JoyceS1 (Indiana)
Posts: 140
Posts: 140
Posted:
How does your HOA approve/pass the annual budget?
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Budget Approval
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RogerB (Colorado)
Posts: 5,067
Posts: 5,067
Posted:
Posted By JoyceS1 on 10/03/2006 4:04 AM
How does your HOA approve/pass the annual budget?
How does your HOA approve/pass the annual budget?
1) The Managing Agent prepares a draft of the annual budgets.
2) The Board reviews, modifies as desired, and approves the annual budgets. These budgets include an operating budget and a reserve budget. The annual assessment is clearly identified.
3) The annual budgets are provided to all owners with the notice of the annual meeting. At the annual meeting the members present vote to ratify the annual budgets. Approval by a simple majority of those voting is required. If not ratified the Board must develop and present new annual budgets. Until such time as approved the Board continues to operate using the previous years annual operating budget.
JosephW (Michigan)
Posts: 882
Posts: 882
Posted:
If you don't have a management company or manager, or if your documents don't require a vote of the owners to adopt the budget, then:
The Treasurer, along with a Finance/Budget Committee, should prepare a draft budget. Their meetings should be open. They should present that to the Board for comment or adoption. They should also prepare, and give to the board, a cover document that will go out when the budget is adopted.
Budgets are a sore point for me--the standard budget is a spreadsheet with a cover letter from the board that usually says something to the effect that "We're sorry we have to raise the assessment this year, please don't hurt us, we have to pay this to". The owner looks at the spreadsheet, their eyes immediately are draw to the total and even though they know they're not paying the whole amount, their first reaction is often, "$450,000!!!!!!, what the hell are they spending my money on!!!!"
Some hints on budgets:
Budgets should always be zero-based. All too often associations simply add a cost-of-living percentage to the current budget and adopt it as next years. This has no bais in reality. Each year you should start from scratch and justify each expenditure.
The budget package sent to the owners should be in a narrative form, explaining the purpose of each line item, and how they arrived at the figure for this year. It should also tell the owner how this number relates to them personally. For example, it doesn't cost the owner $30,000 to have the grass cut, it costs $8 per cutting. You're not hiding anything, just putting it into a personal perspective. It isn't $10,000 for road work - it's to fix that tire-killing pothole on Elm Street and raise that drainage basin on Oak Street. Include a picture of both areas to show why the money's needed.
In other words, you're selling the budget to the owners, and you should use the budget package to convince them that you've done a good job for them. This is probably the single most important communication that you send out to all of the owners and you should treat it as such.
Joe
The Treasurer, along with a Finance/Budget Committee, should prepare a draft budget. Their meetings should be open. They should present that to the Board for comment or adoption. They should also prepare, and give to the board, a cover document that will go out when the budget is adopted.
Budgets are a sore point for me--the standard budget is a spreadsheet with a cover letter from the board that usually says something to the effect that "We're sorry we have to raise the assessment this year, please don't hurt us, we have to pay this to". The owner looks at the spreadsheet, their eyes immediately are draw to the total and even though they know they're not paying the whole amount, their first reaction is often, "$450,000!!!!!!, what the hell are they spending my money on!!!!"
Some hints on budgets:
Budgets should always be zero-based. All too often associations simply add a cost-of-living percentage to the current budget and adopt it as next years. This has no bais in reality. Each year you should start from scratch and justify each expenditure.
The budget package sent to the owners should be in a narrative form, explaining the purpose of each line item, and how they arrived at the figure for this year. It should also tell the owner how this number relates to them personally. For example, it doesn't cost the owner $30,000 to have the grass cut, it costs $8 per cutting. You're not hiding anything, just putting it into a personal perspective. It isn't $10,000 for road work - it's to fix that tire-killing pothole on Elm Street and raise that drainage basin on Oak Street. Include a picture of both areas to show why the money's needed.
In other words, you're selling the budget to the owners, and you should use the budget package to convince them that you've done a good job for them. This is probably the single most important communication that you send out to all of the owners and you should treat it as such.
Joe
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