Q&A: Shuffling Budgets

Q. Once a budget is passed, can monies be taken from one account and used for something else? Example, if there is money in a “paving account” can it be transferred to a “pool repair account,” if needed? It seems that our association budget is more of a “suggestion” than a plan, and funds keep getting shifted around to do things that were never covered during board discussions when the budget was being presented.

                                 — Budget Watcher

A. “Generally, budgets are just a predictive tool used to help to try to control the finances of an operation,” says Gary M. Daddario, Partner at Marcus, Errico, Emmer & Brooks, PC, with offices in Braintree, Massachusetts and Merrimack, New Hampshire. “Of course, life goes smoother when the budget is as accurate as possible, but 100% accuracy is not likely absent someone having the proverbial ‘crystal ball.’  

“That said, if a condominium board shifts some money from one line item to another but retains the integrity of the budget on the whole, I do not see a problem.  In fact, even if the integrity of the budget could not be maintained in general, most boards have the ability to levy a special assessment just about any time they choose. 

“So, in the end, unless the board is spending money inappropriately, I do not see an issue worth pursuit.  The caveat, of course, is that different states have different statutory law.  So, in a state like New Hampshire, for example, the ownership has a right to reject the board’s budget and an identical right to reject a proposed special assessment.  In such situations, it would be easier to craft an argument that any deviation is arguably problematic behavior from the board. Even then, however, absent inappropriate spending, the issue is not likely worth the investment of time, energy and money necessary to have a dispute. 

“In other words, if the money in question is being spent on the association and is being spent within reason in the overall best interest of the association, then a dispute may boil down to nothing more than semantics. In sum, absent inappropriate spending, there may be no meaningful relief for a disgruntled unit owner relative to the precision with which a board follows every line item of a budget.”

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