CAI-NJ Feb. 2019

“The more special assessments they see, the more likely they are to stop paying or walk away...”

TOP 10... from page 31.

problem, the budget should always reflect the shortfall. The time to find out about a budget shortfall isn’t at the end of the fiscal year when bills are due. Shortfalls can lead to bills not being paid on time and that can lead to late fees and a ruined reputa- tion. These shortfalls can also lead to borrowing from reserves, and that’s a bad habit to establish. 4. Borrowing from reserves to pay for operating expenses or skipping reserve funding Borrowing from reserves can create a host of problems: • FHA approval problems (you’re required to maintain a minimum level of reserves) • You have to pay back what was bor- rowed plus the required contribution • Future buyers may be hesitant to buy into a community that borrows from reserves • Community could be in financial trouble if a component fails early and adequate reserves are not available. Accurate budgeting and consistent reserve studies can prevent most of these problems. 3. Unforeseen expenditures Even with the most diligent plan- ning and budgeting, things happen. Sometimes replacements will be needed before the reserve study date, or damag- es won’t be fully covered by insurance. These situations can even create the need for an assessment increase, spe- cial assessment or community loan. 2. Too many special assessments College tuition. Anewcar.Weddings. Community members have a lot to save

tion will be better off having some- thing fixed correctly and the first time. 5. Not budgeting for uncollect- able assessment fees If a community has a collection

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