Budgeting Basics for HOAs —A Short Guide
The annual budget is one of the most essential topics on the agenda of any homeowners association, whether you want to take the weight of the yearly budget on the shoulders of your HOA board or seek the support of an HOA management business. Here are some tips for your HOA yearly budgets. To learn more, click here.
Before delving into the specifics of constructing a HOA budget, it is critical to first grasp the fundamentals. An HOA budget is a financial plan that details the following year’s income and spending. It assists the association in allocating resources, establishing fees, and planning for essential repairs and renovations.
Assess the sources of income
- Assessment fees
The assessment fees that homeowners pay are the principal source of income for most HOAs. These fees pay for operational expenses, reserve money, and community improvements.
- Other streams of revenue
Depending on the amenities and services available in your community, you may have extra revenue streams such as event fees, rental income, or fines for rule infractions. These resources can help you augment your budget.
Identify the expenditures
- Operational costs
This area covers expenditures such as landscaping, utilities, insurance, and management fees. Make sure you understand your community’s operating requirements.
- Revenue fund
The reserve money is designated for substantial repairs, replacements, and improvements. It is critical to properly fund this account to avoid special assessments when unforeseen costs emerge.
- Community enhancements
Plan projects or enhancements that would increase the value of the community and inhabitants’ happiness, such as clubhouse refurbishment, a new pool, or landscape improvements.
Assemble a team
The first step is to put together a task force. At the HOA budget planning meeting, your HOA board does not have to be the only one there. In fact, including your HOA manager (assuming you have one) is an excellent idea. You may also wish to invite the chairmen of the finance and budget committees.
Early preparation is key.
It is never too early to start considering the HOA’s annual budget. After the summer, most HOAs start planning for the next year. A special budget meeting should be set early to guarantee that it is not postponed until later.
Schedule a dedicated session.
It takes time to plan the annual budget for the HOA. It cannot be crammed into the final five minutes of a board meeting. As a general guideline, avoid scheduling your budget planning session on the same day as a critical meeting or event. Set aside an afternoon to do the assignment. Also, try to arrive at the meeting with a clear mind and a ready attitude.