Planning the annual budget can be stressful for HOA board members in a common interest community. There are many costs to consider and account for, such as insurance, maintenance, and maintaining reserve funds. Hiring a management company can help simplify condo management and help you create an accurate budget that follows state and HOA laws.
How To Plan an HOA Budget
Planning and budgeting for condo management can be complex, but HOA management companies can help you using their budgeting experience. Involving your HOA management team in creating a budget can help create an accurate and realistic budget.
Assemble a Committee
HOAs often have committees to assist in the workload of the HOA. A qualified HOA management company can assist in creating a realistic budget, but having an additional committee to help with planning and budgeting can help streamline the process. A committee can get HOA volunteers involved in the budgeting process – all while being overseen by experienced HOA management professionals.
Determine Your HOA Goals
Determining what you would like your association to accomplish in the coming year can help you plan a realistic budget. It can also be helpful to break the year down into individual months. You can ask your management company for guidance if you aren’t sure what goals you should have.
Evaluate Past Budgets
Looking at past budgets can help determine the budget for the coming year. First, look at the budgeted amount and how well it was followed. If reserve funds were used, look at what they were used for to help determine if the cost could occur again this year, and if it is likely to, then add the cost into the budget to avoid dipping into reserve funds. If the HOA came in under budget, consider evaluating if the budget can be lowered for the coming year.
Anticipate Possible Increases
Anticipating possible increases can help you better plan your budget. Insurance and utilities typically fluctuate the most, but inflation can also increase the cost of other services. Where possible, send out requests for proposals to vendors to get a specific number or a more accurate estimate.
Keep a Detailed Account of Expenses
When writing out your HOAs costs, be specific about what the money will go towards. Doing so will allow for a more transparent and readable budget. For example, instead of putting down a certain amount for ‘maintenance,’ break down how much money will be spent on the different types of maintenance, such as plumbing or roof maintenance. Detailed accounts will help you create more accurate estimates in the future and will also promote budget transparency.
Remember the Reserves
Reserves are there to pay for future repairs or replacements that may need to be covered by the HOA. It is generally recommended that HOAs keep a 70% funded reserve, so evaluate your reserves and make sure your budget allows for some money to be added if necessary.
Know Your Insurance Policies
If you do not know your insurance policies and what they cover, then do your research and make sure you have coverage for all necessities. You can contact your insurance provider if you have any questions about coverage, and to review your options. Once you have updated your insurance and determined if your premiums will increase, be sure to include deductibles in the budget. Including insurance deductibles in your budget can help you avoid using money allocated for other things to pay deductibles.
Ratify the Budget
Some HOA governing documents specify that a budget must be ratified to be approved. Ratifying a budget entails receiving approval from the homeowners. HOA bylaws may specify whether board members or homeowners must vote in order to approve the budget. HOA management can help you navigate the process of getting a budget ratified.
Certain states in the US require HOAs to give homeowners a budget report at the end of the fiscal year. HOA management can inform you if you are in one of these states. However, even in states that do not require a budget report, consider being transparent with homeowners about where their money is being spent.
Get Help With Condo Management Today
If you need help with condo management, then work with an experienced HOA management company. Management can help you plan and create budgets, remain compliant with HOA and state laws, and perform many other jobs that HOAs are responsible for. If your HOA board struggles to keep up with HOA duties, reach out to an HOA management company for assistance.