HOA Budgets

    When creating your community’s annual budget, it is critical to review and follow both the timeline for completion and approval by the Board to ensure that distribution requirements outlined in the HOA’s governing documents can be met. For example, some HOA’s CC&Rs state that the approved budget must be mailed or delivered to homeowners 30 days before the effective date of the budget or before year-end.

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

    • Review the governing documents
      • Look for specific requirements for the preparation and distribution of the HOA’s budget.
      • Be aware of any recent changes to State Statutes.

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

    • Review the reserve study
      • Review governing documents to confirm if they require an annual reserve fund analysis.
      • 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.

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

    • Review existing contracts and anticipate fluctuating costs
      • Contact utility companies to see if their price rates are set for the next year.
      • Reach out to active vendors and ask about service costs for the next year.
      • Consider requesting RFPs from potential vendors.

    • Examine each category
      • Projected Revenue - Assessments
      • Operating Costs – Maintenance, supplies and utilities
      • Fixed Costs – Taxes, insurance, status filing
      • Administrative Costs – Bank fees, management, legal, website, office expenses
      • Review each line item to account for increased costs. 

    • Necessary assessment increase
      • Divide the total projected costs among the number of homeowners to determine whether an assessment increase will be necessary to cover costs.
      • Compare recommended funding in the reserve fund to the current level of actual funding to also determine if an assessment increase is needed.

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

    As Board members, financial prudency is one of your top responsibilities. This is why investing time and starting early on creating an annual budget will set your HOA up for financial success.


    If you are looking for more HOA budgeting tips, be sure to check out our 7 Tips to Prepare your Community’s Association Budget.