Six-Step Reference Guide to Preparing HOA Budgets

Organizing and finalizing the annual budget for your homeowners association (HOA) is a vital responsibility of the board. With the support of your property management team, you can create a well-structured budget that guides your community towards success. Here’s a blueprint you can follow, with assistance from your management team, to begin crafting your community’s budget.

Establish a timeline for your HOA budgets

Devoting initial time to design a practical plan for your association budget will simplify the process. Begin by establishing the deadline for the final budget and work backward to set up checkpoints along the timeline. Collaborate with your manager to determine any timing requirements stipulated by state or local laws, your association’s governing documents, or any management contracts.

Delegate budget assumptions to groups

The location of your community typically dictates specific details of this step, though the main goal remains unchanged. Engage relevant teams, committees, or individuals, and outline necessary expectations to ensure you are operating with sound figures and precise data. As the quality of your budget heavily depends on the information you have, pay special attention to this stage.

Analyze expenses and trends

Although each community faces unique circumstances regarding specific expenses, common trends affect all. Recognizing these patterns and using them to inform your budget is crucial. Association expenses generally fall into the following categories, and reviewing each comprehensively is important:

- Repairs and Maintenance

- Reserves

- Utilities

- Payroll and Medical Benefits

- Taxes

- Debt Service

- Insurance Coverage

- Vendor Contracts

- Discretionary Expenses

In addition to these categories, consider factors like the previous year’s deficit or surplus, decisions between repair or replacement, proper monthly cash flow, and accounts receivable delinquencies.

Identify revenue streams

Ascertain whether your association has revenue streams that could offset common expenses in your budget. These may encompass sources of income such as access cards, storage, parking revenues, and commercial rent.

Review the budget

The finance committee or board should examine the first draft of the budget. This period is the appropriate time for scrutinizing all elements of the budget with your management team, including associated contracts, assumptions, and trends. This stage provides an opportunity to recommend adjustments before finalizing the draft.

Approve the final budget

After collaborating with your manager to make necessary changes to the draft, you can proceed to approve the budget as per your community's governing documents. Additionally, ensure that property owners are adequately informed about the approved budget and how it affects their association dues.

Get insights from our HOA Budgets survey

Board members often identify several factors contributing to a successful budget process, showing that a wide range of elements must align to maintain budget accuracy. Check out the survey report for detailed insights.

For further guidance on the budget preparation process in your community, consult with your manager.