Buying And Living in a Multi-Unit Development Property in Ireland

14. Management Company Budgets

Continued

14.4.1 Considerations when setting the management company budget

The following are some considerations for directors when preparing a budget:

Examine the previous years accounts to establish the company's current financial situation and also to see if the company ended the financial year with a positive or negative balance;
Examine the previous years budget compared with actual expenditure;
The new budget should be compared with the previous year's actual expenditure;
When estimating future costs, reference should be made to the previous contract price, market price, inflation rate and quotations from contractors. Contact all contractors to see if they can give you an idea of how much their services are anticipated to increase in pricing for the coming year;
All previous expenditure items should be reviewed and new items considered;
A budget deficit should be avoided;
Owners should be consulted, particularly if a major increase in expenditure is planned;
The basis for making budgetary decisions should be recorded as minutes to account for any new projects or significant variations between the previous years budget as directors may be required to answer budget enquiries from owners;
Know when bills are due and approximately how much they are expected to be, bearing in mind any outstanding debts that the company may have or money that may be owed to the company;
The sinking fund level should be reviewed and not be used to finance day-to day expenditure.

14.5 Considerations when presenting the budget at the AGM

As developing a budget may take some time, the board of directors should set and agree the budget in advance of the AGM.

The directors approved budget for the year should, where possible, be issued to the members in advance of the AGM.

The directors should explain their rationale in approving the budget and provide clear and precise information in plain English as to the proposed level of income and expenditure outlined in the budget and to explain any discrepancies or major differences with previous years' services or service charge level.

At a minimum, directors should consider providing owners with:

A comprehensive level of detail on the company's proposed income and expenditure to enable owners to fully understand what services they can expect to receive and the cost of these services;
Explanations of significant costs/savings and variances from the previous year's budget/accounts;
Supplementary information on core matters critical to the management company's finances (e.g. sinking fund level, debts owed by the company, monies owed to the company by creditors etc.);
Separately identified managing agent costs;
A statement detailing how any income the management company holds (e.g. interest accruing in the sinking fund) is dealt with;
The achieved and/or targeted measures of improved management performance (e.g. successes in delivering improved quality services and greater value for money).

The directors should consider providing detailed income and expenditure information in relation to service charges.

Through the work of the Multi-Unit Development Stakeholder Forum, the National Consumer Agency has developed an interactive document which can be used to summarise and outline the typical categories of company income and expenditure.

A management company may adopt this document to help owners understand how the service charge money is being spent. This document is available in the Downloads section of this website.

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