An HOA budget is meant to create a plan on how to cover the expected day to day expenses of the community association while setting aside funds that may be needed for future large or long-term projects. The proper budget process will be well-timed, transparent, and focused on meeting the responsibilities and goals of the association. We’re sharing a few items that you’ll need to consider as your putting together your next HOA budget.
When to Draft a Budget
You’ll want to have the budget voted on, approved, and in place well before your fiscal year begins. Many associations hold annual meetings and elections at the beginning or the end of the year, so make sure that you get an early enough start to have the time to anticipate the next year’s expenses, for the Board to agree upon the following year’s project priorities, do the needed research to anticipate the costs, determine the amount of reserves to be saved for future repairs and/or replacements, and finally approve them as a Board. If your board approves a budget in December for the following year, but then all or some of the board members are replaced in January; for continuity, the outgoing Board should set a time to explain their financial plan to the new Board and how they came to their conclusions for the budget.
Budget for Contract Services
Your budget should review all of the contracts that are delivering products and services to your association. This may include landscaping, pool service, property management, attorneys, etc. Before you include the cost of these services in your budget, consider sending out an RFP to see if you can find competitive prices for the same services. This can keep your costs down and your directors accountable to the members.
Balance Income and Expenses
In addition to the contracts, you’ll need to incorporate the maintenance needs of your community and any reserve funds that need to be set aside. Balance this against your expected income, which will be your membership dues. It is not recommended that a Board budget late fees or fines because there is the possibility that this income will not arrive if everyone pays on time and adheres to the governing documents. Include any special or upcoming assessments.
Most boards will hold a meeting to review and finalize the following year’s budget. Once the board and possibly owners (depending on the governing documents) approves a budget, you can distribute it to homeowners.
A Benefit of Community Management
Working with a St. Louis property management company that specializes in communities like yours can help you streamline the budgeting process and cost effective for your board and your homeowners. If you have any questions about putting together a budget or professional management, please contact us at firstname.lastname@example.org or 636-227-8688.