1. 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 Budgeting & Financial Reports

2. 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 Budgeting & Financial Reports

3. 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 Budgeting & Financial Reports

4. 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 Budgeting & Financial Reports

5. 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 Budgeting & Financial Reports

6. 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 Budgeting & Financial Reports

7. 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 Budgeting & Financial Reports

8. 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 Budgeting & Financial Reports

9. 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 Budgeting & Financial Reports

10. 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 Budgeting & Financial Reports

11. 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 Budgeting & Financial Reports

12. 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 Budgeting & Financial Reports

13. 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 Budgeting & Financial Reports

14. 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 Budgeting & Financial Reports

15. 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 Budgeting & Financial Reports