CAI-NJ July 2022

IT’S GONNA BLOW... from page 18.

ed costs within the budget. Without it, the maintenance fee would need to be increased to cover the anticipated expenses. Whenever dealing with the addition of a surplus carryforward or deficit reduction within your budget, it is recommended to consult with your management team and financial professionals to determine the best approach. Depending on the size of your surplus or deficit, it may take multiple budget cycles to properly remedy the situation. Overall, an accurate and realistic budget is key to the long-term financial health of an association. More than ever, costs are going up. Almost all the line items within your budget will have some degree of price increase each year, and for most condominiums and associations, the only way to cover these rising costs is to increase the monthly maintenance fee. Although it is not always the easiest news to deliver, consistent marginal increases will help ensure that the association has the necessary funds to cover its anticipated expenses and will help prevent your site from falling into a financial deficit. n

expense section of your budget. However, there will be no actual “expense” incurred for this line item. For the budget to balance after the addition of the deficit recovery, the board will be required to increase the monthly maintenance fee. Assuming all other line items within the budget go as planned, the association will then recognize a surplus equivalent to the budget deficit recovery. The current year’s surplus will then be used to offset the existing cumulative deficit as included in the prior year’s audit. Surplus Carryover: This situation is more favorable than the deficit recovery discussed above. For associations that find themselves in a cumulative surplus position, a portion of that surplus can be utilized to subsidize the subsequent year’s budget. Similar to the “paper expense” discussed above, a surplus carryforward is essentially a “paper revenue” included as a line item within the budget. This allows the board to use a portion of the accumulated surplus to offset the anticipat

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