Share this post
We’re excited to provide an insightful recap of a recent webinar hosted by Magnum York’s very own President/Associate Broker, Alex Casuga, who provided a step-by-step guide to corporation budgeting for condominium board members. In the ever-evolving world of condominium management, effective budgeting is a cornerstone of success, and our webinar highlighted the considerations and best practices that can make all the difference.
Whether you were able to join us live or are just discovering this valuable resource, we’re here to ensure that you gain a comprehensive understanding of the crucial insights and advice shared during this informative webinar. Join us as we revisit the key takeaways and empower condo boards with the knowledge to navigate their financial responsibilities confidently and precisely.
Table of Contents
The Budget Timeline
Establishing a well-structured timeline for budget planning within a condominium corporation, based on the corporation’s fiscal year-end, is crucial for financial stability and governance. The process begins with the Board reviewing financial documents as well as a draft budget provided by Magnum York. After the review, it is critical for the Board to have a meeting between 40 and 60 days before the year-end to finalize and approve the budget. Once the new budget is determined, Magnum York shares the new budget and contribution schedule with owners, advising on condo contributions for the following year. Magnum York then sets up new payment arrangements just before year-end, ensuring a smooth transition. This timeline promotes financial prudence and efficiency.
Preparation for the Budget Process
When preparing for the budget, meticulous attention to financial documents is paramount. The Board should focus on two key sets of documents. First, it’s crucial to examine the most recent monthly financial package, ideally spanning the last couple of months. This allows the Board to gain real-time insights into the corporation’s current financial health, identifying any recent trends or anomalies that might impact the budget. Second, a profit and loss previous year comparison report offers invaluable historical context. By comparing the current financial status to the same period in the previous year, the Board can discern patterns, assess growth or contraction, and make informed decisions about future budget allocations. These two sets of financial documents serve as essential tools in crafting a budget that is both accurate and forward-looking, ensuring the financial well-being of the condominium corporation.
As a member of the Board of Directors and a valued client of Magnum York, you have exclusive “read-only” live data access to our system via MYWebPortal. Through this secure portal, the Board enjoys convenient access to a range of reports, including essential financial documents. Notably, the profit and loss report, as previously mentioned, can be easily extracted directly from MYWebPortal. This streamlined access empowers the Board with real-time financial insights, facilitating informed decision-making and ensuring transparency.
For further instructions on how to use MYWebPortal, read our detailed manual, which can be found here: https://forms.magnumyork.com/mywebportal-manual.
How do you read the Corporation’s Financial Documents?
If you’re a newly appointed board member, it’s entirely understandable that you might not initially grasp how to navigate and interpret the intricate financial documents involved in condominium management. The world of finances can be complex, and it takes time to become acquainted with the specifics of condo budgeting and accounting. However, rest assured that Magnum York has your back. We’ve created a comprehensive financial reference quick guide tailored for all condo board members. This guide not only outlines the various financial documents you’ll encounter but also provides a step-by-step breakdown of how to read and make sense of them. It’s a valuable resource designed to empower you with the knowledge and confidence you need to actively participate in sound financial decision-making for your condominium corporation
Download your FREE copy of Magnum York’s Financial Reference QuickGuide for Condominium Board Members: https://introducing.magnumyork.com/quickguide-condo.
Recommendations and Considerations when Reviewing Financials
When reviewing financial documents, particularly the profit and loss comparison, it’s essential to approach them with a discerning eye and an analytical mindset. Within this report, you’ll find a detailed breakdown of expenditures categorized by accounting codes, each line item providing clarity on the nature of these expenses. As a responsible Board member, it’s crucial to identify any recurring trends in spending. Consistently high or low categories should grab your attention. If you notice a specific category consistently surpassing its budgeted amount, it’s likely time to consider an increase in that budget allocation. Conversely, if expenditures consistently fall below the budgeted figure, you may explore opportunities for cost reduction. Additionally, keep a lookout for one-time expenditures, as these can significantly impact the overall financial picture for the year and warrant special consideration. By proactively addressing these recommendations and considerations, you play a pivotal role in maintaining the financial health and sustainability of your condominium corporation.
Exercise caution when approaching contract renewals, as it may necessitate a thorough evaluation of potential pricing adjustments for services like landscaping and waste management.
Magnum York is set to introduce VendorPM, which will be available soon. This is an advanced, modern software platform designed to streamline the processing of requests for proposals (RFP) and requests for quotes (RFQ). This innovative tool will consolidate these processes, enabling swift and efficient comparisons and seamless presentations to the Board members.
What is included in Condo Fees?
Many components of monthly condo contributions are essential for maintaining the overall well-being and value of a property. To gain a better understanding of the specific categories that constitute a significant portion of condo corporation expenditures, we invite you to explore one of our previous webinar recaps – Webinar Recap: Customer Townhall – Condo Owners & Board Members. This informative resource delves into the key areas of spending within a condominium community and what monthly condo fees go towards.
How does the Consumer Price Index (CPI) impact budgeting?
The Consumer Price Index (CPI) serves as a crucial gauge for tracking fluctuations in the costs of goods and services commonly purchased by consumers. In Alberta, it stands as the predominant indicator for assessing price shifts. When reviewing budgets, condo boards are encouraged to adopt a proactive stance toward CPI. Magnum York advocates incorporating the averaged CPI percentage as a valuable reference point for managing year-over-year expenses and forecasting capital outlays for the reserve fund.
Thankfully, we are witnessing a gradual recovery from last year’s inflationary pressures, with the current averaged CPI showing a promising downward trend. To stay updated on the latest developments in the averaged CPI, please visit: https://introducing.magnumyork.com/CPI
For more on CPI, visit our blog post: What Consumer Price Index (CPI) Increases Mean For Alberta Properties and Communities
Other Considerations for the Board of Directors
- Review year-end balance
- Is there a projected surplus or deficit at the end of the year?
- How will the surplus be applied?
- How will the shortfall be repaid?
- Reserve Fund
- Review your reserve fund plan.
- Is there any change to the contribution schedule?
- Cash Flow
- Does the Corporation have a lot of accounts receivables?
- Are the accounts payables building up?
- Are there funds set aside for insurance claims?
Reviewing your Draft Budget
Now that you’ve taken these supplementary factors into consideration while reviewing the financial documents, you’ll be well-prepared for your upcoming budget meeting. Prior to the meeting, take a moment to reflect on your role both as an individual unit owner and as a member of the board. Consider any changes or improvements you personally envision for the community. While Magnum York will diligently prepare your draft budget and provide recommendations, as a board member, you have the authority to determine adjustments in specific accounts, whether they involve increases or decreases. Your input plays a pivotal role in shaping the financial direction of the condominium association.
Scheduling your Budget Meeting
During this meeting, it’s essential to convene and deliberate on potential budget adjustments, if deemed necessary. The ultimate decision-making responsibility rests with the Board, and it’s crucial to establish your collective priorities. Are there specific areas of the property that require special attention? As a group, you must collaboratively make these decisions and assess their impact on the overall financial picture. Additionally, as part of the meeting, consider how you wish to articulate and communicate the outcomes of your decisions. Ensuring alignment among Board members on these matters will enhance the clarity and consistency of your communications.
Download your complete guide on Condominium Board Meeting minutes here: https://introducing.magnumyork.com/board-minute-guide
To increase condo fees, or not to increase?
Budgeting for a year-end deficit is not legally permissible. It is imperative to account for any previous year’s shortfall, which constitutes a shared responsibility among owners and the board. If there is a budgetary deficit, it is essential to explore alternative funding methods rather than deferring necessary increases.
As a Board member, you have a fiduciary obligation to all owners. If you plan to not increase the condo fees, it is good practice to pass a resolution or record minutes of your meeting to explain your rationale for not increasing fees if an increase is recommended or indicated.
How to fund an increase
The most straightforward approach is to incorporate a monthly increment within the regular condo contributions. Alternatively, you can opt for a special assessment, a one-time charge applicable only for the current year. With a special assessment, the board can determine payment terms, either owners can make a lump sum payment, or it can be divided into multiple installments, distinctly categorized from the standard monthly contributions. Another viable method for accommodating a budget increase is by procuring a financing loan, which naturally incurs additional costs but can be managed and financed according to established legislative guidelines. Lastly, consider the possibility of selling corporate assets, offering another avenue to generate necessary funds. We encourage all board members to speak to their property managers to discuss alternative methods, as they can offer advice and direction.
Communicating Budget increases with Owners
The budget cover letter holds significant importance as it will be included alongside the budget and the corresponding monthly contribution schedule. Its purpose is to inform owners about the key budgetary factors and how the board has addressed them. This includes outlining the priorities set by the board and the chosen funding approach, particularly if a hybrid payment structure involving a condo fee increase and a special assessment has been decided upon. At Magnum York, we provide template letters, manage the contribution schedule, and present the percentage changes in comparison to the prior year. Additionally, we clarify the commencement date for the increases and the fee collection process for your convenience.
Download your step-by-step Guide to Condominium Budgeting
Creating the annual budget for a condominium’s fiscal year can appear quite challenging. At Magnum York, our commitment lies in promoting education and providing valuable resources to empower board members with the knowledge needed to fulfill their roles and responsibilities effectively, thus enabling them to make well-informed decisions for the condominium corporation. To facilitate this process, we’ve compiled a comprehensive eBook, offering a step-by-step guide to condo budgeting. You can easily access and download a copy here: Step-by-Step Guide to Condo Budgeting for Condo Boards.
Finally, we extend our sincere gratitude to all those who actively engaged in the webinar. We reserve a special expression of thanks for our devoted board members, whose daily commitment to managing their condo corporations through volunteer work is truly commendable.
Save the Date
Ensure you keep an eye out for upcoming webinars by visiting https://magnumyork.com/webinar/. Registration will open soon for the following webinars:
- October 24, 2023 – Roberto Noce of Miller Thomson LLP.
- November 28, 2023 – Dave Clark of Reggin Technical Services.
- Download a copy of the Budget Guide for Condo Boards – https://dev.magnumyork.com/step-by-step-guide-to-condo-budgeting-for-condo-boards/
- Download a copy of the Financial Reference QuickGuide – https://dev.magnumyork.com/quickguide-condo/
- Download a complete guide to Condominium Board Meeting Minutes – https://dev.magnumyork.com/download-board-minutes/
- Webinar Recap: Customer Townhall – Condo Owners & Board Members
- What Consumer Price Index (CPI) Increases Mean For Alberta Properties and Communities
Follow Magnum York on Social Media!