Chapter 10

  1. What is a financial plan?
    Allows association to estimate future income and expenses.
  2. The budget provides projections of ______. It also serves as a _________ and identifies ________.
    • income & expenses for a fiscal year
    • financial reporting tool
    • how much money should be collected from members
  3. What is a fiscal year?
    Annual budget year that can start on any date as long as it incorporates a  month period.
  4. What are some of the financial records that are used in budgeting and accounting?
    • Approved budget
    • Statement of revenues & expenditures 
    • Past years budgets and end of year (EOY) revenue & expenditure statements
    • Accurate, itemized & detailed receipts for all expenditures
    • Accurate, itemized & detailed info documenting revenues from sources other than routine & special assessments
    • Up to date account info for each unit
    • Accounting statements and financial reports
    • Bank statements and reconciliations for all accounts
    • Engineering reports 
    • Maintenance records
  5. When should budget preparation occur?
    • Info gathering is on going
    • Professionals recommend at least 3 months prior to new fiscal year
  6. Who develops the budget and what are the advantages of each participant?
    • Manager
    • Accountant
    • Treasurer
    • Budget Committee - made of members. Allows them to understand budget requirements better
  7. The budget has two main sections, which are:
    • Revenues
    • Expenses
  8. Provide  examples of line item accounts that might appear in an operating budget:
    • Administration of association
    • Management fees 
    • Maintenance
    • Insurance
    • Other expenses
    • Reserves
    • Rent for recreational and other commonly used facilities
    • Taxes upon association property
    • Taxes upon leased areas
    • Security provisions
    • Fees payable to the division
    • Operating capital
  9. What are the required reserve item accounts in a condo or coop budget?
    • Painting
    • Pavement resurfacing
    • Roof replacement
    • Any deferred or capital maintenance item anticipated to cost more than $10K.
  10. Describe the budget approval process for a:
    A. Condo/coop
    B. HOA
    • Association must provide each member with a copy of the proposed budget and reserve schedule no less than 14 days prior to meeting at which association will consider budget. (must read book for rest)
    • Read 179-180 for answers
  11. How is funding for cable or satellite handled in condo/coop budget?
    • If provided for in declaration of condo, it is deemed a common expense. If declaration is silent board may enter into contract as common expense, but allocated on a equal per-unit basis rather than a % basis.
    • If provided in bylaws, it is deemed a common expense. If bylaws silent, board may enter into contract as common expense, but allocated on a equal per-unit basis rather than a % basis.
  12. What information is required in a condo/coop budget?
    • Assessment revenues (maintenance assessments)
    • Administration of the association (office supplies, professional fees, licenses)
    • Maintenance (pool, landscaping & grounds, janitorial, ect)
    • Rent for recreational and other commonly used facilities
    • Taxes upon association property
    • Insurance
    • Security provisions
    • Operating capital
    • Reserves
  13. What info is required in HOA budget?
    Fully funded reserves in proposed budget if currently funded or voted for by the majority of the TVI.
  14. How are assessments allocated in a condominium or cooperative?
    • Most either assess by square footage of the unit as a percentage of total unit square footage or equally.
    • Condos before April 1, 1992 may have used different allocation.
    • Unless in documents, changes can only be made to percentages of ownership if provided for in documents.
    • If docs silent, ownership interest can be amended with 100% approval of voting interest, including lien holders.
  15. Explain how to develop a reserve budget in a:
    A. Condo/Coop
    B. HOA
  16. Explain the difference between segregated and pooled reserves.
    • Segregated Reserves - Each item is calculated separately. Funds from one category cannot be used to fund another without the vote of the members.
    • Pooled Reserves - Condos, Coops, HOA are permitted to form pooled reserve accounts instead of or in addition to, individual reserve accounts. Single source of funds to pay for multiple categories of reserve expenses.
  17. Describe how reserves are funded and any limitations on using reserve funds.
    • Reserve funds are restricted for specific purposes and may not be used for routine maintenance.
    • Deferred maintenance: any maintenance that will be preformed less frequently than a year.
    • Capital expenditure: any expenditure of funds for purchase or replacement of asset whose useful life is greater than one year.
  18. What are the requirements of HOA reserves?
  19. Describe the calculation of assessments.
    • How assessments are allocated among units
    • Number of units in association
    • How often assessments are to be collected.
    • Documents need to state how frequent and the % charged for each unit.
Card Set
Chapter 10
To understand how community associations acquire operating funds To be able to understand the budget development process To calculate maintenance dues To understand reserves requirements and schedules