The budget
“Manage your spending by creating and
sticking to a budget.”
—Alexa Von Tobel
Budgets are very important in condominium management as they are the
basis for the assessment of the monthly common element expenses.
Budgets also provide information for the assessment of projected cash
flows. From month to month, the board will know if they are on budget
or not.
The monthly reviews of the budget is also a key control to prevent and
detect fraud or error in the finances as the board's review of budgeted
revenues against actual revenue can provided evidence of accounting
errors or misappropriated funds.
The monthly review of budgeted expenses against actual expenses can
provide evidence of accrual and classification errors, or unauthorized
spending.
Budgets should be made both for expected operating and Reserve Fund
spending. Also, a budget needs to be made for expensive repairs and
replacements or major improvements to the common elements.
Annual budget
There should be a detailed budget delivered to every owner a month prior to the start of each fiscal year.
The budget should list the expected expenses and start what the new monthly common element expenses will be for your unit.
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