HOA budget committee responsibilities come up in a major way once a year. When it’s time to draw up a budget, most HOA committee guidelines have provisions for a budget board. The need for this specific committee is pretty obvious then. But what does a budget committee do the rest of the year? As it turns out, a mainstay budget committee can benefit your association in a number of ways.
Why A HOA Board Needs Its HOA Budget Committee
If a homeowner’s association is going to be successful, it needs a strong board of directors. The directors need to understand their roles and pursue their goals with passion.
For a board of directors to be successful, they need to understand the weaknesses and strengths of the association. Board members also need to understand the history of the association and what needs to be accomplished. Homeowner’s associations need to take responsibility for their assets and operations. They must also make sure they’re in compliance with local ordinances, federal law, state law and governing documents.
Juggling all those requirements can’t be left to a single person. You need a team.
The HOA Budget Committee: A Team of Financial Experts
Homeowner’s associations that have an annual budget need a team to get them through the crunch. Working out the numbers for their expenses from January through December next year is a huge task. HOAs, which are mostly made up of volunteers, often have to draft this budget in a limited amount of time.
The work does not stop there, however. Once the budget is created, it must be approved before the year-end mailing event. Sometimes, budget items need to be brought to a vote. That part depends on the governing documents of an HOA. In every step of that long process, the HOA budget committee needs to be there.
A homeowner’s association must have a budget committee, and the committee can be comprised of members of the community association, HOA board members or a combination of both.
The Roles of the HOA Accountants and Treasurers
The HOA budget committee is usually chaired by HOA board regulars. When it comes to budget matters, few positions will be as qualified as the board treasurer.
The board treasurer chairs the budget committee. As the chair of the budget committee, the treasurer needs to make sure that the progress on the budget stays on track. It’s the treasurer’s role to stay updated on what everyone is doing while the budget is being created. After that, the treasurer also needs to present the resulting budget to the rest of the board.
As someone who is most familiar with the details of the budget, the treasurer is the best person to explain it to other members for approval.
If a homeowner’s association decides to work with an accountant, the accountant can offer the board consulting services. However, when it comes to deciding the budget, the account doesn’t play a specific role. Depending on the association in question, the creation of the budget could be entrusted to a management company.
Once the management company has devised the budget, the budget committee meets with the management company and reviews the budgets. The committee then adjusts the budget during this meeting.
Who Needs To Be In It?
It’s not uncommon for owners to serve on the budget committee. Homeowners can serve on the budget committee of the HOA board if they have the background needed for it. If the HOA board does decide to bring on owners to budget planning, they need to make sure that all sections of the whole community are well represented.
Many of the members who might decide to serve have expertise constructing very specific areas of the budget. These skills are can prove to be very useful to the whole community in this planning phase of the budget.
On the other hand the committee shouldn’t get to grow too large with all the members coming in. Too many members may prove to be unwieldy for the treasurer to handle. This can then cause a wide range of management problems, not something you need when there’s a budget to draw up.
What Can The HOA Budget Committee Do?
It’s important to understand that the budget is comprised of three major components. The role of the treasurer is to make sure that every committee member is familiar with all the components that make up the budget.
These components are:
The Funds Needs for Daily Community Operations
The daily operation of the community is a budget priority. It’s up to the HOA budget committee to set aside funds for these. For example, the HOA will need funds for general maintenance, grounds maintenance, water and electricity. It will also need a budget allocation for insurance, management, and other costs as well. These expenses can be one-time costs estimated based on past spending. The HOA budget committee can also provide a budget to hire a vendor on a contract basis.
When examining items found in the operating budget, it’s important to consider the community expectations. For example, do members wish to hire a landscaper who does their thing and then packs up and leave?
For some communities, this service might be enough. In many HOAs, however, members might prefer to hire a landscaper that provides a more extensive level of service.
The Funds Needed to Maintain a Sufficient Level of Reserves
Another major component of the budget consists of funds needed to keep reserves high. The reserves are important because they provide money for the repair of streets, roofs, pools and other community assets. Without sufficient reserves, it’s impossible to keep assets in good repair or provide money for replacement.
The Funds Required for Enhancements or Additions to Existing Property
Community members want certain improvements, and they would be willing to pay money for these. For this component, the HOA board should consult with the owners, and propose projects for these additions. Then, the HOA budget committee should present these projects for approval.
HOA Budget Committees Are Crucial for Community Planning
Your HOA budget committee does more than just plan the budget. They also help plan the future of your community. Want to know more about the benefits of proper HOA budgeting? Call us for inquiries, let’s work together to bring your community to the next level.
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