Condo association budgets are prepared by the condo board. It’s one of the board’s biggest responsibilities, and often a task board members have the most questions about. Below we’ll discuss some factors to consider when developing your association’s annual budget and steps your board should take to adopt the budget.
Budget Planning Best Practices
Regardless if you’re a board member or just an association unit owner, it’s important to know about the budgeting process – after all, it’s your money that pays for the expenses itemized in the budget. When planning for the upcoming fiscal year, here are some things to keep in mind:
● Review your associations governing documents and bylaws – Know what your association’s Rules and Regulations say in terms of preparing your budget and what to do if there are any surplus funds or shortages from the previous year.
● Separate your operating fund from your reserve fund – Planning for the long-term financial needs of your association should be separate from your ongoing operating expenses. If you have any planned expenses that might tap into your reserve fund, start soliciting bids for those services now so you can adequately budget for them. As a reminder, the ICPA requires Illinois condo associations to maintain “reasonable reserves.”
● Account for taxes – You should also include as an itemized expense in your budget any potential real estate taxes or income tax payment your association may be responsible for.
Adopting a Budget in Illinois
In order for the condo association board to adopt the budget, all unit owners must receive a copy of the proposed annual budget at least 25 days prior to the board meeting. Per the Illinois Department of Financial and Professional Regulation, the budget must be approved by at least a majority of the board members present at a properly noticed open board meeting, at which a quorum of the board is present during the entire meeting.
If you have questions about preparing your association’s annual budget or need help with any of your association management needs in Chicago, please contact us at First Community Management.