember that creating an accurate and well-planned budget is essential for the condominium
association’s financial health and its residents’ well-being. Regular updates and transparent
communication with unit owners are crucial to successful budgeting.
