Association Budget Preparation 101

As Boards of Directors are preparing their annual Association budgets, there are some important tips to consider that will help ensure that the budgets are as comprehensive and as accurate as possible.


First, it is critical to review the timeline for the association 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 HOA budget preparation process successful:

    • Analyze expenditures for the current year and pinpoint assets that may need to be replaced or upgraded in the coming year.

    • Examine each income and expense line item to account for increased/decreased costs.

    • Review contract terms and contact vendors to discuss possible increased/decreased costs.

    • Review the HOA 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.

    • Divide the total among homeowners to determine whether an assessment increase will be necessary to cover costs.

    • Include a narrative explanation of how each income and expense item was determined.

    • Review Governing Documents for specific requirements and recent changes to State Statutes.

    • Be sure to prepare both an operating budget and a reserve budget for the upcoming year. Include the final Association budgets as agenda items for approval during an open Board of Directors meeting.

HOA Budgets Infographics


Board Members have also read our article Budget Tips, It's Never Too Early to Start Planning