Tag Archive for: Budgeting

Proactive Softscape Budgeting: Plan Ahead

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Spring is here! The birds are singing, and the flowers are blooming! The garden centres are open with flowers a plenty, and you’re thinking about how you would like the property to look for the upcoming season. Just like anything else, it’s important to ask – do we have the money?

 

For any project, a budget should be set early on for what you and the board would like to do with the common elements in the upcoming year. The process should start when preparing the budget for the upcoming year.

First, always consider your corporation’s financial standing. Does the corporation have a general fund surplus or deficit? If it’s in a deficit, then the board may not want to spend on softscapes until the corporation is “back in the black”. If there is a surplus, then there may be more options.

 

When the board is preparing their budget for the forthcoming fiscal year, a line for non-contract summer landscaping should be included that would account for additional lawn care such as fertilizers and over-seeding, planting of trees and shrubs, flowers and mulch. These are items that are not already included in the monthly landscaping contract. It can be hard to decide on these things in the dead of winter, but it’s important to set a budget for it if you plan to make any improvements beyond basic monthly maintenance.

 

Remember to review your reserve fund study to see if there are any allowances for landscaping renewal and verify what type of work these funds allow for. Replacing existing trees or shrubs that have succumbed to damage or disease is a valid reserve fund expense, if included in the most recent reserve fund study.

 

With a budget in place, it’s time to create a detailed plan of what needs to be done once spring arrives. With the upkeep of softscapes being an easy cost to put off, they may have been ignored for several years. As such, bringing them back up to an acceptable level may require a plan that spans several years.

 

The first step is to schedule a walk through the property with your landscape contractor once the weather is good enough to clearly see the state of things. Identify any deficiencies, dead or dying plantings, or deteriorating hardscapes. Rather than replacing what has been there in the past, consider new design ideas and improvements. For example, a grassy area subject to high foot traffic will never last if it’s an obvious pedestrian shortcut. Perhaps the grass could be replaced with a more durable hard surface, or using the shortcut could be discouraged by adding rocks or shrubs. The same goes for a garden design and location that invites its use as a doggy toilet. Consider the lifespan of the softscape and choose planting choices that require as little maintenance as possible.

 

When getting quotes from landscapers, a good rule of thumb is to get quotes where the potential work is broken into options. This allows the board to pick and choose what can be completed without going over budget. Depending on your level of confidence and trust in your landscape contractor, consider repeating the exercise with one or two other landscapers. Not only could they provide you with cost comparisons, but they may also be able to provide you with a whole new vision!

 

Now get those hands dirty and enjoy the beauty of nature!

 

 

Shalon Chapman,

BBS, LCCI, Manager, RLB LLP

John Hayes,

P.Eng., Board Member, CCI Grand River Chapter

Preparation for Capital Projects

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When a condominium corporation is moving towards a capital repair project it can become a daunting
process at times. Below are some best practices when undertaking a large project such as paving,
building envelope restoration, and/or infrastructure replacement. While it is likely your reserve fund
study or some other indicator (hopefully not failure) such as a condition survey that has identified a
capital item that is need of repair or replacement, the challenge is just beginning. Many would agree
that it is the primary steps of a project that can really set the tone for success. Please consider the
following:

  • Determine the scope of a project. Make use of the Reserve Fund Study, any condition
    assessments, or repair recommendations that may have been provided, or seek the advice of
    professionals related to the overall project scope.
  • For simpler or more straightforward projects, a professional/expert may not be required for the
    duration of the project and in those cases a corporation should be prepared with the assistance
    of their manager to identify the scope, obtain competitive estimates based on the scope, and
    select and manage the work directly with the approved contractor.
  • For larger or more complex projects, look to engage a professional/expert to workReserve Fund Consulting with the
    corporation throughout the project process from scope of work to tendering/estimating,
    inspections, etc. In today’s competitive world these professionals will greatly assist a
    corporation in securing competitive viable estimates, reduce liability, and provide a comfort
    level for the corporation and contractors which can lead to better value and overall results.
  • Timing of larger projects should always be reviewed. Keep in mind you may have other annual
    maintenance items that could be completed while undertaking a large project that will result in
    savings for the corporation from an operating standpoint. A simple example is to have the
    roofers scope include cleaning the eaves when roof replacement is being done. Consider
    repairing adjacent items, such as curbs, sidewalks, or buried infrastructure when doing asphalt
    replacement.
  • All have seen large variances with pricing. Ensure requests for quotations are clear and simple.
    Ensure the key points are captured such as what (service, supply) and when (frequency,
    urgency). Contracts and purchase orders need to clearly reflect the approved scope, pricing, and
    timing expectations.
  • Quoting/tendering and contract preparation can be challenging in today’s environment for
    varying reasons. Volatile marketplaces, surplus of work, and increasing inflation have made this
    process far more challenging as of late. Much of the time contractors, when given the
    opportunity for future business, will provide firm pricing and or annualized increases for multi-
    year commitments when possible.
  • Communication with residents is always vital for a successful project. Try to be informative but
    general in nature with respect to the scope, timing, specific needs such a relocation of vehiclesetc., and what to expect for residents such as noise, vibration, and traffic. Be prepared to
    provide updates as projects progress. This will ensure residents have what they need information wise. Clearly identify who concerns should be brought to in the event a question or
    issue arises.
  • As a project moves forward, look to keep all parties updated through progress reports prepared
    by who is managing the project and ensure all participating contractors are sent updates as well
    to ensure all agree at each phase.
  • At project completion, ensure full project reviews are undertaken and any holdback, warranty,
    future maintenance requirements, etc. are discussed and recorded.

Please remember this advice when considering your next project!

Corey Sargeant RCM,
President,
G3 Property Solutions Ltd

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Budgeting: Should Last Year’s Surplus Be Used to Fund a Pet Sanctuary?

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It’s that time of year again for the Annual General Meeting and the process of forming next year’s budget. The auditor happily noted that the condominium had a growing surplus in both accounts. A golden retriever with a goofy grin ran onto the stage. His owner read a flyer that showed the benefits of having a pet sanctuary.

Budgeting: Should last year’s surplus be used to fund a pet sanctuary? 

It’s that time of year again for the Annual General Meeting (AGM) and then comes the process of forming next year’s budget. 

AGM Meeting

The AGM began with the auditor taking the stage to present the audited statements. The auditor happily noted that the condominium had a growing surplus in both the general account and the reserve account. After the auditor had left the meeting, the president of the board opened the floor and asked the unit owners what they would like to do with the surplus funds. 

Unit Owner Discussion 

The serious accountant, fiddling with her laptop, informed the other unit owners that they could put the surplus into a GIC, but the interest rates had fallen since the pandemic started in 2020, so the benefit was minimal. She then suggested that they could decrease their monthly common element assessment fees for the next fiscal year or keep their fees locked at the same rate for the next few years.

The active triathlete piped up, suggesting that the condominium should install an Olympic-sized pool and gym with stationary bikes for spin classes. He went on and on about the health benefits of exercise until a golden retriever with a goofy grin ran into the room and escorted him back to his seat by tugging on his pant legs. 

The owner of the dog, a unit owner and humanitarian, took the stage. He read a flyer that showed the health benefits of having a pet sanctuary.

Pet Sanctuary

The room was abuzz with excitement, as many unit owners in that community loved pets. The board took this to a vote, knowing that they would need 66.67% of the owners to approve any change to the common elements. The vote was unanimous in favour of purchasing the pet sanctuary. 

Budgeting with a Surplus Balance 

At the next board meeting, the directors discussed how to form next year’s budget to plan for the coming year, as a budget is required by the Condominium Act to be included in the audited financial statements. The board followed these steps:​

  1. They looked at the auditor’s financial statements. The auditor had let the board know that the corporation had one year’s worth of expenses as a surplus in the general fund. (Typically, accountants like to see ½ month to 3 months’ worth of spending as a surplus in the general fund). 
  2. When forming the budget, they were told to work backwards. 
  3. What were the known expenses? The landscaping contract was $35,520. Property management fees were $25,100. Insurance premiums were quoted at $9,000. 
  4. What were the trends of increasing/decreasing expenses over the last five years? They saw a trend of water expenses increasing by $1,000 every year. Waste removal was also increasing by $2,000 each year.
  5. The treasurer of the board added up the total expenses they were anticipating for the next fiscal year. 
  6. The board member in charge of the pet sanctuary project had researched the costs of constructing the pet sanctuary and added the project, as a one-time expense line item to the budget. The board member had also researched the costs of maintaining the pet sanctuary and added another $1,000 to their budgeted utility expenses. The board debated decreasing security costs due to the additional security the pets provided. They decided to wait another year to get a more accurate measure of how the sanctuary impacted security costs. 
  7. The treasurer observed the reserve fund study to see if there were any upcoming major repairs that they needed to consider. The corporation had been transferring the required amount to the reserve fund. There was appropriate funding for their reserve expenses and the treasurer saw no additional transfers required in the reserve fund study within the next three years. 

After doing this exercise to figure out their total expenses, the treasurer noticed that their budgeted expenses were higher than the total amount of fees that they collected in the prior year by $20,000. As a group they decided that they were comfortable keeping their monthly fees consistent with the prior year, resulting in a planned shortfall of $20,000 for the current year. After the initial construction of the pet sanctuary, they would have fewer costs in the subsequent fiscal year. Their plan allowed them to continue with a surplus of $80,000, which gave them enough cash flow to cover the costs of the year, paying all of their vendors on time.

Now that the board had the financial plan for the year, the pet sanctuary committee could start selecting which pets they would like to save. 

… If I was on the committee, I would definitely have chosen the monkeys first!

Jennie Buerkle CPA, CGA

Senior Accountant at RLB LLP

https://www.rlb.ca/

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