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Don’t Wait, Start Working on Your Operating Budget Now

The key to creating a successful operating budget for your

association with little stress is starting the process early.

Starting to work on your budget early allows you time to focus

on each specific area of the budget to fully understand what

the expense is, why it is in the budget, and how it positively

affects the association.

Your budget process should start in August with a general

property inspection. Take note of the overall condition of the

association elements of responsibility to determine

maintenance needs. Also take this opportunity to consider

projects that will enhance the value of the association. Ask

yourself, do the buildings need to be painted, is the asphalt in

need of sealing, should a weather shelter be built over the

mailboxes, does the clubhouse need new carpet, etc.

Compile the list of projects, get cost estimates for the

projects, then prioritize the list from most important / probable

to least important / probable. You will use this list to select

your projects once you complete your preliminary budget.

August should also be a time to review your current lawn care

operating plan to make any changes you feel will benefit the

association. Lawn care service is perhaps the largest

expense of a budget, so take your time to fully review and

modify the lawn care operating plan. Sometimes this means

increasing the level of service (and cost) of your lawn service,

however, this can also be a time to reduce or eliminate

services that don’t add value to the association, such as

reducing hard blade edging from 8 times a year to 6. Once

your lawn care operating plan is finalized, get bids from

multiple companies so you have them ready by the time your

preliminary budget is completed.

Once the project list and lawn care review are completed you

should be ready to start working on your preliminary budget,

generally in September. The preliminary budget is comprised

of all the routine expenses necessary for your association to

operate. These items include insurance, administrative,

management fees, legal, accounting, utilities, reserves, etc.

Review all your routine expenses for the current year, along

with any notes you made throughout the year regarding price

changes or service modifications, to determine what will

remain as an expense in 2018 and what the cost of the item

will be.

Once you have your preliminary budget completed, add in the

cost of your new lawn care contract, then subtract the total

expenses from the income to determine how much income

remains. This surplus is what you have available to spend on

projects. Now is the time to review your list of potential

projects to determine which ones you will complete. Enter the

selected projects into your budget to arrive at your completed


Once your budget is approved by the board, don’t forget to

send it to the owners along with a pie chart showing them

exactly what their dues pay for.

Budgeting Notes:

Accounting: Your association should be a non-profit entity, so

it is required to file a tax form with the Federal Government.

Make sure you allocate funds for the preparation of this form.

Reserve Funding: It is vital that you have an accurate reserve

study and that you allocate the appropriate amount of funds

as stated in the study. This is not just saving 10% of your

income per year. You need to save what is necessary, not

just the minimum, as stated in the ORC 5311, unless a

majority of the owners approve not to fund it each year.

Operating Reserve: The operating reserve (generally two

months of dues as required by the declaration) is what you

need to have in your operating account at the beginning of

the year. If you end your current year with more than this

amount you should transfer the surplus to the reserve


Bad Debt: Be realistic and recognize that it is not uncommon

for a few accounts to be delinquent. Make sure to account for

any delinquent accounts so you don’t go over budget.

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