How Is Your Homeowner’s Associations Budget Setup?
How Is Your Homeowner’s Associations Budget Setup?
If the homeowners association that you belong to is like most, it is conducted during the fiscal year, which runs from July through June. With summer sneaking into view on the horizon, now is the perfect time to get prepared by giving your budget a modernized upgrade.
Like the majority of HOA board members, you are likely familiar with the basics of HOA accounting for community associations, including that the process works oppositely than it does for the average American’s household budget. Most notably, an HOA is run by making an estimation of expenses first, and subsequently, locating and choosing an appropriate source of revenue. Most of these dividends are generated through Association fees, which are typically collected on a monthly, annual, and bi-annual basis.
If you find yourself asking what should be included in your balanced homeowners association budget, you’ve come to the right place. Before you start blindly tweaking your budget, read through the article below to make sure you’ve got all of the basic components necessary to keep your Association operating smoothly and at its full potential.
These expenses are vital to a successful and long-lasting Association. The main duty of this specific fragment of the budget is to determine what services homeowners will be presented with and how the community will be maintained in the day-to-day and long-term sense. These expenses cover a range of things, including utilities, management, accounting and legal services, and anything related to the cleaning and maintenance of the property.
Common services provided by an Association include things such as:
City services – this could include trash removal, water and sewage services.
Insurance – this insurance typically covers exterior damage to the property or surrounding property only. Insurance to cover the interior of the property and all its contents would be solely the responsibility of the homeowner.
Lawn care – this service could include snow removal, landscaping, and general lawn maintenance, such as weekly cuts and weed-eating.
Pest control – this service is provided by most HOAs and includes a monthly inspection from the Association’s designated pest control company in order to prevent a pest infestation.
Exterior maintenance and repairs – this service could cover a wide range of things, like roof repairs (leaks, damage resulting from wind damage, etc.), driveway concrete repairs, exterior painting, and more. Gym and pool maintenance would also be included.
A responsible Association will also pre-determine a schedule of when these available services will be offered to homeowners to better assist with calculating costs, including whether it will be a weekly, monthly, or seasonal offering. Also, the new and improved budget should clearly identify the person or persons who will be responsible for providing these services, including whether they are employed by a contracted or property management company.
Just as the budget needs operating expenses in order to run smoothly, it also requires reserves set aside for any major, long-term projects that could come up, both in the near and distant future. These reserve funds are to be used as an emergency back-up, drawn from only for repairs, maintenance or replacement of parts that the association has taken responsibility to maintain, or for any law disputes related to these elements. Possible major and long-term projects could include roof maintenance or replacement, improvements to pools, tennis courts, and fences, or repairs to streets and parking lots. Associations are also encouraged to conduct a beneficial reserve study, which involves bringing in an outside expert to determine any forseeable major projects that may need to be completed within the next 20 years. This advice from a fresh and neutral set of eyes is often helpful in calculating how much money the association should realistically set aside in order to pay for these anticipated future projects and repairs.
In some cases, it may be a wise choice to seek the help of an expert, such as an attorney, accountant, or Association manager. These professionals can assist in guaranteeing your budget is in correlation with your legal documents, and additionally, they can also help you to better understand the laws in relation to your budget.
Making these simple yet effective improvements to your Association budget is sure to aid in guaranteeing your coming year runs smoothly and prosperously. Any responsible Association board will work diligently to preserve, improve, and maintain the homeowners association. Earning a solid and reputable reputation is easy when these guidelines and components are in place. In addition to carefully planning for the Association’s future, any part or element that would work to keep the Association a safe and pleasant place to live should be included and documented in the budget so that it can be easily understood by all Association board members.