M-206 PowerPoint Slides - Module 1 - PowerPoint PPT Presentation

Loading...

PPT – M-206 PowerPoint Slides - Module 1 PowerPoint presentation | free to download - id: 3cd58d-OGU5M



Loading


The Adobe Flash plugin is needed to view this content

Get the plugin now

View by Category
About This Presentation
Title:

M-206 PowerPoint Slides - Module 1

Description:

Personnel Cost Benefits Determined by the employer. Employer may require matching contributions from employee. Benefits vary by employer and locale. – PowerPoint PPT presentation

Number of Views:50
Avg rating:3.0/5.0
Slides: 82
Provided by: caionline
Learn more at: http://www.caionline.org
Category:

less

Write a Comment
User Comments (0)
Transcript and Presenter's Notes

Title: M-206 PowerPoint Slides - Module 1


1
(No Transcript)
2
Course Introduction
  • Welcome!
  • Introductions
  • Ice Breaker
  • Housekeeping
  • Agenda
  • Course Materials
  • PMDP courses

3
Course Introduction
  • Housekeeping
  • Ground Rules
  • Be on time
  • Listen to and show respect for the opinions of
    others
  • Avolid side-conversations
  • Cell Phones off
  • Breaks
  • Lunch
  • Facilities

4
Course Introduction
  • Course-Agenda
  • Course Introduction
  • Module 1 Budget Development
  • Module 2 Understanding Financial Reporting
  • Course Summary

5
Course Introduction
  • Professional Management Development Program
    (PMDP)
  • M-100 The Essentials of Community Association
    Management
  • M-201 Facilities Management
  • M-202 Association Communication
  • M-203 Community Leadership
  • M-204 Community Governance
  • M-205 Risk Management
  • M-206 Financial Management

6
Course Introduction
  • Course Materials
  • Pre-session Assignments
  • Participant Guide
  • 2 Modules
  • Financial Management
  • Bidding and Contracts
  • Activities
  • Course Evaluation Exam forms

7
Course Introduction
  • Importance of Course
  • A budget is a financial plan for managing
    community association.
  • Budget establishes
  • What services community provides
  • When they will be done
  • How they will be done

8
  • Introduction to Module 1 Budget Development

9
Budget Development
  • Focus
  • Developing a community association budget

10
Budget Development
  • Module 1 Objectives
  • Identify the elements of Duty of Care.
  • Identify and explain the elements associated with
    Duty of Loyalty.
  • Identify a budget line item and its level of
    service based on the associations obligations,
    its needs, and owner expectations.
  • Develop budget line items using zero-base
    budgeting and a comparison to historical trends.
  • Apply zero-base budgeting to calculate current
    replacement costs.

11
Budget Development
  • Module 1 Objectives, cont.
  • 6. Determine whether current replacement costs
    are adequately funded.
  • 7. Apply zero-base budgeting to calculate the
    cost of performing a service in-house versus
    outsourcing a position.
  • 8. Reconcile budget revenues and expenses.
  • 9. Obtain approval for an associations operating
    and replacement fund budgets.

12
Budget Development
  • Optional Pre-Reading
  • Three chapters from M-100 available to review
    basic concepts
  • Chapter 5 Budgets and Reserves
  • Chapter 6 Section on Assessment
  • Chapter 7 Report Funding Financial Statements

13
Lesson 1 Fiduciary Duties
14
Fiduciary Duties
  • Lesson 1 Objectives
  • Identify the elements of Duty of Care
  • Identify and explain the elements associated with
    Duty of Loyalty

15
Fiduciary Duties
  • Board members are bound by state law
    to
  • Act within their authority
  • Exercise due care
  • Act in good faith
  • Act with ordinary care that they believe to be in
    the best interests of the association

16
Fiduciary Duties
  • Fiduciary duties include
  • Duty of Care
  • Duty of Loyalty

17
Fiduciary Duties
  • The three main functions of the Board of
    Directors is
  • Policy making body
  • Approval body
  • Oversight body

18
Fiduciary Duties
  • The Duty of Care
  • Requires a director to act in a reasonable and
    informed manner when participating in the
    Boards decisions and its oversight of the day
    to day management of the community.

19
Fiduciary Duties
  • Elements of Duty of Care
  • Attend board meetings regularly
  • Serve on a committee
  • Exercise independent judgment
  • Act in the best interest of the corporation and
    its members
  • Obtain adequate information
  • Rely on experts
  • Delegate authority to act

20
Duty of Care
Independent Judgment
Serve
Attend
Delegate Authority
Act
Obtain information
Rely on Experts
21
Fiduciary Duties
  • The Duty of Loyalty requires the Director to
    exercise power in good faith and in the best
    interest of the community rather than the
    Directors own interest or the interest of
    another person or entity.

22
Fiduciary Duties
  • Duty of Loyalty relates to
  • Conflict of Interest
  • Corporate Opportunity
  • Confidentiality

23
Lesson 2 Developing Line Items
24
Developing Line Items
  • Lesson 2 Objective
  • Identify a budget line item and its level of
    service based on the associations obligations,
    its needs, and owner expectations

25
Developing Line Items
  • No two community associations
  • Are identical
  • Face exactly the same situation from one year to
    the next

26
Developing Line Items
  • Assess and weigh the set of factors that
    determine
  • Whether an item is included in an association
    budget.
  • And if so, the level of service to provide.

27
Developing Line Items
  • Distinguish between
  • Association Obligation
  • Association Need
  • Owners Expectation

28
Developing Line Items
  • Two types of budget line items
  • 1-Mandatory Requirements the community is
    obligated to meet.
  • 2-Discretionary Items are based on owner, board,
    andcommittee desires, but the association is
    not obligated to fund.

29
Developing Line Items
  • When to identify the level of service?
  • When a variation in the level of
    service is possible.
  • A change in obligation, need or expectation
    occurs.

30
Developing Line Items
  • Need for Contingency Planning
  • Budget for contingencies
  • Accumulate operating contingency funds
  • Surpluses
  • Separate budget line items
  • Rule of thumb for level of accumulated funds
  • 2-5 minimum
  • 10-15 very good

31
Developing Line Items
  • Activity 1 Level of Service for an Association
    Budget Line Item
  • Purpose To practice identifying a level of
    service by balancing obligation, need, and
    expectation.

32
Lesson 3 Historical Trend Zero-base Budgeting
33
Historical Trend Zero-base Budgeting
  • Lesson 3 Objective
  • Develop budget line items using zero-base
    budgeting and a comparison to historical trends.

34
Historical Trend Zero-base Budgeting
  • What is the difference?
  • Historical estimates line items based on past
    trends
  • Zero-base starts from zero and justifies every
    amount added to line item

35
Historical Trend Zero-base Budgeting
  • Historical trend
  • Estimates line items based on past trends
  • Easier to use by itself

36
Historical Trend Zero-base Budgeting
  • Historical Trend Budgeting Process
  • What
  • When
  • Why
  • How

37
Historical Trend Zero-base Budgeting
  • Zero-base
  • Verifies the need for a budget line item
  • Starts with zero and justifies every cost source
    added to the line item
  • Meets owner expectations

38
Historical Trend Zero-base Budgeting
  • Zero-Base Budgeting Process
  • What
  • When
  • Why
  • How

39
Historical Trend Zero-base Budgeting
  • Zero base budgeting ensures
  • The association is charged only for their
    utilities
  • No fluff in large dollar line items like
    landscape
  • Pet projects are not being funded
  • On-site employees arent being paid more than the
    worth of the services

40
Historical Trend Zero-base Budgeting
  • Zero-Base Budgeting Process Steps
  • Identify each cost component for the line item
  • Determine the basis for estimating each cost
    component
  • Calculate the zero-base estimate of the expense
  • Compare the zero-base item with the historical
    trend for the item
  • Investigate and resolve any significant
    discrepancies
  • Adjust the estimated expense for any anticipated
    increase in prices
  • Recommend a budget line item

41
Historical Trend Zero-base Budgeting
  • Information you need
  • Basis for estimating individual budget line items
  • Association assets
  • Asset lifetimes

42
Historical Trend Zero-base Budgeting
  • Basis for estimating individual line items
    include
  • Rate
  • Quantity
  • Time
  • Number of Entities

43
Historical Trend Zero-base Budgeting
44
Historical Trend Zero-base Budgeting
  • Sources of Information for Budget Development
  • Management Company
  • Utility Companies
  • Local contractors and consultants
  • Reserve study, engineers
  • State agencies
  • Community Associations Institute
  • Trade associations

45
Historical Trend Zero-base Budgeting
  • Sources of Information on Association Assets
  • Inventory and analysis sheets
  • Manufacturers information warranty statements
  • Original as-built drawings
  • New product information

46
Historical Trend Zero-base Budgeting
  • Sources of Information on Assets Lifetimes
  • Publications from CAI
  • Other trade associations
  • Local contractors
  • Consultants
  • State agencies
  • Reserve study professionals, engineers
  • IRS
  • Certified Public Accountants

47
Historical Trend Zero-base Budgeting
  • Activity 2a Develop a Utility Line ItemExample
  • Purpose
  • To apply the procedure for developing budget line
    items
  • To identify the sources of association costs for
    water usage

48
Historical Trend Zero-base Budgeting
  • Basic Instructions for Small-Group Work
  • Choose a leader
  • Choose a timekeeper
  • Choose a recorder

49
Historical Trend Zero-base Budgeting
  • Activity 2b Develop a Utility Line Item Group
    Work
  • Purpose
  • Develop a zero-base line item
  • Compare a zero-base line item to the historical
    trend to see if there is a potential for
    efficiency and savings

50
Lesson 4 Replacement Reserves
51
Replacement Reserves
  • Lesson 4 Objectives
  • Apply zero-base budgeting to calculate current
    replacement costs.
  • Determine whether current replacement costs are
    adequately funded.

52
Replacement Reserves
  • Why fund replacement reserves?
  • The association needs a plan
  • Regular periodic assessments are most equitable
  • Loans usually cause a unit owner to pay for the
    asset twice

53
Replacement Reserves
  • Two Parts of a Reserve Study
  • The information about the physical status and
    repair/replacement cost of the major common-area
    components the association is obligated to
    maintain.
  • Analysis of associations reserves, income, and
    expenses.

54
Replacement Reserves
  • Reserve Specialist (RS)
  • CAI established the Reserve Specialist
    designation to help identify qualified reserve
    study providers.
  • The Reserve Specialist Code of Ethics is online
    and in the Resource Section of this guide.

55
Replacement Reserves
  • The four primary funding strategies
  • Baseline funding
  • Full funding
  • Threshold funding
  • Statutory funding

56
Replacement Reserves
  • The concept of basic investment principles
  • The board of directors, supported with the advice
    of the community association manager, has a
    fiduciary responsibility to all unit owners to
    make sure reserve funds are invested properly.

57
Replacement Reserves
  • Investment Concepts
  • Safety
  • Liquidity
  • Yield
  • Laddering

58
Replacement Reserves
  • Suitable investments instruments for
    association reserves
  • Certificates of deposit (CDs)
  • Money market deposit accounts (savings, checking)
  • Money market funds
  • U.S. treasuries and U.S. treasury strips (zero
    coupons).

59
Replacement Reserves
  • Activity 3a Develop a Replacement Line
    ItemExample
  • Purpose
  • To review a roof replacement example together as
    a class before working on your own in groups.

60
Replacement Reserves
  • Activity 3b Develop a Replacement Line
    ItemGroup Work
  • Purpose To practice
  • Calculating the current replacement cost for an
    item using zero-base budgeting.
  • Determining whether the current replacement cost
    for an item is adequately funded or not.

61
Lesson 5 Personnel Cost
62
Personnel Cost
  • Lesson 5 Objective
  • Apply zero-base budgeting to calculate the cost
    of performing a service in-house versus
    outsourcing a position.

63
Personnel Cost
  • Personnel Line Items
  • A fourth use of zero-base budgeting is to compare
    the cost of performing a service in-house with
    outsourcing.

64
Personnel Cost
  • Use Zero-based budgeting to inform employee
  • Total cost of position to community association
  • Total compensation versus take-home pay

65
Personnel Cost
  • Base compensation gross pay
  • Take-home pay gross pay - taxes - benefits
  • Wages pay for nonexempt (hourly) employees
  • Salary pay for exempt (salaried) employees

66
Personnel Cost
  • Benefits
  • Determined by the employer.
  • Employer may require matching contributions from
    employee.
  • Benefits vary by employer and locale.
  • Usually a percent of gross pay or of the cost of
    the benefit.

67
Personnel Cost
  • Workers compensation insurance
  • Rate varies by employee classification.
  • States establish the requirement and the amount
    of coverage necessary.
  • In most states, commercial insurers provide the
    actual coverage.

68
Personnel Cost
  • Payroll taxes
  • Set by the taxing body
  • Employer must pay its share and withhold and
    forward employees share
  • State and local governments vary in terms of
    requiring payroll deductionsand the types of
    deductions required
  • State income tax
  • Federal income tax
  • FICA (social security)

69
Lesson 6 Reconciling Revenues Expenses
70
Reconciling Revenues Expenses
  • Lesson 6 Objectives
  • Reconcile budget revenues and expenses.
  • Obtain approval for an associations operating
    and replacement fund budgets.

71
Reconciling Revenues Expenses
  • Factors that Affect Assessment
  • Governing Documents
  • Statutes in some states
  • Inflation
  • Amount and complexity of service
  • Age of assets
  • Political situations
  • Local situations

72
Reconciling Revenues Expenses
  • Strategies for reconciling revenues and expenses
  • Identify additional sources of revenue.
  • Scale down individual discretionary budget line
    items.
  • Sell an increase in the assessment to the board
    of directors.
  • Motivate and prepare the board to sell an
    increase in the assessment to the owners.

73
Reconciling Revenues Expenses
  • Basic Instructions for Small-Group Work
  • Choose a leader
  • Choose a timekeeper
  • Choose a recorder

74
Reconciling Revenues Expenses
  • Activity 4 Reconcile Budget Revenues and
    Expenses
  • Purpose
  • To practice reconciling budget revenues and
    expenses.

75
Reconciling Revenues Expenses
  • Whether or not a method of reconciling revenues
    and expenses is appropriate depends on the
    specific set of circumstances.
  • Ignoring facts and overestimating revenues or
    underestimating expenses will not change the real
    world which must be dealt with.

76
Reconciling Revenues Expenses
  • Activity 5 Develop Strategies for Obtaining
    Budget Approval
  • Purpose To strategize ways to obtain budget
    approval in difficult situations.

77
Module Summary
  • Module 1 Focus
  • Development of a community association budget
    from identification of budget items and their
    level of service through budget approval.

78
Module Summary
  • Module 1 Objectives
  • Identify the elements of Duty of Care
  • Identify and explain the elements associated with
    Duty of Loyalty
  • Identify a budget line item and its level of
    service based on the associations obligations,
    its needs, and owner expectations.
  • Develop budget line items using zero-base
    budgeting and a comparison to historical trends.
  • Apply zero-base budgeting to calculate current
    replacement costs.

79
Module Summary
  • Module 1 Objectives, cont.
  • Determine whether current replacement costs are
    adequately funded.
  • Apply zero-base budgeting to calculate the cost
    of performing a service in-house versus
    outsourcing a position.
  • Reconcile budget revenues and expenses.
  • Obtain approval for an associations operating
    and replacement fund budgets.

80
Discussion and Questions?
  • Why is it important for a community to budget
    for unexpected conditions or losses?
  • Whats the difference between historical trend
    budgeting and zero-base budgeting?
  • Why is it important for an association to fund
    reserves?

81
Additional Resources from CAI
  • CAI offers many excellent resources about
    financial management. For information on these
    products, call CAI for a bookstore catalog at
    (888) 224-4321 or visit the bookstore online at
    www.caionline.org/bookstore.cfm
About PowerShow.com