An HOA budget calendar is a timeline of events that supports planning for the new fiscal year’s operating and reserve budget. Every association should have one, as it helps make the budget planning process more manageable. Without one, board members would have no proper guide, resulting in an inaccurate budget.
What is an HOA Budget Calendar?
An HOA budget calendar is a strategic timeline that outlines the tasks board members must complete at every stage. It is an organized approach to budget planning that ensures the board doesn’t miss any crucial steps.
The calendar incorporates action items such as gathering data, evaluating current funding, and proposing the draft budget.
Budget planning may seem like something the board can accomplish in a few weeks’ time. In reality, planning takes months, often beginning in April of the previous year. This might feel like too much time, but the process demands careful thought and consideration. There are several variables to consider, each affecting costs, revenue, and projected dues.
Tasks to Include in an HOA Budget Timeline
January marks the start of the new fiscal year, but boards must begin budget planning in April of the previous year. Here is what an HOA budget calendar should look like.
April – June
At the start of April, HOA and condo boards must commence preparations. Action items include:
- Evaluate all contracts currently in force.
- Review vendor performance and rates.
- Assess the association’s financial health using past and current financial statements.
- Analyze reserve funding levels to ensure they meet the community’s needs.
- Begin soliciting bids from potential vendors by sending out RFPs.
This process will take a few months because vendors may not respond promptly. Additionally, associations with complex financial profiles will need to take a deep dive into their operating and reserve budgets. Historical data must also be reviewed to gain insight into probable future costs.
These actions will give the board a clearer picture of what the year ahead may bring, ultimately leading to more accurate projections. Accuracy prevents surprises, reducing the risk of special assessments or significant dues increases.
July – August
Following the data-gathering portion of the HOA budget calendar, boards can proceed to create the budget in July. Here are the key points when drafting the budget:
- Determine the association’s objectives and priorities. For example, if the pool needs repairs, allocate enough funding for the project.
- Project each line item based on the data gathered in the previous months.
- Factor in reserve fund contributions in line with the requirements of the reserve study, as required by Virginia law (Section 55.1-1826 for HOAs and Section 55.1-1965 for condos).
In terms of reserves, Virginia law dictates that the annual budget must include:
- The current estimated replacement cost, estimated remaining life, and estimated useful life of all association assets;
- The current amount in the association’s reserves as of the start of the coming fiscal year and the expected reserves contributions;
- A written explanation of the methods the association used to calculate reserve needs and how it plans to collect and build reserve funds over time; and
- A statement showing the reserve funding level recommended by the reserve study compared to the amount of money currently available in the replacement reserve fund.
This serves as the meat of the process. Due to its complexity, boards should allocate two months to the task. It is likely that the budget will need a few revisions before it is finalized. When in doubt, enlisting the help of an accountant or HOA management company is a good idea.
September – October
Once the board has a final draft, it must distribute copies of it to all homeowners. This will allow them to review the budget and make objections or provide input. Allow 30 days for this step, as that should be enough time for evaluations.
Board members must take feedback seriously. Of course, this does not mean that they should amend the budget to suit every opinion. The board must know how to discern which criticisms carry weight and which do not.
Transparency will help build trust within the community, and sharing the budget supports that. By the end of October, the board should have a final proposed budget.
November – December
Virginia law requires associations to make the annual budget and a summary of it available to all owners prior to the fiscal year for which it serves. This applies to both HOAs (Section 55.1-1826) and condominiums (Section 55.1-1965).
Some associations are also required to present the budget to members for approval. It depends on the provisions of the governing documents. If approval is required, the board must schedule a budget ratification meeting before distributing the annual budget, as required by Virginia law.
The board must also send the notice of dues or assessments for the coming year.
January
The new fiscal year begins in January, and the budget goes into effect. Work does not stop there, as the board must continue to monitor spending and ensure it sticks to the budget. If necessary, board members must use their judgment to make adjustments. Then, use the lessons learned here to inform the next round of budget planning in April.
Tips to Avoid HOA Budget Planning Mistakes
Here are some tips to employ to avoid errors in the budget planning process.
1. Plan Ahead of Time
Boards can avoid cramming the budget planning process into just a few weeks by starting early. April is the best time to do this, as it gives them more than half a year to gather data, evaluate current financials, and make adjustments.
2. Ensure Transparent Communication
Internal communication is the key to ensuring a smooth planning process. At the same time, keeping residents in the loop promotes transparency and builds trust. Make sure to give proper notice as well.
3. Make Conservative Estimates
A practical budget should be conservative, with enough buffer for unanticipated expenses. This might slightly inflate the budget, but it’s better to be prepared than to underestimate it in an effort to keep residents satisfied. Don’t forget to account for delinquencies, too.
4. Rely on Data
Never adopt a “wing it” approach to budget planning. Board members should rely on historical and current data to make estimates. A data-driven budget supports future needs.
5. Seek Professional Advice
Planning the annual budget isn’t always easy. For an expert approach, associations should consult an accountant or an HOA management company.
Personalized Calendars
An HOA budget calendar serves as a guide for board members throughout the budget planning process. While the above timeline can serve as a template, communities should tailor their calendars to their needs and goals. Every association is different.
National Realty Partners is a leading provider of HOA financial management services in Virginia. We can help your board manage and enforce the rules. Call us today at 703-435-3800 or request a proposal online!
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