Image Up Advertising & Design

24 FOUR SEASONS BREEZE | FEBRUARY 2019 THE FOUR SEASONS HOA BUDGET PROCESS It is the responsibility of the finance committee to develop and recommend to the HOA BOD a budget that addresses the needs of the community in a fiscally responsible manner. We have been fortunate to have had a very effective finance committee through the years that has always emphasized keeping our community on a solid financial footing. This has always involved developing sound budgets. The achievement of this goal begins with the preparation of realistic budgets. In mid-year, the Finance Committee initiates the planning process for building the next calendar year's budget. An important first step is to meet with the HOA Committees to identify their anticipated spending needs for the coming year. Simultaneously, a working group of the Finance Committee will examine the trends in spending categories over the previous 12 months. Based on this review, the Committee begins to project spending requirements for budgetary line items. Let's take a look at a few key considerations in building our budget recommendation. • A key element of our budget is our revenue. Since 97 percent of our total revenue comes from homeowner dues, we are mindful that our expenditure plan is limited to the projected assessment revenue. It would seem to be a relatively simple process of multiplying the monthly homeowner assessment by the number of homes that have been sold in the community. However, our process factors in new homes that potentially will be built and sold over the coming year. This would result in additional homeowner assessments as the year progresses. • Another considerable challenge is the projection of expenditures based on assumptions because of limited information. For example, our utilities budget is significant, representing 12 percent of the total budget. The annual cost for utilities (gas, electric and water) is a function of usage and rates. We make assumptions on usage based partially on prior year trends. However, usage has shown an increase in expenses beyond the trends due to mature landscaping requiring more water. • Similar challenges arise in other areas of the budget. Landscape maintenance and general maintenance are 19 percent and 13 percent of our budget respectively. The previous trends for these line items do not adequately reflect increased cost associated with new contracts, labor and material. • In addition to the overall community budget, we also must develop budgets for the Springdales (111 condos) and the Front Yard properties (556 homes). Each of these owners pay an additional HOA fee for services specifically associated with their homes. It should be noted that these additional assessments must be sufficient to cover the costs of their specific cost centers. Any shortfalls cannot be covered by diverting revenue from the master operating budget. Another element of the budget process that has significant meaning to every homeowner is our reserve fund. A portion of each month's HOA fee is directed to the reserve fund. This money is used exclusively to replace common facilities, e.g. streets, building roofs, swimming pool heaters, air conditioner units, etc. These Facility Assets have an estimated useful life and will eventually require replacement. The Association contracts with a firm that specializes in taking an inventory of every capital asset owned by the Association and provides a useful life and cost of replacing each item. The Capital Reserve Study assists the Finance Committee and BOD in determining the amount of funding required to meet our capital needs without further assessment to the homeowners. Currently, our reserve fund is over 120 percent funded. A more detailed review of the reserve fund will be provided in a future article. We hope this information affords you a better understanding of our budget process. If you have questions or would like further information, attend our monthly Finance Committee meeting, the last Tuesday of each month at 1 pm. ~ Barry Ginnetti and Claudia Rozzi, b2ginnetti@gmail.com Finance Committee

• Cover