15 Helpful Steps to Create a Budget for your HOA or Condo Association


Budgeting for a community association is both a difficult task and a massive responsibility. The process is a marathon, not a sprint. If you wait too long to start budget preparations, you’re adding the burden of last-minute panic to an already stressful project.

Give yourself at least five months to prepare next year’s budget before the end of your current fiscal year. If your year-end is December 31, for example, you should have started the budgeting process back in July.

To create a well-planned, realistic budget, board members and budget committees need to understand the community’s assets and operations. They also need to comply with condo or HOA legislation and governing documents – rules for disclosure to owners, time limits, and more.

The first rule of budgeting (besides starting early) is to always develop a budget by projecting income and expenses on a monthly basis, which then adds up to the totals for the year.

But before you start plugging numbers into a spreadsheet, you need to gather all the relevant information: utilities costs (adjusted for inflation); the current reserve fund study and financial statements; prior year financial statements; projected income statement; and insurance quotes.

Having all your ducks in a row will make the budgeting process smoother. A great place to get started is with this handy budgeting checklist created by ACM Community Management – it spells out all the steps you need to take, from preparing a business plan that outlines the community’s goals for the year to distributing the budget.

Here’s a quick reference of the 15 steps for creating your HOA or Condo association budget:

Prepare a business plan.
What do the board and residents want to accomplish, as a whole? Adding amenities (e.g., a playground or security gate) can be costly, or a luxury. Residents may instead want a budget that enhances the current property at this time.
Develop processes & assign tasks.
The goals and objectives of the association have to be reviewed, numbers must be crunched, resident input should be sought, and budget review meetings need to be scheduled. All of this takes time and effort. Put an organized process in place.
Review financial history
Examine budgets and financial statements, from at least the past several years to help determine a starting point. Compare this year’s actual expenditures to date against the original budget, so adjustments can be made as well in next year’s budget.
Project utility costs.
Do you provide water and/or heat to your residents and the common areas? Utility rates are soaring in many cities nationwide. Find out what the trends are in your community. Some increase, should always be built in for utility costs regardless.
Review vendor contracts.
Do landscaper or maintenance company contracts call for a price increase in the coming year? Are any contracts expiring? Review all contracts and seek bids.
Do a maintenance review.
Inspect the entire property. Are playground or pool repairs pressing? Any driveways or lots need repaving? Hallways due to be repainted? Preventive maintenance can prevent costlier problems.
Evaluate insurance policies.
Like your personal policies, your community’s policies should be reviewed yearly. Are limits and types of coverage sufficient? Do your reserves cover any deductibles that might be needed? Would a lower-premium, higher-deductible plan make sense?
Include legal and collections costs.
Few associations can translate 100 percent of their fees due into actual revenue. Referring to previous legal or collection actions might provide valuable insight into expectations for your future costs.
Create a worksheet.
When you determine known expenses, start inserting the numbers into a spreadsheet and compare them with expected revenue. At least you’ll know how much above or below your projected operating costs you are.
Prioritize projects.
Something will need upkeep or a change every year. Make sure needs — especially those that expose the association to liability
(e.g., stairwell repairs) — are budgeted for before wants (e.g., beautification projects).
Expect the unexpected.
Set aside funding for some “emergencies” that cannot be identified in advance. One year, mosquito abatement might be necessary; another year, vandalism might present a problem, or a storm might destroy landscaping. Being prepared is a good plan.
Plan out reserves.
Over a long enough period, projects such as replacing a building’s roof are as inevitable as they are expensive. Experts suggest a good reserve study should tell you how to fund your reserves.
Be transparent.
It’s not possible to keep every resident happy, but keeping the budgeting process open and transparent at least gives residents a chance to have their opinions heard.
Distribute the budget.
Distribute the proposed budget to the homeowners for their review and comment. Then, once the new budget has been approved by the association board, get it into the hands of all homeowners.
Follow the budget.
Except for emergencies that have not been budgeted for, follow your plan. The budgeting tool keeps the community operations on track.

Do you have any experience with creating a condo association or HOA budget? Share your tips in the comments below!

Since 1986, ACM Community Management provides high quality management services to town homes, multi-story condos, homeowner associations, and vintage buildings in the Chicagoland area.

Evercondo the leading web and mobile platform that facilitates quick, useful communication between property managers, the condo association or HOA board, and residents. Contact us for a demonstration or a free trial to see how we can keep your communities happy.