HOA Budgets

To create your HOA’s annual budget, review and follow the timeline for Board completion and approval. This ensures you meet the distribution requirements outlined in the HOA’s governing documents. For example, some CC&Rs require mailing or delivering the approved budget to homeowners 30 days before the effective date or 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 preparing and distributing 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 raised 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

• Pinpoint assets that may need replacement or upgrades for the current year.

Review existing contracts and anticipate fluctuating costs

• Contact utility companies to confirm their price rates for the following year.
• Reach out to active vendors and ask about service costs for the following 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 expenses.
• Compare the recommended funding in the reserve fund to the current actual funding level to determine whether an assessment increase is needed.

Include a narrative

• Always include an explanation of how each income and expense item was determined.
• Financial prudence is one of your top responsibilities as a board member. This is why investing time and starting early on creating an annual budget will set your HOA up for financial success.

If you want more HOA budgeting tips, check out our Guide on 7 Tips to Prepare Your Community’s Association Budget.