The governing documents of your community define the property to be maintained by the association, and specifies maintenance and service responsibilities and requirements. These maintenance and service items will appear in the expenses section of your community’s budget.
Like most budgets, the two main components of a budget are simply revenue and expenses. However, what these two items consist of with regards to a community association such as an HOA can be finite, and it's important to understand what each includes. Scroll over the below images to get a better idea of each individual component.
Most board of directors are responsible for establishing, approving, and monitoring the community’s budget. Although they have the power to establish a budget, most will delegate preparation authority to their manager. When the board of directors for any community association reviews a proposed budget, they should consider the following:
> Legal requirements of state statutes and governing documents > Owners needs and desires (balancing mandatory and discretionary items) > Committee and owner feedback > Reconcile revenue and expenses > Financial forecasts and analysis of past financial activity prepared by the manager
The community treasurer is responsible for ensuring the draft budget is prepared and approved. usually initial preparation of the budget is done by a manager, and treasurers work with them to get the budget approved. The treasurer may review the draft budget with a finance committee if available. If the association has a finance committee, it is important that the treasurer consult all committee chairpersons and invite owner input to ensure their support. Their participation and support would be especially important where a vote of owners is required or recommended for:
> Increase in assessments > Special assessments > Major improvements > Funding replacement reserves
The manager is typically responsible for preparing the draft budget, reviewing the draft budget with the board, revising it after any changes are made, and providing a summary of the budget to the owners after board approval (unless stated otherwise in your governing documents or state statute).
Some states and some community governing documents require that the budget be passed by a vote of the owners. The preceding discussion explains when and why owners should be involved in reviewing the proposed budget - even when the board is responsible for its adoption.