Budget Time So Get Ready!
September is just around the corner and that means it is time to start preparing the 2024 budget for your Ohio Condominium or Homeowners’ Association. When college football begins, so does budget season! It may seem too early to start reviewing the operating budget and reserve contribution, but now is the time to start getting ready for 2024 and assessing what the expenditures for 2024 are estimated to be.
Boards need to review past and future expenses and contributions both to the operating account and the reserve account. Regarding the operating account, what were the expenses from 2023 for snow removal, landscaping, property management, administrative costs, insurance, and other regular expenses incurred by the Association for the operation of the Association, including typical maintenance and repair costs? Are those expenses expected to stay the same as 2023 or will they increase for 2024? As with just about anything related to the economy these days, prices most likely increase. Insurance premiums and deductibles have increased more quickly this past year than before due to changes in the insurance industry with Association insurance policies. Is your Association’s premium or deductible set to increase substantially with renewal? Will there be additional maintenance and repair projects which are not major capital improvement repair or replacement projects? For instance, are there smaller less costly projects that need to be completed in 2024? If so, those costs should be included in the 2024 budget. All of these aforementioned items should be considered when factoring in what expenses the Association is estimated to incur in the upcoming year.
When looking at the reserve contribution a Board should be reviewing the reserve study to ensure reserve contributions are within the guidelines of the reserve study recommendations. Are the reserves underfunded and the Board needs to “catch up” on the reserve contribution or are the reserves funded within the reserve study guidelines. If underfunded, how much is the reserve account underfunded? If contributions have been deferred over the prior years, the Board should be working with management or the Association’s legal counsel to plan ahead for contributing to the reserves as projected by the reserve study. Remember, a reserve study is a budgeting tool and there may be circumstances related to your Association which would then provide the Board with more flexibility in determining the amount contributed into reserves (for example, did your Association receive insurance proceeds to pay for roof replacements? If so, that may affect the reserve contribution requirements in future years).
The Association’s manager is a valuable asset and resource when developing the estimated budget for 2024, including the reserve contribution. The Association’s manager can assist the Board in developing a budget based on prior expenses, projected costs of 2024 expenses, including projects the Board expects to complete, and lastly, reserves. By the end of October or early November, the Board should be reviewing the draft budget and finalizing numbers so the final 2024 approved budget can be distributed to homeowners in December along with the amount of the 2024 condominium or homeowners’ association assessments.
If your association has questions, contact our office at 614-228-0207 and speak to one of our attorneys.
Ms. Strohm has been practicing law since 2004 and is a principal of the firm Williams & Strohm, LLC. As a member of the Ohio and Columbus Bar Associations, she is admitted to practice in all Ohio courts and the Federal District Court for the Southern District of Ohio. Read Robin Strohm's full bio.