2023 Budget Process

2023 Budget Process

By: Don Havard, Accounting Manager

What is a Budget?

A budget, also known as an annual operating budget, is a financial plan for the upcoming fiscal year. (January 1st, 2023 to December 31st, 2023). The budget is a guide for the Tahoe Keys Property Owners Association (TKPOA) Management Staff, Cove Advisors and Board of Directors to use to ensure the Association’s financial goals are met by the end of the fiscal year. The Budget is broken into “operating periods”, which in our case are monthly periods that are added up to give the total forecasted or anticipated revenues and expenses for the entire fiscal year. The Budget contains the Associations Revenue (Income), Payroll, and Operating Expenses as well as the individual Cove/Subdivision Budgets. Based on these revenues and expenses it also provides Staffing Guidelines for the departments.

The Finance Committee

One of the responsibilities of the Finance Committee is to assist in building and reviewing the fiscal year budget. The Finance Committee is comprised of members of the TKPOA, which are actual residents that have input on how the TKPOA money is spent. The members who serve on the Finance Committee represent a cross section of the community. Of course, there are some members willing to serve who have expertise in areas such as insurance or finance that contribute their expertise. The committee members are volunteers and they hold regular monthly meetings throughout the year, currently scheduled on the Tuesday after the Board of Directors Regular Board Meeting that is currently held on the third Wednesday of the Month. The Finance Committee Meeting is held at 10:00AM in the TKPOA Pavilion Boardroom. The TKPOA Board of Director’s Treasurer is a member of the Finance Committee. As the Chair of the Finance Committee the Treasurer’s job is to keep everyone on track as the budget process takes place and the new budget is prepared.

The TKPOA Management Team Role

Following the direction given the TKPOA Board of Directors and 2023 Budget Subcommittee, the TKPOA Management Team creates the “first draft” of the budget for all eight departments that comprise the Association “business units”. The Accounting Manager and General Manager work with the TKPOA Management Team on preparing their individual budgets to meet their operational needs as directed. The Accounting Manager, General Manager and Project Coordinator also will need to meet with the Cove/Subdivision Advisors to develop their individual budgets.

The “First Draft” of the proposed 2023 Budget will be presented to the 2023 Budget Subcommittee for review, on Wednesday July 27th, 2022. This Subcommittee will review the budget and return it to the General Manager and Accounting Manager for discussion and request changes to be incorporated in the next draft. The General Manager will present the “Second Draft” of the proposed 2023 Budget to the Finance Committee during an Open Meeting on Wednesday August 10th, 2022 at 10:00AM at the TKPOA Pavilion. The Finance Committee will review the budget and returned it to the Accounting Manager for discussion and changes. This meeting is open to all TKPOA Members.

The General Manager will present the “Third Draft” of the proposed 2023 Budget to the Board of Directors and the Finance Committee during an Open Meeting on Wednesday August 17th, 2022 at 5:00PM at the TKPOA Pavilion. This meeting is open to all TKPOA Members.

After this process, again the Accounting Manager and General Manager and TKPOA Management Staff will make changes to the proposed budget, based on the Finance Committee and TKPOA Board of Directors recommendations.

The Accounting Manager and General Manager plan to present the “Final” Budget to the TKPOA Board of Directors for approval at the regular TKPOA Board meeting as early as Wednesday September 7th, 2022 at 5:00 PM at the TKPOA Pavilion. If more review is necessary, then it will again be presented, at a time to be determined, at the TKPOA Pavilion the meeting is open to all TKPOA Members. At either of these meetings, the Board may set the assessment amounts for the 2023 Fiscal Year.

The final budget needs to be approved on a timely basis to meet the Annual Disclosure deadline, for delivery to the TKPOA Members per the Bylaws, 30 days before the new Fiscal Year.

The TKPOA Accounting Manager and the TKPOA Treasurer make sure the TKPOA Board, Cove Advisors and Finance Committee understand the three components of the budget and the financial health of the Association.

1-Operating Funds and Expenses are needed for daily operation of the Tahoe Keys Property Owners Association. These are broken in to non discretionary expenses which would be required costs such as common areas electricity and water, grounds maintenance, insurance, TKPOA Management and general maintenance. Most of these expenses are either contractual or can be reasonably estimated based on past amounts, past experience, or other cost allocation algorithms or formulas. Then there are Discretionary Expenses that are budgeted based on estimated business and service levels that can be spent during a budgeted month based on actual business levels that occur. An important consideration when looking at the “line items” in the operation budget funds is what are the expectations of the community members and what is the balance that needs to be achieved between costs of operation and the service that can be provided. If these expenses are too high, the Finance Committee and TKPOA Management will look for ways to lower expenses without comprising service. If budget does not balance, the Finance Committee may have to make some tough decisions and recommendations to the TKPOA Board of 2-Reserve Funds need to be maintained at sufficient levels. The Reserve Funds provide money for on going the repair and replacement of the community assets (Common, Water Company and Water Quality Funds) such as buildings, pools, and Townhome Reserve Funds, such as Cove roofs, docks and asphalt, etc…

3-Development Funds for additions or enhancements to an existing TKPOA common property that may not be currently accounted for in the current Reserve Funds. This is a function of what community members want and are willing to pay for. The community should provide input and approval for use of these funds since in California major renovations; additions and/or some improvements or maintenance projects might require a “Special Assessment” (which requires approval, when the amount is greater that 5% of the Association’s fiscal year budget).

In Closing

With this knowledge, TKPOA Board of Directors, the Board Subcommittee, the Finance Committee, Cove Advisors and the TKPOA Management Team will analyze the proposed budget drafts and the final draft. The final budget that is adopted will be then used to determine the Annual Member Assessment that will balance the budget and cover all the Fiscal Budget years’ expenses for the TKPOA. It takes the entire Budget process, the TKPOA Board of Directors, Cove Advisors and Finance Committee all through volunteer hours, and the TKPOA Management Staff to work numerous hours to prepare the optimal financial plan for the upcoming year, for the approval of a new Fiscal Year’s budget.