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​The HOA Budgeting Process

7/5/2022

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One of the most integral parts of managing a Community Association is creating a budget to help guide the year. Next to the governing documents, the budget is the most important management tool and here’s why:

- The Association budget outlines expected expenses which will be paid for through collected assessments. The budget allows an association to provide the most “real” assessment number to assign each unit.

- The Association budget shows potential buyers into the Community what their assessments go towards, and that their Association does their due diligence with finances. How does an Association budget get made?
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The Board, along with the guidance of the Community Manager, will utilize the prior years’ budget as a baseline for creating the current/future budget. Several line items are consistent year to year, while others will come and go based on a reserve study, past projects, upcoming projects and identified future expenditures by the Board. A reserve study is critical to creating an accurate budget to accommodate for expected replacements and properly fund the reserve account. A reserve study also helps the Association accurately budget for Assessments to avoid a Special Assessment down the line.

Community Managers keep a pulse on the consumer price index to adjust annual increases in Community trash, Association insurance, Community snow removal, Landscaping Maintenance and other Community line items that are affected by inflation and inform the Board so they can properly adjust those line items accordingly.
Association Budgets are a complex process with lots of moving parts and are the piece that drive Assessments and functionality of the future of the Community. When they are done correctly, an Association should not see a Special Assessment or giant increase in overall monthly Assessments. 

Bree O'Neil - Community Manager 

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Diversified Association Management, LLC
4325 N Nevada Ave #100
Colorado Springs, Colorado 80907
Phone: 719-578-9111 (office)
Diversified Association Management, LLC
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Denver, Colorado 80111
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