Budgeting for Recovery FINANCIAL RECOVERY BEGINS WITH A REALISTIC BUDGET You can’t fix anything without money Your members are your only real source of funds Do not presume they will not pay It is your job to budget accurately and be able to support your budget with facts, figures, contracts and pictures. A Fresh Start for Your Community® BMDP-201 Budgeting & Financial Reports

Budgeting for Recovery FINANCIAL RECOVERY BEGINS WITH A REALISTIC BUDGET Elements of a Recovery REALTISTIC BUDGET Allows for payment of all contractual and fixed operating expenses Recognizes delinquency, inflation and component depreciation as inevitable Balances the needs of the community with the financial ability of the unit owners A Fresh Start for Your Community® BMDP-201 Budgeting & Financial Reports

Budgeting for Recovery FINANCIAL RECOVERY BEGINS WITH A REALISTIC BUDGET Elements of a Recovery Reserve Study & Other Expert Guidance Property Restoration Plan Accurate Financial History Realistic Budget It is your attitude that will have the greatest impact A Fresh Start for Your Community® BMDP-201 Budgeting & Financial Reports

Budgeting for Recovery FINANCIAL RECOVERY BEGINS WITH A REALISTIC BUDGET Elements of a Recovery Reserve Study Performed by a certified Reserve Analyst Evaluates component condition, life expectancy and replacement cost Projects replacement cost outlays for future years and evaluates needed contributions A Fresh Start for Your Community® BMDP-201 Budgeting & Financial Reports

Budgeting for Recovery FINANCIAL RECOVERY BEGINS WITH A REALISTIC BUDGET Elements of a Recovery Property Restoration Plan Prioritizes repairs and improvements Projects costs Includes preventive maintenance A Fresh Start for Your Community® BMDP-201 Budgeting & Financial Reports

Budgeting for Recovery FINANCIAL RECOVERY BEGINS WITH A REALISTIC BUDGET Elements of a Recovery Accurate Financial History History repeats itself unless those shaping the future know the history and how to avoid a repeat Absent zero-based budgeting, history is the best forecaster of expenses such as utilities History shows that inflation is a factor that must be considered in future projections A Fresh Start for Your Community® BMDP-201 Budgeting & Financial Reports

Budgeting for Recovery Major Factors in Budget Development Reserve Contributions Probably the single most important component of the budget in protecting the future value of the property for the present owners and those to come. It is your FIDUCIARY DUTY to protect the inclusion of this line-item in the budget. A Fresh Start for Your Community® BMDP-201 Budgeting & Financial Reports

Budgeting for Recovery IT’S NEVER TOO LATE TO PLAN FOR RETIREMENT of your property components But, like your own retirement, the later you start, the harder it is Monthly deposits to save $250,000 at 3% interest 20 years -> $760/mo 10 years -> $1,785/mo 5 years -> $3,858/mo A Fresh Start for Your Community® BMDP-201 Budgeting & Financial Reports

Budgeting for Recovery Major Factors in Budget Development Fixed Operating Expenses Contractual services, Administrative costs Generally those expenses which, while you can shop for better prices, changes in the costs will be longer-term goals. (You have contracts in place at this time) A Fresh Start for Your Community® BMDP-201 Budgeting & Financial Reports

Budgeting for Recovery Major Factors in Budget Development General Operating Expenses Ongoing and unavoidable costs over which there is more control Utilities, Payroll, Building Repair Services A Fresh Start for Your Community® BMDP-201 Budgeting & Financial Reports

Budgeting for Recovery Major Factors in Budget Development Non-Operating Expenses Debt principle payments, transfers to reserve, taxes Generally items which might not be tax deductible Note: You might need to budget for an operating profit to cover non-operating expenses A Fresh Start for Your Community® BMDP-201 Budgeting & Financial Reports

Budgeting for Recovery Budget Development Timeline Preliminaries Last Year’s Budget This Year’s Actuals (year-to-date) plus projections Contracts/Proposals Management Plan-Property Restoration Reserve Study Loan amortization tables Inflation Rate/Utility Inflation Rate A Fresh Start for Your Community® BMDP-201 Budgeting & Financial Reports

Budgeting for Recovery Timeline 5 months prior to fiscal year – Gather Data: insurance, contract and reserve analysis 4 months prior to fiscal year – current year projections 3 months prior to fiscal year – next year projections and adoption of proposed budget. Mailing to homeowners. 1-2 months prior to fiscal year – board meeting for final budget approval & notice to members A Fresh Start for Your Community® BMDP-201 Budgeting & Financial Reports

Budgeting for Recovery Educating the Board When cutting expenses, start from the bottom Reserve Contribution Contractual Expense Fixed Operating Expenses General Operating Expenses Enhancements Those that pose a health or safety risk Those that get more costly with time Cosmetic improvements / discretionary spending A Fresh Start for Your Community® BMDP-201 Budgeting & Financial Reports

Budgeting for Recovery Educating the board Budget basics How to read a reserve study Duty to maintain the property and infrastructure Duty to manage finances in a fiscally sound manner Duty to exhaust all efforts to collect from every member A Fresh Start for Your Community® BMDP-201 Budgeting & Financial Reports