Thoughtful Fee Targeting

The major pitfall that associations must avoid in the development of their operating budgets is the tendency to rationalize expense levels in specific categories to arrive at a predetermined fee increase or no-fee increase.

Examples of fee target budgeting are:

• A mild winter or cool summer is predicted; therefore, gas or electricity usage can be reduced.
• The snowfall will be less than in the past; therefore, snow removal costs can be reduced.
• The property is in good condition; therefore, maintenance and repair estimates can be minimal.

These, and other such rationalizations, must be avoided. The budget must be developed in an objective, step-by-step manner based on actual historical data and careful projections.

Remember, good budgeting is the key to an association’s financial health.