There are two budgets
“I think my mother was like a small company which, because things are not ship-shape, keeps two sets of books, one for the auditors and then there's the other one.”
—Michael Lindsay-Hogg

In most condos, there are actually two budgets, the one that the board works with and the far simpler one that the board includes in the financial statements.

1. The detailed budget
This is used to determine the next fiscal year's monthly maintenance fees and any special assessments.

It is also used to track spending on a month to month basis. It is included in the monthly financial statements that the management company provides the board for its monthly meetings.

2. The budget the owners see
The owners will see a simpler budget with most of the details buried into general headings.

They will not see that the superintendent is getting a 3% raise and a $500 Christmas bonus. They will also not see that the secretary is getting paid to take the minutes and the treasurer is getting paid to review the monthly financial statements. The higher management fees are in there somewhere. They will never see that the directors bill the condo for their board meetings take-out food.

That kind of information will just upset them.

The draft budget
Usually the management company prepares a draft budget that lists all the projected costs in great detail. This year's budgeted figures, the actual expenditures and the proposed expenditures are all listed.

The operating costs and the reserve fund contributions are itemized.

Then proposed monthly fee increases are included. This is the figure that the directors fix their attention on like a pride of lions staring at an injured antelope.

If the directors think that they cannot "sell" the owners on the suggested fee increase, then they look through all the expenses lines to see what can be reduced or pushed out into the future.

Finally, they will agree to the new budget and then send out a notice to the owners stating what the new fee increase will be.

How to reduce costs
There are ways a board can legitimately reduce costs. However, these are usually one-time items that give limited benefits.

Requesting tenders
Every three years or so, all contracts should be put out for tender. That is to insure that the condo is getting good value for the money.

Cut back on services
Some services, such as 24 hour security may not be needed, it depends on your building and your neighbourhood. Some maintenance may be scheduled for bi-monthly instead of monthly servicing. Perhaps the hallway temperatures can be kept slightly cooler in the winter and a bit warmer in the summer.

However, a board has to be careful not to cut too far as the building will suffer.

More promising is if the condo starts a gardening committee so that volunteers will plant and care for the flowers in the flower pots and in the garden beds rather than paying the landscaping company for that.

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