It’s Budget Time
Last year’s audit is in the wrap-up stages. It appears that your PORAC financial team was able to gauge our income and expenses fairly well. When you deduct our unrealized gains and losses on our investments, we ended up with a surplus.
By the time you read this article, the budget committee will have met and will be well on the way toward presenting the proposed 2017 budget to the Board of Directors. As has been our past practice, our accountant has done some extensive reviewing of the past three to five years’ income and expenses to create a better prediction for the 2017 budget. We continue to see some certainties on areas where increases will be needed. We have also created a perpetual account in the area of computers and IT, to ensure that the organization is able to keep our technology up to date.
When preparing your association’s budget for the coming year, you may want to consider using the three-to-five-year-average method. Association budget preparation calls for a bit of a paradigm shift in your thought process, from government budgeting to business budgeting. In the first phase, you need to determine what items you are looking at maintaining at status quo and which will require an increase or decrease. This phase is where the three-to-five-year average comes in handy to provide justification for the amounts you have decided to place under each category. Second, it’s important to remember that, in business budgeting, a surplus in your past year’s budget shows you have done a great job in the budgeting process, as well as keeping your fiduciary responsibility to your members. Conversely, the surplus does not mean that you need to go and spend the money before the end of the budget cycle, fearing that item will not be fully funded for the following year. Remember that, as association leaders, you make the decisions on what will or will not be funded for the following year.
Finally, do not set your budget in stone. You are not required to have your members formally adopt the budget. That does not preclude them from reviewing it and making recommendations. If it’s your association’s practice to formally adopt your yearly budget, you may want to reconsider the practice, especially when it comes to modifying your budget by making significant increases to a specific line item. If your members formally adopted the budget, you will have to get your entire membership to meet and adopt the change. If you are part of a small association, this may not be a problem; however, for large associations, this could be a costly process. Regardless of your approach, keep your members involved and informed during the budget process by giving them the opportunity to review it along the way, and provide them with guidance through the fiscal roadmap your board has decided to take for the following year.
As an association member, by not setting your budget in stone, you are not automatically giving your board carte blanche to do as they please with your money. This is why it is imperative that the bylaws and standing rules that govern your board, president and vice president’s actions when spending your money are up to date. Your bylaws and standing rules should clearly delineate how much authority you are willing to give the aforementioned executive officers when it comes to making financial decisions, and when they need to seek input from the members.
Please don’t forget to attend your local chapter meetings and keep yourself informed as to what is occurring within your city, county and state, especially in the “anti-police” or “war on police” environment we find ourselves in today. It is extremely unfortunate that certain groups can espouse hatred and ill will toward law enforcement and we have to be the ones to stand up and support one another. It is unfortunate how those who condemn us are also the first to expect our help when things go sideways for them. In addition, we have some politicians who can’t help but jump in front of a camera or reporter to save their hides, and make uneducated or unnecessary remarks when an event occurs that is not textbook in nature or is considered inappropriate or wrong by those who have never done this job or faced making a critical decision in their lives. Hopefully, you understand that your chapter meetings are imperative — see you there.
PORAC Finance and Administrative Manager Kim Busman and I are available to assist you should you need help with your association’s budgeting needs. I look forward to seeing you at Conference at Disneyland and providing you with the opportunity to review your 2017 PORAC budget. By the way, don’t forget to register early for this year’s Conference. You may do so at www.porac.org/events/conference.
Be safe and keep an eye on each other.