The Annual HOA/Condo Budget: A Step-by-Step Playbook for Board Success
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For community association boards, the annual budget is more than numbers on a spreadsheet—it’s the financial roadmap for the year ahead. A well-built budget protects property values, funds necessary services, and helps avoid surprises that frustrate homeowners.
Here’s a simple, step-by-step process any board can follow to build a strong, transparent budget—with a few real-world lessons along the way.
Step 1: Set the Timeline Early
Start 90–120 days before the fiscal year begins.
Confirm adoption and notice requirements in your governing documents and state law.
Schedule budget workshops and the adoption meeting now to avoid last-minute stress.
Why it matters: Clear timelines prevent compliance headaches and rushed decisions.
Step 2: Gather Your Inputs
Pull financial and operational data: prior-year actuals, reserve statements, contracts, insurance policies, utility histories, and your reserve study.
Step 3: Review Year-to-Date Performance
Look at where spending is over or under budget, why variances occurred, and whether certain costs are one-time or recurring. Trend three years back if possible—it helps boards avoid chasing anomalies.
Step 4: Update Contracts and Fixed Costs
Ask vendors for updated bids or confirmations, check utility rate outlooks, and request early insurance renewal information where possible.
Pro tip: Don’t automatically renew a contract that isn’t serving the community well. This is where vendor oversight and accountability matter.
Step 5: Recalibrate Reserve Funding
Reserve studies help boards plan for long-term repairs like roofing, paving, and pool equipment. Use them to determine how much should be contributed annually. Avoid the temptation to underfund reserves to keep assessments flat.
Real-World Example: The “No Increase” Board
At Pine Ridge Townhomes, the board proudly kept dues flat for five years. Homeowners cheered at every annual meeting—until the pool pump failed and roofs leaked in the same summer. Reserves were depleted, and the board had no choice but to levy a $1,200 special assessment. Owners were furious. The following year, the board tied reserve funding to their reserve study and raised dues modestly. It wasn’t celebrated, but over time, trust returned as projects were completed without special assessments.
Lesson Learned (Homeowner voice): “I’d rather pay a little more each month than get hit with a huge special assessment I can’t afford.”
Step 6: Plan for the Unexpected
Add a contingency line item for emergencies, storm cleanup, legal fees, or unexpected spikes. This is separate from reserves and helps keep operations stable.
Step 7: Prioritize Maintenance Proactively
Rank projects by urgency: safety, asset protection, and community impact. Fund preventive care so you spend less on emergencies. Align maintenance plans with your reserve study.
Step 8: Build the Draft Budget
Start with last year’s numbers, update with current contracts and reserve contributions, add contingency, and document your assumptions for each line.
Real-World Example: The Forward-Thinking Developer Transition
When Summerfield Condos transitioned to homeowner control, the new board was shocked: “We’re responsible for a multi-million-dollar building?” The developer’s budget covered only cleaning and utilities—no reserves. Owners pushed back hard when dues jumped 12%. Twenty years later, when the roof was replaced without a special assessment, the skeptics admitted, “I didn’t like it at the time—but now I get it.”
Lesson Learned (Homeowner voice): “That first increase stung, but now I see it was about protecting all of us long-term.”
Step 9: Model Assessment Scenarios
Prepare 2–3 versions showing the impact of different funding levels. Make it clear how each scenario affects reserves, maintenance, and assessments. Transparency builds trust.
Step 10: Workshop It—Then Decide
Hold an open meeting, present the draft, answer questions, and then adopt the budget per your documents. Document the decision in the minutes.
Real-World Example: The Communicator vs. the Calculator
At Willow Creek HOA, the treasurer’s detailed spreadsheets left homeowners confused and restless. The secretary suggested a one-page summary with pie charts and simple explanations. The next meeting felt completely different—owners nodded instead of frowning. “This is the first time I’ve understood where my money’s going,” one said. The numbers didn’t change, but the communication did.
Lesson Learned (Homeowner voice): “When the board explains things in plain language, it feels less like numbers on a page and more like a plan we’re all part of.”
Pro Tip: Instead of saying, “The water bill is $250,000 per year,” explain, “Of your monthly fee, about $25 goes to water.” Add a “Per-Unit, Per-Month” column for all line items to make each costs more relatable.
Step 11: Notify Owners and Implement
Send notices within the required timeframe, update payment systems, and brief vendors on approved scopes and timelines.
Step 12: Monitor Monthly and Adjust Early
Review financials monthly, track reserve transfers, and schedule a mid-year check-in to ensure the budget is still on track.
A Note on Investing Association Funds
Some boards ask about investing association funds beyond a standard checking account. AMG is not an investment advisor, nor do we give investment guidance. It is always the association’s responsibility to instruct AMG on whether and how funds should be invested, but we are certainly here to help administratively and act on your decisions.
Most governing documents and best practices do not allow for aggressive investments. However, there are federally insured options boards may consider, such as money market accounts and certificates of deposit (CDs) with varying terms. AMG does not require you to use any particular bank, other than to receive your monthly assessments.
Final Takeaway
A well-planned budget protects the community today and prepares it for tomorrow. Homeowners want stability, boards want predictability, and everyone wants to avoid unpleasant surprises. With a step-by-step process, transparent communication, and proper reserve funding, annual budgeting becomes less about crunching numbers and more about building trust.
For over 40 years, AMG has supported Carolina communities with transparent financial reporting, board training, proactive maintenance planning, and proven results. Your board leads the way—we provide the tools, expertise, and support to make the process smoother.
For a printable version that includes a checklist visit our Board Member Resources Page or Click Here.
