HOA Annual Budget


Staff member
I have been asked a few times if I had any thoughts on preparing an annual budget for the HOA.

If one Googles this topic, you will find several articles on how an HOA might go about preparing an annual budget. Here is a summary of what I have found:

  1. Get a Team Together

    Assemble a task force. Your HOA board does not have to be the only party in the HOA budget planning session. In fact, it is a good idea to include your HOA manager (if you have one). You may also want to consider inviting finance and budget committee heads.

  2. Start Planning Early

    Most HOAs begin thinking about the following year at the end of the summer. During the late spring and early summer months (or even earlier), a special meeting for the next year’s budget should be placed on the schedule for the late summer or early fall in order to guarantee it is not left until later.

  3. Schedule a Dedicated Session

    Planning HOA annual budget takes time. It is not something you can simply squeeze into the last five minutes of a board meeting. As a rule of thumb, do not schedule your budget planning session on the same day as an important meeting or event. Set aside an entire afternoon for the task. Also, make sure to come into the meeting with a clear head and a ready attitude.

  4. Define Your Community Goals

    Community goals are just that — they come from the community. These are not objectives your board alone can decide on. As such, survey residents before your budget planning session to gather information. Then, assess these goals and identify which ones are worth pursuing. Just because a single resident wants a hot tub in the clubhouse does not mean your HOA should follow through.

  5. Anticipate Increases

    There will be inevitable increases in cost every year. It is crucial to anticipate these increases before they occur for the health of your HOAs finances. Consider utility increases as well as increases in the cost of services and materials when putting together the next year’s budget. You must take inflation into account. If you can, it is a good idea to survey your vendors to see if they plan to increase their fees for the next year. This way, you can either make room in your budget or start considering cheaper options.

  6. Prioritize Replacements and Repairs

    An HOA board’s primary responsibility is to maintain the community. So, if you neglect to repair or replace common facilities, you are not really doing a good job of fulfilling your role. Remember that curb appeal plays a huge role in maintaining property values. Homeowners invested a lot of money into their houses. They even pay regular dues. As such, they have a right to demand better maintenance from the board.

  7. Boost the Reserve Fund

    Use the RFA to update your reserve study. This way, you know the optimal level at which your reserves should operate at any given time.

  8. Calculate and Include Insurance Deductibles

    Be sure to include the deductible amounts for all of your insurance plans in the budget. In so doing, you can avoid using money that should be used for unexpected repairs instead. Do not dip into the reserve fund for these deductibles.

  9. Reassess Vendors and Insurance

    Every year, the planning of the new budget provides an opportunity to reassess all of your vendors and insurance plans. It is important to take the time to do this for two reasons. The first is that many of your vendors and insurance providers will increase the cost of their products and services on a yearly basis. The second is that you can ensure that you are still getting the best product for the lowest price. Companies change, and as they do, do not be afraid to switch to a different provider or vendor.

  10. Plan Special Projects

    Special projects can increase the morale of a community and promote camaraderie among residents. Spend time planning which special projects will be done the following year and which can be put off for a later time. Try not to schedule too many special projects at one time to avoid imposing excessive fees on homeowners. Include any identified special projects into the RFA.
As an aid in preparing the annual budget, I am attaching an Excel workbook that you may want to use to help you identify and enter some typical expense items. This is not meant to be an all encompassing or definitive example, it is merely a simple workbook that you can adopt if you so choose.