Budget Smarter Not Harder

It is critical to review the time line for budget completion and approval by the Board so that distribution requirements set forth in the HOA’s governing documents can be met. For example, some HOAs’ CC&Rs state that the approved budget must be mailed or delivered to homeowners 30 days prior to the effective date of the budget or prior to year end.

While keeping these critical deadlines in mind, consider the following items to help make the budget preparation process successful:

  • Review the reserve study to determine how much money the association should have set aside for replacement costs and other contingencies. Determine the percentage funded in reserve. Make sure you have planned for adequate cash flow for upcoming expenditures. Compare recommended funding in the reserve fund to the current level of actual funding to also determine if an assessment increase is needed.
  • Analyze expenditures for the current year and pinpoint assets that may need to be replaced or upgraded in the coming year.
  • Examine each line item to account for increased costs.
  • Divide the total among homeowners to determine whether an assessment increase will be necessary to cover costs.
  • Review governing documents for specific requirements and recent changes to State Statutes.
  • Include a narrative explanation of how each income and expense item was determined.
  • Be sure to prepare both an operating budget and a reserve budget for 2015. Include the final budgets as agenda items for approval during an open Board of Directors meeting.