It’s Budget Time
Last year’s audit is in the wrap-up stages. It appears your PORAC financial team was able to gauge our income and expenses fairly well. At the end of the day, 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 already met and be well on the way toward presenting the 2018 proposed budget to the Board of Directors. As has been our past practice, our accountant has done an extensive review of the past three to five years’ income and expenses to create a better prediction for the 2018 budget. We continue to see some certainties in areas where increases will be needed.
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. You need to shift your thought process from government budgeting to business budgeting. There are a few considerations in this paradigm shift to prepare your association’s budget. 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. It is in this phase that the three- to five-year average comes in handy in providing 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 previous year’s budget shows that you have done a great job in the budgeting process as well as in keeping your fiduciary responsibility to your members. Conversely, the surplus does not mean you need to go and spend the money before the end of the budget cycle for fear 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 your members from reviewing it and making recommendations. If it’s your association’s practice to formally adopt your yearly budget, you may want to reconsider that practice, especially when it comes time to modifying your budget by making significant increases to a specific line item. If your members formally adopted the budget, you will be looking at having to get your entire membership to meet and adopt the change. Now, if you are a part of a small association, this may not be a problem; however, for large associations this could be a costly process. Notwithstanding either approach, keep your members involved and informed during the budget process by giving them the opportunity to review it along the way and providing 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 environment that we find ourselves today. It is extremely unfortunate that certain groups can espouse hatred and ill will toward law enforcement, but we have to be the ones to stand up and support each other. It is unfortunate how those who condemn us are also the first to expect our help when things go sideways. In addition, we have some politicians who can’t help but jump in front of a camera to make uneducated, unnecessary remarks about events that are not textbook in nature or that are considered inappropriate or wrong by those who have never done this job or faced making a critical decision in their lives. Hopefully, you understand your chapter meetings are imperative — see you there!
Ultimately, I or Kim Busman, your PORAC Finance and Administrative Manager, are available to assist you should you need help with your association’s budgeting needs. I look forward to seeing you at Conference in San Diego and providing you with the opportunity to review your 2018 PORAC budget. By the way, don’t forget to register early for this year’s Conference. You may do so at www.porac.org.
Be safe and have fun.