August 2024
The condo budget is a plan to help manage your corporation finances by figuring out how much money you get, spend and save. It helps to balance income with savings and expenses, and is a guide to future plans. Individuals, condominium corporations and cities all rely on budgets for financial planning.
The want is limitless …
The money is not!
Condominium corporations should have their budgets finalized prior to commencement of their fiscal year. Failing in this, condo boards operate without fiscal discipline. There is no plan for how condo fees are to be spent, and no way to ensure condo boards are acting prudently. Without a budget, a condo board does not have measurable benchmarks and is not held accountable for their spending.
Toronto has a similar process. The city is required to have presented, and ideally approved by council, their annual budget prior to January 1. If there is no budget by this date, the city is taxing and spending without proper scrutiny and approval from elected representatives and voters. Toronto failed to complete their budget on time so started 2023 with no fiscal plan. Condominium corporations should not be following the example of city officials.
Everyone is financially stretched. Budgets are essential to understand how much money is available and what it is to be spent on.
Condominium corporations, like the city, have tax and spend authority. Without a budget to control overzealous spending, and as a measurement tool, the system breaks down. There can be no trust in spending practices of the corporation without a budget to compare intentions with actual results.
Condo boards deliver their budget before the fiscal year commences. This is a detailed plan on how they intend to spend money entrusted to them by condo owners. At the end of the fiscal year, actual spending is compared with the budget. A deficit exists when spending exceeds revenues and must be financed by a prior surplus or revenues from the next year. Condo fees can be increased to pay a deficit. In extreme cases, a special assessment may be implemented or a loan taken.
Budgeting is not an exact science so there will be deviations because nobody can accurately predict the future. Boards and management unable to end their year close to their budget without explanation have a problem. Those unable to do so for consecutive years lack financial skills essential to the continued success of their community.
