Why Is It Important To Practice Budget Transparency

When you create your next community association budget, you will likely make some decisions that are unpopular with certain members of your community. To avoid unnecessary conflicts with community members, it is important to make residents feel like they are included in the budget process. Practicing budget transparency makes residents feel important and limits potential conflicts.


Exercise Budget Transparency for a Better HOA

Monthly budget document with white calculator and coffee cup on blue wooden table | transparency of budgetMany homeowners believe that there is no transparency involved in the budget process. They think that the board refuses to disclose any budget details until they are finalized. Because of this, most homeowners may feel that they have no knowledge or influence over the process. However, that should not be the case.

Transparency of budget in HOAs is vital. In fact, some states even have laws mandating transparency among homeowners associations. For instance, according to the Arizona Revised Statute 33-1805, homeowners must have access to the HOA’s financial records. Apart from being required by law, HOA transparency has a handful of benefits.


1. Encourages Involvement

When an HOA is struggling financially, board members have a tendency to keep it under wraps, but you don’t have to deal with problems alone. When you let the community know what is happening within the HOA, it encourages them to get involved. You never know what community members can offer you. Some of them might be good at financial planning, while others might have a strong background in accounting. If you want residents to participate in community affairs, do not leave them out.


2. Establishes Trust

people handshake on city office building in background | budget transparency in an HOAMuch like a relationship, HOA budget transparency builds trust between parties. There is nothing that can break trust more easily than deception. If you keep your members in the dark about HOA matters, they are more likely to grow suspicious.

Homeowners pay regular fees to keep the association running smoothly. Naturally, they want to know where their money is going. As a board member, it is part of your job to keep residents in the loop about financial decisions.


3. Limits Conflict

When members don’t trust their HOA board, conflicts are bound to arise. Without transparency, residents will start to feel cheated, even if the board is not doing anything wrong per se. Keeping secrets from homeowners is a surefire way to plant contempt and conflict among members of the community. To combat this, make sure to inform everyone of the goings-on in the community, including the homeowners association budget.


How to Practice Budget Transparency in an HOA

By now, it is clear that budget transparency is an essential part of HOA management. But, how can one achieve such a level of transparency that builds trust, reduces conflict, and encourages involvement? These tips should help you with this coming budget season:


1. Communicate Regularly

Aerial View of Group of People with Communication Word | transparency of budget in HOAConsider a quarterly or semi-annual communication that updates homeowners on the budget situation. For example, if you are over budget, you likely need to increase HOA fees. Before arriving at a decision, let homeowners know what is going on right off the bat. This way, they will not be up-in-arms when they find out an increase is slated for the following year.


2. Keep Updates Short and to the Point

For best results, many professionals recommend shorter but more frequent communications as opposed to long, annual updates. These long updates are usually packed with so much information that homeowners don’t bother to understand or don’t have an interest in reading. Something as simple as a short and straightforward monthly update, whether at a meeting or via social media, email, or a letter, will go a long way for the homeowners in your community.


3. Overcommunicating Is Better Than No Communication at All

woman discussing business with two men in office | HOA transparencyIf you feel that you are providing too many budget updates to the community residents, remember that it is much better to over-communicate than not to communicate at all. Little or no communication will create a feeling of mistrust toward the residents of your association.

If you explain everything clearly, especially major budget changes, residents will feel more included and will have higher satisfaction rates with the community.

Make sure to communicate to residents that attending the annual budget meeting is not the only way of learning about the process. Many HOAs create monthly financial reports online, which is a great resource for homeowners. Encourage residents to read all online resources and help them understand the process. It will make them feel like they are a part of the association and will answer a lot of their questions.


4. Get Residents Involved

Involvement is a cycle. By staying transparent, you encourage residents to actively participate in community affairs, but you can also promote transparency by getting homeowners involved.

Ask residents to take part in the association’s finance and budget committees. Send out a request for volunteers and allow those who are interested to have a say in the budget process. Doing this can decrease the levels of confusion among the residents, and make the whole process move much more smoothly.


How to Communicate an Increased HOA Fee to Homeowners

woman and bearded man discussing in office | HOA budget transparencyWhen you raise dues for the coming year, you must let residents know. Your HOA may have a specific procedure on this, so it pays to check your governing documents beforehand. Generally, though, communicating an increased HOA fee to homeowners takes a few steps.

The first thing you should do is write a notice to the homeowners, composed by the board or your management team. Make sure to put this notice in writing, at least 30 days before the increased fee goes into effect. You can let community members know of any increase in fees by mailing a notice.

Alternatively, you can hold a public meeting to describe why the board decided to increase the HOA fee. If a homeowner disagrees or has questions about a line item, try to clearly explain the rationale for the specific item. If they don’t accept your reasoning, you can invite them to have a one-on-one discussion to try to resolve any disagreements.


Budget Transparency Begins with You

Any organization will benefit from budget transparency, HOAs included. Not only will it encourage residents to engage in community activities, but it will also limit conflicts and build trust among members. And, as you can see, you don’t have to jump through hoops to practice budget transparency in an HOA. All it takes is open and constant communication, as well as motivating residents to get involved.

If you are having difficulty managing your budget, it may be time to ask a professional for help. In that case, give us a call anytime.