HOA Budget Season is Starting Now
3 min read, By May Galan, SVP Association Management
Budget season is here! It’s a time when homeowners association boards (HOAs) need to carefully consider their expenses and make sure that they are getting the most out of their budget. Homeowners’ associations (HOAs) are responsible for the maintenance and upkeep of common areas in a community. This includes things like roads, sidewalks, landscaping, and amenities like pools and clubhouses. To pay for these expenses, HOAs collect dues from homeowners.
The amount of dues that homeowners pay is determined by the HOA's budget. The budget is a financial plan that outlines the HOA's expected income and expenses for the coming year. It is important for HOAs to prepare a realistic budget so that they have enough money to cover their expenses and avoid going into debt.
Here are the steps on how to prepare an HOA budget:
Gather financial data. The first step is to gather financial data from the previous year and year-to-date. This includes things like expenses for maintenance and repairs, utility bills, contract increases and any other expense that the HOA pays for. Ask for a year-to-date income and expense report to compare to last year’s profit and loss statement.
Estimate expenses needed for the coming year. Once you have gathered financial data from the previous year, you can estimate income needed for the coming year. This will involve forecasting things likely to increases such as insurance premiums, maintenance contracts, payroll, and general repairs costs.
Redraft your current budget. Once you have estimated income and expenses for the coming year, you can update your current budget. The budget should include a line item for each expense, as well as an estimated amount for each line item. If expenses are being lumped in together, its best to analyze and separate these costs to truly have a gage on what is costing your association the most.
Review and revise the budget. Once you have drafted the budget, you should review it carefully and make any necessary revisions prior to your Budget Adoption Meeting. This is important to ensure that the budget is realistic and that the HOA has enough money to cover its expenses. The board should have a budget workshop meeting prior to the Budget Adoption Meeting to discuss increases and go over their current contracts and services provided and make any changes needed prior to finalizing the budget.
Approve the budget. Once the budget has been reviewed and revised, it should be approved by the HOA board of directors. Proper notices are required and should strictly be adhered too.
Preparing an HOA budget can be a complex process, but it is important to do it correctly. By following the steps outlined above, you can create a realistic budget that will help your HOA to maintain its common areas and provide services to its residents.
Here are some additional tips for preparing an HOA budget:
Be as accurate as possible when estimating income and expenses.
Build in a contingency fund to cover unexpected expenses.
Review the budget regularly and takes notes on what line items the HOA frequently overspends.
Communicate the budget to homeowners so that they understand how their dues are being used.
By following these tips, you can help to ensure that your HOA's budget is sound and that your community is well-maintained.
Precedent Association Management is a professional HOA management company that can help HOAs save money in a number of ways. Here are a few examples:
Negotiate better rates with vendors by getting multiple quotes leveraging to negotiate better rates on things like insurance, maintenance contracts, and landscaping services.
Advise boards on how to invest in preventative maintenance to help reduce the need for costly repairs down the road.
Streamline operations to help HOAs by automating processes, implementing new technologies, and eliminating unnecessary expenses.
Provide financial oversight by reviewing budgets, tracking expenses, and identifying areas where costs can be reduced.
If you are an HOA that is looking to save money, Precedent Association Management can be a valuable resource. Contact us today at info@pam-iam.com to learn more about how we can help you.