Underfunding occurs when a board approves a budget that won’t be sufficient to operate a building based on its historical expenses.

When boards do this, they fiddle with the budget projections for the upcoming year, often for line items such as regular repairs and maintenance.

While underfunding may provide some short-term gratification for board members looking to hold the line on monthly costs, it sets the timer on a potential financial bomb that could cause serious damage later on.

No unit owner wants to find out that there’s a shortfall in the community bank account and bills have gone unpaid, and no prospective buyer wants to buy into a community that can’t balance its books. 

It is important to create a realistic budget to avoid these problems. Examine your budget each month against annual results and make adjustments where necessary. 

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