Ed Kwiatkowski, CPA. LLC

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Member of: AICPA, NJCPA, & CAI-NJ


As an accountant, I am all about numbers, especially when preparing and reviewing financial statements for my clients.  I deal with management and Boards directly in my audit and tax engagements. One of the most important fiduciary duties of a Board and their property management company is to properly prepare a comprehensive budget for their community.

 

All too often, communities might put budgeting off until the last minute.  Unfortunately, this can have consequences for the financial health of the community.  A rushed and poorly thought-out budget could lead to underfunding in operational needs as well as the replacement fund; this may lead to special assessments being passed along to the community, on top of their regular maintenance fees.

 

All of this should be done at least 90 days prior to yearend, so that there is plenty of time to prepare, discuss and approve the budget.  Members are normally required to be notified at least 30 days prior to yearend.

 

As you and your property management company sit down to discuss the forecast for the current year results and begin planning your next year budget, I recommend discussing the following:

 

  1. Review your most recent finalized audit.  As an auditor, one key part of my job is to suggest improvements to management and the Board.  My suggestions might include an updated replacement study, reducing your operating deficit, or finding ways to use your surplus to fund special projects.

  2. Review your most recent engineering study.  Are you contributing according to the engineering’s 30-year projection? Is your replacement fund adequate to meet next years planned expenditures?  The engineering study is a great source when determining your needed yearend balance so you have enough on-hand to cover replacement projects costs as they come due.

  3. Review your current year-to-date profit and loss statement with management.  Pinpoint items with large variances and discuss.  “Did we miss a planned project we told the community we were going to do?” or “Did we completely under-budget our tree replacement project, and is there anything else we can hold-off on until next year due to this overage? Or do we have enough operation surplus to absorb it?”  These are the types of questions to ask during the budget process.

  4. Review your current signed contracts, and get at least 3 proposals for any contract that is up for renewal.  This could be a means to save money, or get better service for the same cost.  These new numbers should be included in the budget for next year.  The more accurate your budget is, the better your community will be financially.

 

While, as an auditor, I am not allowed to prepare your budget – I need to maintain my independence – I can definitely answer questions that you may have to assist you during the process.

 

Ed Kwiatkowski, CPA

www.edkcpa.com

732-485-2889

BUDGET SEASON IS UPON US