As every board member knows, a realistic budget is essential to the financial health of their co-op or condo. Creating a workable budget is not an easy task: while you can use the current year's budget as a jumping off point, many expenses must be estimated. Determining these numbers often feels like stepping into the unknown, as predicting expenses can prove difficult.
Creating a Budget
Every co-op or condo deals with two types of budgets: capital and operating. Capital budgets are long-term and exist to improve building conditions. The operating budget includes recurring expenses such as staff salaries, taxes, utilities, insurance and day-to-day building maintenance. All of these areas must be addressed when putting together the budget for next year.
While it is not always necessary for the entire board to attend the initial planning meetings, there are a few key players who should be involved in setting the annual budget. At the very least, the board president and treasurer, the managing agent, the head of maintenance and the bookkeeper should be present.
"New budgets are built on the foundation of the previous year's budget," says Jay Novet, president of Budget Saving Strategics in Great Neck, a consulting firm specializing in helping co-ops and condos improve their financial profile. "The task is determining the most realistic amounts to enter in anticipating the upcoming year's expenses. This is often up to 15 months in advance and must be done with limited information before the new budget's completion deadline.
"Serious work typically begins about six months before the deadline," says Novet. "This way a certain amount of current price information is available for at least rough estimates. When to begin should also be based on the depth of the job balanced by the number and ability of people involved."