If you are a resident of a homeowner's association (HOA), it's important that you understand the budget. This financial information can help you stay informed about the financial health of your community.
Many residents do not understand HOA budgets, what they include, or how to review them effectively. Whether you are a long-time resident or new to HOA living, it's never too late to learn how to review your HOA's budget. In this guide, we will provide essential information on HOA budgets and how financial decisions affect your community.
How HOA Budgets Affect Residents
Let's begin by explaining why HOA budgets matter to residents.
An HOA budget outlines how the association plans to collect and spend funds throughout the year. The budget funds everything listed below:
- Landscaping
- Maintenance of common areas and utilities
- Insurance
- Utilities of common areas
- Long-term reserves
- And much more
Residents help fund the HOA budget with their assessments. By regularly reviewing the budget, you can ensure the HOA Board is using the funds you pay into the community wisely.
What's Included in an HOA Budget?
While we have touched on a few items covered by the HOA budget, here is a more detailed breakdown of what you will find in the document.
Operating Expenses
Operating expenses cover the day-to-day costs of running the HOA community. These may include the following items:
- Grounds maintenance
- Management and administrative fees
- Repairs and routine maintenance
- Insurance premiums
- Utilities for common areas
- Landscaping
When reviewing operating expenses, look for realistic expense projections and note any significant increases in these costs from previous years.
Reserve Contributions
HOAs do not only take care of the community in the present. They also plan for its future by establishing a reserve fund. Reserve funds can help cover the costs of major future expenses, such as roof replacements, paving, or large mechanical system upgrades.
When reviewing your reserve contribution, confirm that the budget includes consistent funding aligned with an up-to-date reserve study.
Common Budget Red Flags to Watch For
No budget is perfect. However, the following signs may indicate problems with your HOA's current budget.
- Little or no reserve funding
- Unrealistically low maintenance costs
- Repeated deficits or reliance on special assessments
- Large unexplained increases in expenses
How Partners Community Management Can Help
While not all residents will serve on the HOA Board, every member of the community can effect change. You must remain an active HOA member by reviewing the budget and bringing any concerns or questions to the Board.
Another step you can take is to recommend that the Board partner with a professional community association management company, such as Partners Community Management. Professional managers can help the Board develop accurate budgets, track expenses, and ensure proper financial reporting.
ContactPartners Community Management today to learn how we can help your HOA thrive today and in the future.
