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Publications Understanding the Budget Return to Bookstore Understanding the Budget A guide for Section 95 (56.1) and Section 61 (34.18) co-ops What is a budget? Every year, your co-op prepares a budget for the coming year. A budget is simply a financial plan. It plans: how much will be spent what the money will be spent on, and where the money will come from. Why is it important? It affects every member. When members approve a budget, they agree on a program for the co-op. This program includes: maintenance and improvement services to members increases in housing charges community activities, and support for the co-op sector. It is one of the ways in which members control the co-op. This is one of the big differences between living in a co-op and renting from a landlord. It makes the co-op plan carefully instead of guessing. It makes the co-op responsible for itself by setting targets for future years. It is a way of controlling costs. What is in the budget package? Normally, you will receive the budget before the members' meeting. There will probably be a budget package which contains the operating budget a list of housing charges by unit type notes to the budget a breakdown of the budget for administration and maintenance. There may also be a capital budget and a summary of reserves. An operating budget sets out the plan for next year's income and expenses. A capital budget sets out the plan for projects which go beyond one year and which will not be paid for from one year's operating budget. Usually they are paid for from reserves. In this brochure, we will look only at the operating budget. How to understand the operating budget The operating budget will be in two parts: Income (or Revenue) and Expenses. There will be several columns of figures with headings like these:  Last year's budget Projected actual New budget Increase / Decrease This lets members compare last year's budget with next year's budget. There are many items which members can not control such as municipal taxes, government subsidies, insurance and increases in utility costs. The main items to look at are those which the co-op can control. Costs the co-op can control Under Income, these are: Housing charges. Wait until you have been through the rest of the budget before you decide you want to bring them down. Vacancy loss. This should be zero or low. If the figure for this year's Projected Actual seems high, ask for reasons at the members' meeting. Interest. This is the interest earned by the co-op's money. If the co-op is building its reserves, the interest should be growing. Under Expenses, look at increases in Administration and Maintenance Costs. You will find more details in the breakdown of this part of the budget and in the notes. The finance committee, maintenance committee and staff will answer your questions. Look carefully at the budget for reserves. There will be a Replacement Reserve. There may also be other reserves such as an Improvements Reserve or a Special Reserve. This is one of the most important parts of the whole budget. There may also be a Summary of Reserves in your package. This will tell you what the co-op expects to have in the reserves at the end of this year and how much it plans to put into them next year. It is a mistake to keep housing charges low by cutting the reserves. Ask about the plans for building up the reserves and for using them next year. Ask whether the co-op has had professional advice about its reserve planning. Look also at the line at the bottom of Expenses which is called Contingency. This is usually about 3% of the total expenses. It is an amount to cover costs that were not planned, or were higher than expected. If it is not there, or if it seems low, ask about it. Next look at the list of Housing Charges. Increases will often be around the same rate as inflation since co-ops must meet the same rate of inflation as everyone else. However, if a co-op is planning increased maintenance work, or is trying to build up reserves, increases may be higher. Office and administration expenses Members sometimes want to cut expenses in this area. However, this area covers the cost of the community aspect of the co-op. Look to see if there is enough funding for such items as: member education child care committee expenses membership fees books, and conferences. These are important costs to meet if the co-op is going to be more than just a place to live. Some co-ops include Professional Services under Administration. Others put this item as a separate note. It includes costs for legal fees, the annual audit, consultants to assist with long-term planning and accounting. The staff will be able to give more details at the members' meeting. Notes At the end of the budget there should be notes to the budget. Most lines in the budget will have a number to refer you to a note with the same number. Look at the notes carefully. They explain the amount in the budget. If you want more detail, ask for it. Asking questions You can make the members' meeting go well by having your questions ready before the meeting. If possible, write them down and send them to the office before the meeting date. This will help the treasurer and finance committee to get information ready. This will save time at the meeting. 24 hour housing information (416) 465 - 1309 Email: info@coophousing.com