Understanding budget meeting process and requirements for community associations

By Doris Prado, Property Manager

The basic purposes for developing the annual budget

Florida has many technical and legal requirements about the way the budget is presented and what the budgets of community associations must contain, but let’s start with the basic purposes for developing the annual budget.

Preparing the annual budget really means preparing the operating budget and the reserve budget.  The operating budget is a tool to make sure all operational needs are identified and to approximate expenses for the coming year. The adopted budget is used to establish the maintenance assessments for each unit owner. It is also a method to communicate with the owners about the expected costs of operating the association.  For condominiums, Florida Statutes require budgets to be detailed and show amounts budgeted by accounts and expense classifications.

Early preparations and budgeting consideration

The community manager and board treasurer start early to verify the monthly fees with the association’s service providers such as landscaping, security, and maintenance companies. At this time, they find out if there will be increases in utilities billing and they call the insurance agent to get an estimate of the cost to renew insurance policies. The manager will also meet with the board to determine if any one-time maintenance project needs to be addressed in the new budget, and if the amount budgeted for repairs and maintenance in the current budget is expected to remain the same for the coming year.

For those that have automatic payments, you must make the proper adjustment to reflect the increase in fees by no later than December 20, 2023.

Once the operational budget is completed, the next budget to be addressed is the reserves. Florida law requires the board to present a fully-funded reserve budget. By statute, condominium reserves must include roof replacement, building painting, pavement resurfacing, and any other item for which deferred maintenance expense or replacement cost exceeds ten thousand dollars. Associations may also establish other reserve accounts if the board deems it necessary.

Reserve funding calculation and annual adjustments

To calculate the amount of reserve funding required, it is necessary to have an estimated replacement cost for the reserve component and its remaining useful life. This information can be hard to determine, so many associations may engage an engineering company or reserve analyst to perform a reserve study. The reserve study will ensure that you are working with accurate, current replacement costs and have an accurate estimate of remaining useful life. Each year adjustments must be made to reserve funding requirements to take into account variables like changes in cost, premature deterioration of the component, or maintenance performed which may extend the component’s life.

Budget meetings and payment deadlines

Most of the Moors Associations have their budget meetings in October. Each year we mailout a copy of the proposed budget to all owners and once approved everyone receives their coupons book for the year. For those that have automatic payments, you must make the proper adjustment to reflect the increase in fees by no later than December 20, 2023.

New maintenance fee payments by association