If you are like me, you find the FHA budget to be an intimidating document, full of large numbers, the meaning of which is rather obscure. So I asked the treasurer, Tony Daniels, for an explanation, which I found very helpful. You can find the budgets on the FHA website. Select FHA, then click on Budgets, and choose the most recent. What you see is a planning document, an exercise in crystal ball gazing. At the beginning of the year, the treasurer, with input from the board, estimates our expected income and projects how much money must be spent. Estimated income for 2020 is $300,292, over 90 percent of which will come from dues and other assessments. This sets a limit on what we can spend during the year.

To understand where the money goes, we need to distinguish operating expenses from reserves. Operating expenses, projected to be $228,403 in 2020, are regular costs that must be incurred every year. They are divided into seven broad categories, such as Grounds and Facilities, Hospitality Office, and so on. Grounds and Facilities is the largest category, taking 39 percent of the total. The Administrative category is next, at 37 percent. A category includes as many as a dozen or more separate sources of expenses. You can see the full list by scrolling through the budget document, although the first time you do this, you may find it challenging.

Operating expenses will absorb about three quarters of expected income. The remainder is used to build our reserves, which are the FHA’s rainy day fund. For example, no matter how conscientiously we maintain The Gathering Place, one day the roof will need replacing. This will be costly, outside the scope of regular expenses, and we will need to dip into reserves to pay for it. Engineers have estimated how often the roof will need replacing and what it should cost five or ten years in the future. Of course, this is guesswork, but if it’s done carefully, the guess should be pretty accurate. A reserve study was updated in 2019. The good news is that we are building the reserves to where they need to be when the big storm comes.
Unless you are an accountant, it may be hard to interpret detailed lines in the operating expense budget. As an example, take Lake and Pond Maintenance, the seventh line under Grounds and Contracts. Ignore the first number. It is for use by accountants. For now, skip the three columns for 2019 and look at projected expenses for 2020: $3,000. This is 1.3 percent of the year’s operating budget. It is not a lot, but note that it does not include sediment removal from ponds, which is another $10,000. Together they amount to 5.6 percent of operating expenses.

Here’s another way to think about it: There are 1,335 budgeted households in our 2020 village. The $13,000 cost for looking after ponds and lakes amounts to $9.73 per household. That’s a small overestimate, since there are associate memberships that provide some of the FHA income, but it provides a good basis for comparison. Activities for children, for example, will cost $500. That’s 0.2 percent of expenses, or roughly 37 cents per household. Or take the cost of the contract with the management company (in the Administrative category), which is $43,368. That’s 19 percent of the total, almost $32.50 per household.

Here’s one more example: The cost of the printed newsletter is hard to find in the budget, since it is distributed among a number of items, but we know that last year it was $13,480. That’s 6.5 percent of the 2019 total, over $10 per household. No wonder the board is asking people to opt for an online version. You can save costs, save trees, save ink, and save some of your neighbors’ hours of volunteer labor if you go digital and read the newsletter online. With these concepts and tools and a calculator, you might want to spend a rainy afternoon perusing the budget for your favorite items and finding out what they really cost. A follow-up article will discuss the reserve study and how the budget closed in 2019. If you have questions, feel free to contact Tony Daniels at treasurer@fhaboard.org.

-- Gordon Pitz,