Building Better Budgets Step by Step


When it’s time to create the annual budget, and there’s no management company to help, how can an association build the best budget possible? These five steps foster transparency and accuracy, and should be part of every board’s planning process.


  1. Read.  Read up on any new municipal, state, or federal statutes or changes that may affect the association’s income or expenses at any time during the upcoming budget year.  Review the community’s legal documents for procedures and timeframes to insure compliance with the community’s standards.

  2. Inform.  Make sure all titleholders know when the budgets are prepared from year to year.  Homeowners have different levels of interest in the process, but all should be made aware of it.  Transparency is key.  Although the actual preparation of budgets is a Board of Directors’ responsibility, individual homeowners often have great ideas worth implementing.  The more homeowners are part of the process, the fewer surprise objections there will be when the Board presents the final product in an open meeting with homeowners.

  3. Review reports.  Take a look at the most recent Reserve Study and review the funding levels.  Is there enough cash flow to pay for planned and unplanned expenses?  Have other reports completed throughout the previous year been analyzed? Be sure to incorporate any and all recommendations in the planning process. Compare the recommended funding level to the actual funding level to decide whether an assessment increase is necessary.

  4. Check and balance.  Go through each line item and affirm or decline the expenses one by one.  Make special note of common elements scheduled to replace or update, total the expenditures and divide that amount among homeowners.

  5. Prepare a presentation. Write out a script explaining how income and expenses are projected.  Be ready to explain in clear language both the operating budget figures and the reserve budget figures so that homeowners understand what the numbers represent.


These 5 steps will insure that an association’s budget makes legal sense, shows numbers that are checked and balanced, and can be explained in language that homeowners understand.  Build a better budget step by step so that the final product is the best that it can be.