
Budgeting is a cornerstone of financial stability for homeowners associations (HOAs) and condominium communities. A well-prepared budget ensures your community avoids financial pitfalls, stays proactive, and is ready for the future. Here are 10 actionable tips to help community association managers navigate the budget planning process with ease.
1. Create a Task Force
Forming a dedicated team for budget development can streamline the process and improve decision-making. Your task force should include:
The board president and treasurer
The community manager
Finance and budget committee heads
If possible, bring in a financial consultant or accountant for expert advice. This focused approach ensures attention to detail and collaboration.
2. Survey Your Homeowners
Understanding the needs and preferences of your community is vital. Distribute surveys to gather feedback on:
Desired improvements
Community priorities
Areas that need attention
While not every request can be addressed, incorporating homeowner input fosters trust and ensures the budget reflects shared goals.
3. Schedule Dedicated Budget Planning Sessions
Set aside uninterrupted time for budget discussions. Whether it’s one session or several, avoid rushing the process or allowing distractions. Budget planning requires thoughtful analysis and input from all key stakeholders.
4. Assess Your HOA’s Financial Position
Take a close look at your community’s current financial standing:
Review account balances
Analyze records from the past two years
Compare past budgets with actual expenses
Identifying trends and gaps ensures your budget aligns with the reality of your community’s finances.
It's a good idea to review your standing contracts with trades to make sure you're not caught off guard by unexpected costs. Specifically, look at any clauses that mention annual price increases, as these can affect your budget. Here’s how you can stay on top of it:
Check Annual Increases: Find out what percentage increases are built into each contract and adjust your budget accordingly.
Review the Scope of Work: Make sure the services covered still match what the building needs, and update the budget if there are any changes in scope or pricing.
Negotiate if Needed: If the price hikes seem too high, don't hesitate to negotiate with your current vendors or look for other options to keep costs manageable.
It's also helpful to take a step back and look at your repair and maintenance history. Spotting trends can help you plan for future costs and avoid surprises:
Look for Patterns: For example, if you had to replace a lot of window IGUs (Insulated Glass Units) last year, you might need to budget for more of the same this year.
Assess Funding Sources: Figure out whether these costs should come from your reserve fund or operating budget. If they’re operating expenses, make sure you have enough set aside to cover them.
Track Recurring Issues: Keep an eye on ongoing issues, like plumbing leaks or elevator repairs, and allocate enough funds to address them as they come up.
5. Outline Long-Term Goals
Map out your HOA’s objectives for the next three to five years and outline the steps needed to achieve them. Clear goals help prioritize immediate actions for the upcoming fiscal year, keeping the community on track for long-term success.
6. Prioritize Projects
Distinguish between essential and non-essential projects. Safety and compliance initiatives should take precedence over aesthetic upgrades. By categorizing projects, you can allocate resources efficiently and address the most pressing needs first.
7. Contact Vendors for Estimates
Reach out to vendors for cost estimates on planned projects and inquire about potential price changes for ongoing services. Having accurate figures helps:
Build a realistic budget
Determine which projects can be tackled now versus later
Locking in rates with regular service providers can also help mitigate future cost increases.
8. Prepare for the Unexpected
A well-prepared budget includes a contingency fund for unanticipated expenses, such as:
Economic fluctuations
Delinquent dues
Emergency repairs
Aim to allocate 5–10% of your total budget to this category. While reserve funds are available for major emergencies, it’s wise to minimize reliance on them for routine financial shortfalls.
9. Save for the Future
Contribute at least 20% of your HOA’s annual income to a reserve fund. Regularly update your reserve study to assess long-term needs and comply with state laws. A healthy reserve fund ensures your community is prepared for capital expenses like roof replacements or infrastructure updates.
10. Build Your Budget
Once you’ve gathered estimates, analyzed trends, and planned for contingencies, it’s time to compile your budget. Key components to include:
Income projections
Administrative costs
Utility expenses
Contracted services
Insurance premiums
Reserve fund contributions
Remember, it’s better to overestimate expenses than to face shortfalls later.
Final Thoughts
Budgeting is essential for your community's financial health. By involving the right people, gathering input, and leveraging tools like CondoVoter to send budgets electronically, you can ensure a transparent, efficient process that builds trust and sets your HOA up for success.
Click here to discover how you can simplify your budget season.