FEATURE
Six Ways to Make Community Budgeting Easier By Sierra Carr, CMCA
W
hen you are on the board of a homeowners association (HOA), budgeting is a critical part of your responsibilities. Your community’s budget provides the sound structure for all the initiatives that your board wants to accomplish. It is more than a series of numbers; it’s the framework for reaching your community’s goals. That’s what makes it so important—and what can make it so stressful. Unfortunately, many boards are challenged when it comes to creating and managing budgets. Here are six basic principles of budgeting that will help ensure you’ve covered all the bases.
1. Keep GERT in mind as you develop your budget. That may sound like a nonsense word, but it’s an acronym for everything you’ll need to remember to create a successful budget: • Goals and objectives of your association • Estimated common element expenses and income • Reserves that you’ve calculated • Timeline for your budget
Taken together, these four elements create the framework for budgeting successfully. Focusing on the goals of your HOA helps you focus on the big picture while you’re sifting through the details. Estimated expenses and income form the numerical foundation. Reserves provide an important resource for capital improvements or, if necessary, a source of revenue. And the timeline is critical to delivering your budget so that it can take effect promptly.
2. Collect necessary documents.
Quorum June, 2019
You have defined your GERT and collected important historical data and records. Now it’s time to compile all that information into budget categories and line items. Every budget is different, but you probably need to include most of the following items. Operating budget: • Estimated common expenses • Expenses per unit owner • Management fees
This probably isn’t the first budget your HOA has ever created. Even if it is, many of these documents are monthly records that you should have on hand. Either way, you should be able to access past documents that provide the data and the structure you need to build a good budget. Try to gather the following items: • Past budgets • Financial statements • Association documents
• Administration • Security provisions • Maintenance • Insurance • “Other” expenses (specific to your community or part of the state) • Landscaping • Provision for bad debts Reserve budget for projects such as: • Painting the building
• Monthly management report
• Replacing the roof
• Schedule of delinquent unit owner accounts
• Resurfacing driveways or a pool
• Vendor contracts • Wish list items
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3. Determine your budget categories.
• Capital expenditure or deferred maintenance greater than $10,000
