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What is a financial plan?
Allows association to estimate future income and expenses.
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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
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What is a fiscal year?
Annual budget year that can start on any date as long as it incorporates a month period.
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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
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When should budget preparation occur?
- Info gathering is on going
- Professionals recommend at least 3 months prior to new fiscal year
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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
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The budget has two main sections, which are:
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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
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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.
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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
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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.
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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
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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.
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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.
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Explain how to develop a reserve budget in a:
A. Condo/Coop
B. HOA
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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.
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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.
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What are the requirements of HOA reserves?
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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.
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