Finance & Legal: Budget minutes: 2004-05-15

Special Notes:

Budget Review Notes

Minutes:

How the projected budget spreadsheet was calculated

The budget that was approved on 11/05/2003 was based on just the operating costs (capital expenses are for the most part project contingency items), and made the following assumptions:

1. All units are closed and paying association fees at the full rate
2. All offices are occupied and paying full rent.
3. All expenses are being incurred each month (e.g., common house utilities)
4. All expenses will be incurred only in line with the budget.
5. Any departures from income are reported (e.g., bad debts, unoccupied offices)

In reality, here is what happened:

1. People moved in over the period 7/31/03 to mid July 2004
2. Offices were fully occupied, but only partial rent paid on one
3. The CH was only finished in March 2004
4. Expenses have been incurred outside of the budget agreement
5. Money rolled over from the cohousing club account.

Because we need to spend no more money than we take in, a reasonable question is how to determine what is left for each budget item, since

* we will not take in the $62,053 in income for 2004
* we have been active since 7/31/03, not 1/1/04
* some items have been spent fully each month (e.g., association insurance), and others not yet
* not everyone was moved in until very recently.

Proposal

That we start based on the following points

* We start the fiscal period from the beginning of the association's activities, 7/2003
* the period goes from 7/2003 to 12/31/04
* we use the approved budget to establish the way money is allotted
* fixed association costs are taken as is
* non-fixed costs are scaled based on how long the item applies (e.g., CH-related expenses)


Further, the following be adopted

* any committee or individual wanting to deviate from the budget must have community approval, usually through introducing a proposal
* no one can spend money without there being money for that budget item, and all requests for payments must identify the budget line item

Process

1. Adjust the original budget by reducing the CH/garage/truck loan item from a total of $19,597 ($15,190 CH loan, $2,240 truck loan of $9,500 at 6.5% 5 yr, and $2,167 garage loan 6% 15 yr) to 26/37 that or $13,771 (a difference of $5826, which is 11/37 * $19,597). So the total expenses should be adjusted down by $5826 to $56,227. The total budget income should be adjusted from $62,053 to $56,227.
2. calculate the total projected income from 7/03 to 12/31/04: This figure is $60,893.81
1. excluding LTCRF
2. excluding water/sewer
3. excluding the $750 misc income in 11/2003
4. including office income
5. including the discount for pre-payment of the CH/garage/truck loan
1. Usual assoc fee is $123/month. If pre-paid, $88/month. Cost is $917.74/month for association, or $35.30/unit (of 26 units paying, since 11 pre-paid). $126-$88=$35. Original budget amount was $19,589/year, adjusted (see above) to $13,771.
6. including the 1st month of lower rent
7. assuming Sims closed 5/1/04 and Doster on 7/1/04
8. assuming that CH will be charged for the share of the 3rd office
3. Project "fixed" expenses as follows:
1. Loan orig fee, as incurred
2. CH/garage/truck loan, as incurred plus $917.74/month
3. Condo insurance, as incurred plus $874.14/month
4. Garbage hauling, as incurred plus $85/month
5. Truck insurance, as incurred (assume payments to date cover 1 year in 2 6-month payments)
6. childcare, as incurred plus 8 more months at $240, minus 2 months (July, August) as per recommendation from childcare coordinator
7. Meeting meals, as incurred (no longer applicable)
4. Determine how many months an expense category will be active in the 18-month time period
5. Determine the 18-month budget for expenses other than "fixed" by taking the monthly budget for the item and multiplying by the number of active months inthe 18-month time period. Number of months determined as follows:
1. based on acquisition (e.g, truck, common house, loan)
2. based on when expenditures started (e.g., insurance started 7/03)
3. for most other items, set to 12 months (since the budget was to cover a season)




1. Known issues

a. transition from club to association
b. project contingency

1. ad hoc prop not finished wrt proj cont
2. money spent by committees w/o incoming money

c. unanticipated expenses

1. loan origination fee
2. water bills--what will they be?
3. actual loan cost--need to adjust budget
4. unapproved membership--childcare

2. Goals

a. Cash flow
b. Operating budget
c. Contingency