Planning annual budgets is one of the biggest responsibilities of any Illinois condo board. Not only must board members account for the day-to-day operational needs of the association when planning their annual budgets, but they must also factor in future expected and unexpected costs. These variables all impact how much in assessments the board will collect from its members.
As you approach your budget planning process, here are some things to keep in mind to help you adequately fund ongoing operational expenses as well as long-term projects.
Financial Planning for Your Condo Association
Like any healthy financial planning strategy, you should look at past expenses to help you predict future spending and identify opportunities to cut costs.
As you review your spending categories, you will see daily operational and maintenance costs as well as bigger one-off improvement projects. This is how your budget should be allocated – in two main financial accounts:
- Your operating fund
- Your reserve fund
Operating expenses will remain relatively predictable, though you should expect them to increase annually. Keep this in mind as you calculate an appropriate assessment collection amount for the upcoming year.
Your reserve fund, on the other hand, is potentially less predictable on the day-to-day but no less important to your overall budget strategy. Your reserves will help you pay for planned improvement projects as well as fund unexpected emergencies.
Determining the appropriate assessment amount for your association should factor in both operational and future expenses. As you evaluate how much money you need to adequately fund ongoing costs plus your reserves, keep in mind that you must be transparent with how your assessments will be allocated. As you add up all of your anticipated expenses, plus what you need to hold in reserve, you can use that total to calculate a per-owner assessment fee. All budget considerations and larger-scale future projects must be discussed at board meetings and communicated to the entire association. To relieve some of the stress related to budget planning, consider working with a condo association management company. For help here in the greater Chicago area, get in touch with our team at First Community Management.