male hand stacking gold coins into increasing columns with copy space | hoa budget

When you are serving on the board of your HOA, you have several fiduciary duties that you have to complete each year. One of these fiduciary duties is preparing an annual budget and establishing assessments for your HOA. The budgeting process can be time-consuming and difficult to complete since there are so many factors that HOA boards need to take into account to ensure that they have sufficient funds to pay bills, maintain common areas, and ensure the HOA’s operations are running smoothly. If you are in the process of preparing your HOA budget for the upcoming year, review the valuable tips listed below:


Be Prepared for Resident Suggestions & Complaints

Some residents may view the period where your budget gets decided to be a time to raise grievances or make comments. It is important to consider the resident’s requests because it will help you when you present substantial changes in the budget for the upcoming year.


Understand Your Fiduciary Duty

Fiduciary duty concept written on a paperFiduciary duty can be a concept that is difficult for HOA board members to understand. What is important to remember is that HOA board members have been elected by their communities to represent the HOA organization. What this means is that board members have a fiduciary duty to act as agents on behalf of the HOA and the best interests of their community. It is important to make budgeting decisions that are in the best interest of your community and its residents to uphold your fiduciary duty. Residents also need to have confidence that HOA board members are following their fiduciary duties to the best of their abilities. If residents begin to doubt the integrity of their HOA board, it can potentially legal disputes in the future that otherwise could have been avoided.


Include a Comparison Column

When you are deciding how to present your budget, it can be valuable to have a comparison between last years’ expenditures and the projected expenditures for the upcoming year. Residents are visual and will benefit from seeing exactly how the funds are going to be allocated. If your board fails to show where the dues are going, residents can begin to not trust your HOA, which can be counterproductive to your progress.


Be Sure That Your Budget Is Accurate

It is important to have several board members look over the budget to be sure that all of the upcoming changes are correct and that nothing has been left out. Residents do not respond positively to budget changes later in the year that could have been presented when the initial changes for the year were being made. The most organized HOA boards will have their budgets secured.


Explain Any Upcoming Changes

If your HOA board is making upcoming changes to the budget, they should also be explained clearly. One way to do this is to include a notes column on the side margin of your budget comparison chart. If a resident can see a comparison chart and then there are sections explaining the upcoming changes, it will help them understand your board’s plans. If residents are not able to understand what the upcoming changes are and why they are occurring, they will not support the board’s decision.


Write a Professional Cover Letter to Present Your Upcoming Budget

man looking at paperResidents respond to professionalism. They want to see what their dues are paying for. If your HOA board prepares the upcoming budget in a professional packet complete with a cover letter introducing the changes that will be occurring, residents will be more inclined to take your HOA board seriously. Be sure to take the time to draft a cover letter with your board members to get their main messages across that you want residents to understand. Make sure that your changes are sending across an effective message and strategic plan for the upcoming year.


Consider Presenting Upcoming Resident Involvement Projects with the Budget

Many successful HOAs have board members who encourage resident participation. When presenting the budget for the upcoming year, it would be useful to announce new communities that residents can take part in. HOAs have implemented committees including neighborhood watch, events planning committee, among others. Providing your residents with leadership opportunities is a great way to get them to support the objectives of your community and also get behind your budget projections for the upcoming year.


Seek Outside Expertise if Necessary

There are times where HOA boards do need outside assistance to ensure they are complying with state and local laws. If your budget has issues that your HOA board members are not sure about, then it is wise to speak with a lawyer or accountant that has expertise in the area that your HOA board is lacking. HOAs that take the time to obtain outside expertise is better off in the long-term because they may be able to avoid common pitfalls that could cause a lawsuit in the future. When seeking outside advice, it is wise to research carefully which professionals have the expertise in the areas that your HOA board needs assistance.


Have a Final Review with Your Board to Be Sure the Information Is Presented Correctly

Your entire budget presentation must be proofread and check for content. Even if you do not have a great deal of time, board members must find space in their schedules to ensure that their presentation is polished and ready to be distributed. These extra efforts will further assist residents in supporting any changes or increases in community dues.


How Clark Simson Miller Can Help

Clark Simson Miller is a professional organization that provides remote management, financial services, accounting, and support to community associations and managing partners of all sizes within the United States. Our direct association services enable HOAs to provide better services to their residents.