CAI-NJ February 2021

FINANCIAL TRACK... from page 42.

small increases tend to be much easier to plan for than multiple years of no increase. More often than not, when sites go long periods of time with no increase, boards must make the difficult decision to either pass a large increase in maintenance fees, pass a special assessment or some combination of the

two. As a unit owner, these increases can be difficult to incorporate into your daily finances. Another common pitfall is failing to look at the “big picture”. When pre- senting at annual meetings, we often hear questions such as “our snow bud- get was under budget by $50,000 this year, can we apply that to next year’s budget?”. In the current environ- ment of COVID-19, this may become a very common question considering that many pools, clubhouses, and amenities remained closed in 2020. However, when evaluating the financ- es of the site, it is important to take a step back and take a big picture view. To use the example above, just because an association was under budget by $50,000 for snow does not necessarily mean that it is avail- able to be carried forward to future budgets. It is important to remember that snow removal is just one of doz- ens of expenses included in the annu- al budget. Although snow was under budget, electric, landscaping, or any other of the association’s other expens- es may have been over budget. It is important to look at the overall results of the operating fund when determin- ing the subsequent year budget. Similar to the point above, the over- all results of the operating fund do not just refer to the most recent year’s income or loss. As noted above, most operating budgets net to zero. With such small margins, it is not uncommon for a site to experience an operating loss in a given year. However, a loss in one year is not an immediate cause for concern. It is important to look at the association’s overall financial position, CONT I NU E S ON PAGE 64

focus on nailing down the anticipated expenses in the budget. This will be the best determining factor as to whether or not an increase is needed. In addition, a key principle to follow is that frequent

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