How Building Boards Track Capital Project Budgets and Change Orders

The approved budget is only the starting point

A board approves a $900,000 capital project. Six months later, the contractor has submitted $700,000 in invoices, the architect has recommended $140,000 in changes, and the property manager says the project is "still close to budget."

Is it?

Many boards track only the original contract and cash paid. That leaves out pending changes, professional fees, allowances, permits, testing, retainage, and the remaining contingency. By the time the bank balance reveals a problem, the board may already be committed to costs it cannot avoid.

Good cost control gives the board one current answer: if the project finishes according to today's approved scope and known risks, what will the final cost be?

Separate budget, commitments, and cash

These three numbers are related but not interchangeable.

Budget is the amount authorized for a category of work.

Commitments are amounts the building has agreed to pay through contracts and approved changes.

Cash paid is the amount that has actually left the building's account.

A project can be under budget in cash terms and already over budget in commitments. Track all three columns for every cost category.

Build a complete baseline

The construction contract is usually the largest line, but it is not the whole project. Include:

• Architect, engineer, or owner's representative
• Contractor base contract
• Permits, filing fees, testing, and inspections
• Project-specific legal and insurance costs
• Scaffolding, lifts, access, and temporary protection
• Resident accommodations where applicable
• Financing fees and interest
• Contingency

Each category should show its approved budget, committed amount, paid amount, and current forecast. Connect the project to the assumptions in How to Create a Capital Improvement Plan for Your Building.

Treat contingency as controlled money

Contingency is a reserve for uncertainty in the approved scope, not an invitation to expand the project.

At the start, record the amount, intended risks, approval authority, and reporting method. Every approved use should reduce the remaining balance. A report that still shows the original contingency after changes have consumed it is misleading.

It can help to separate design contingency from construction contingency. The first covers scope refinement before contract execution. The second covers concealed conditions and execution risk.

Set the change-order workflow in advance

The worst time to decide approval authority is while a contractor waits on site and charges delay costs.

The contract and board policy should define:

• Who may request a change
• What supporting detail is required
• Who evaluates technical necessity
• Who checks pricing
• Approval thresholds
• When full-board approval is required
• Emergency authority
• How the contract sum and schedule are updated

The engineer or architect should evaluate technical justification. The board still owns the financial authorization.

Require complete change requests

Every request should answer:

1. What work changed?

2. Why did it change?

3. Was it included in the original scope?

4. What is the cost breakdown?

5. What is the schedule impact?

6. What alternatives exist?

7. Who recommends and approves it?

Do not let the contractor's invoice become the first notice of changed work. Except in a documented emergency, the board should understand the impact before authorizing execution.

Track three change totals

A single "change orders" number hides risk. Separate:

Approved changes. Formally authorized and added to the contract.

Pending changes. Submitted and under review.

Potential changes. Known conditions likely to produce a proposal.

Only approved changes alter the contract sum, but all three affect the forecast. Ignoring pending and potential changes creates an artificially optimistic report.

Reconcile invoices to work

Before approving a payment application, verify:

• Prior payments are carried forward correctly
• Completion percentages are supported
• Approved changes appear in the revised contract
• Unapproved work is not billed
• Retainage follows the contract
• Stored materials meet documentation requirements
• Required waivers or certifications are present
• The engineer or architect recommends payment

A clean payment record links the request, supporting evidence, professional recommendation, board approval, and eventual payment.

Review a forecast at every meeting

Use a one-page report showing:

• Original and current budget
• Original and current commitments
• Paid to date
• Approved, pending, and potential changes
• Remaining contingency
• Forecast at completion
• Forecast variance

The forecast should contain the most reasonable estimate of known costs, not only signed paperwork. Label assumptions so the board can distinguish facts from estimates.

When the forecast changes, record why. "Forecast increased by $42,000 due to concealed steel deterioration" gives future directors context. A changed spreadsheet with no explanation does not.

Set approval tiers

Not every small change requires a special meeting, but no individual should have unlimited informal authority. A policy can delegate small changes to a project team, a higher tier to designated officers, and material changes to the full board.

Require full-board review for changes that materially alter scope, safety, schedule, financing, or resident impact regardless of price. Confirm authority against governing documents and counsel's advice.

Close out the cost record

At completion, reconcile every contract, change, fee, payment, retainage release, credit, allowance, disputed amount, financing cost, and use of contingency. Then capture lessons: which assumptions failed, which concealed conditions drove changes, and which bid exclusions caused disputes?

Construction contains uncertainty. The objective is controlled uncertainty—every known cost visible, every change evaluated, every approval attributable, and every invoice connected to the work it pays for.

BoardRecord keeps project communication, approvals, invoices, and supporting documents together so the board can reconstruct every cost decision. Request a proposal.