Q&A – Revised Budgets

Q. Can an association propose a revised budget that doesn’t balance and can the ¬†association propose the revised budget and vote to impose a special assessment for a deficit?

A. The board cannot decide to stop the funding of reserves; however, the board could call a membership meeting and the members could vote to discontinue the funding of the reserves. They may also vote to transfer any monies in the reserve fund into the operating fund to help offset the deficit.

The correct way to handle this situation is to adopt a budget based on all 113 units. But when you do the budget expense items, you will have a line item for bad debt which will increase the total expense by the amount that the 68 unsold units are not going to pay. This is just sound accounting practices. That will increase the assessments for everyone to make up for the bad debt, and
remember the 68 unsold units are still not going to pay so the budget bad debt expense will have to consider that money as well.
This is essentially a special assessment of the 45 sold units in advance of running out of the money during the year. The budget should not be changed after it has been adopted. If additional funding is necessary later in the year, it would come from a special assessment of the 113, factoring in the amounts the 68 unsold units are not going to pay. It can be complicated.

About Fred Gray

Fred Gray is the owner and President of Gray Systems, Inc and is a licensed general contractor in the state of Florida. Fred has been part of the Community Association Manager Continuing Education industry in Florida since 1988.
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