Presenting the HOA or Condo Budget

It's finally done. You've spent numerous hours working on the budget and now it's time to present it to the residents of your community. What is the best manner in which to handle the presentation of this new budget that will prompt the greatest degree of acceptance? (Especially in view of that much-needed assessment increase?) This article will provide an answer to this quandary and will furnish tips that will not only make this job easier but will also foster trust and confidence in the Board of Directors.

There are two major keys to budget acceptance by the residents; involvement and communication.

Involvement

Involving the residents is important both from practical and psychological standpoints. Allowing input from residents during budget preparation can provide the Board with valuable insights into maintenance results, patterns, and needs. It can also put residents more at ease by virtue of the opportunity to be heard. This also has the advantage of raising the level of trust in the Board of Directors and creating a sense of community because residents feel their contributions matter. Involvement should start early in the budget preparation process. This can be accomplished in several ways but three of the most successful avenues are general meetings, committees, and surveys.

General Meetings. If the Association holds regular general meetings, residents can be invited to offer their input on budget items. Perhaps many residents feel the siding should be cleaned more often, or that the entrance to the community could be enhanced by flower plantings, etc. For communities that don't hold regular general meetings, one can be convened for the purpose of allowing pre-budget preparation input from residents. Either way, it is imperative that the announcement of the meeting state specifically that this topic will be on the meeting agenda, especially if more than one item is to be discussed.

A caution flag, however, needs to be raised at this point. Although input and suggestions from residents are important, the Board must carefully sift through these suggestions and implement only those that will be meaningful, and productive and prove beneficial to the community as a whole, not just to a small number of residents. Often, Boards of Directors will try to implement all suggestions in an attempt to please everyone. This can be difficult at best, as well as unproductive and wasteful. Remember that in a community with 100 condominium units, a suggestion from one person may not have the support of the other 99 residents.

Committees. Appointing interested residents to an Ad Hoc Committee that can provide the Board of Directors with valuable input in the budget preparation process is a good way to involve residents. The committee could even be asked to generate a complete proposed budget that the Board can then consider. This allows a busy Board to delegate much of the budget research and preparation. Committees also have the added benefit of providing a source for future Board members.

Surveys. One of the goals of involving residents is to attempt to reach all of them. Mailing residents specifically targeted surveys is a great way to gather opinions. Many busy residents prefer this method because it allows them to consider one topic at a time and to respond at their convenience. The thoughts of the residents are put forth in writing and can be reviewed by the Board of Directors or Budget Committee in a less formal setting or work session. Be sure to include a response deadline in any survey so residents are aware of when they are expected to reply.

Communication

Communication with the residents throughout the budget process is paramount. This provides important information to those residents who are too busy to be involved or those who simply choose not to be involved. Although these residents may not offer their input or comments, the Board can feel confident that they have presented the information for everyone's review and be assured that it is appreciated nonetheless.

The communication that provides the residents with the budget data should be as precise as possible. This package should include a cover letter, the budget, a budget analysis, an explanation of line items, and possibly charts and/or graphs. It is important to provide enough information to adequately explain the budget without overwhelming your residents. It is recommended that the total package be kept to six pages or less.

Cover Letter. The cover letter would typically contain an explanation of what is included in the package, a brief statement of the budget process, and the major line items the residents are likely to have the most interest in or that have had a profound effect on the budget. It should also state what the new fiscal year's proposed assessments will be. Other supporting statements, such as the number of years since the last assessment increase, could also be included.

Budget. This is the itemization of the proposed budget categories and amounts.

Budget Analysis. This analysis of the budget is the actual comparison of income versus expenses and can be limited to a few columns showing the previous year's budget, the estimated ending income and expenses for the current year, and the new budget amounts. Or it could be a detailed spreadsheet showing the line items and month-by-month anticipated expenditures. The Board should determine which information would best suit or be best received by its residents and tailor the documentation accordingly.

Explanation of Line Items. Explaining each line item can be critical to the success of the budget presentation. Each line item, including the new budget amount, should be listed with a brief explanation of what is included within that category. Supportive information could include details relative to special projects or newly adopted programs, actual bids that have been received, proposed utility rate increases, or historical trends, etc. This information is beneficial when explaining any considerable increase in a particular line item and assists in reducing resistance from residents who want to maintain their current assessment level because of their unhappiness with any one service category. This clearly demonstrates that there are many line item categories with fixed or varying expenses that affect a budgeted amount.

Graphs and Charts. Visual aids can assist in showing residents which categories are the greater or lesser part of the whole budget. Graphs showing the changes in certain line items over several years can also be quite effective. Again, the Board needs to consider and determine what is essential and will best present the information at hand.

The involvement of the residents and the communications aspect of presenting the budget are tied together to a general meeting at which the final budget is presented. Notice of the meeting is all important and should contain the budget communications mentioned above. In preparing for this meeting, the Board should try to anticipate the questions that will be posed and prepare answers for them. This will offer the residents the opportunity to air their concerns or comments. Last-minute changes to the budget might even be considered at this time if they appear appropriate and warranted. However, this will likely not be needed if adequate input from the residents was acquired prior to and throughout the budget preparation period.

After all the preparation, all the meetings, and all the number crunching, the last item on the Board of Directors' agenda is voting to adopt the new budget. Once adopted, a final notice should be sent to the residents announcing that the budget has been approved and outlining the new fiscal year's assessments. Out of courtesy to the residents, the notice should be mailed at least thirty days prior to the new fiscal year in order to allow residents time to prepare for any increased amounts. A reminder of the assessment due date, grace period, and a late fee is also a practical idea.

These are the keys to a successful budget presentation as well as the tips to accomplish this with the greatest degree of acceptance. Observing these methods will provide residents with a greater sense of community and will promote trust, confidence and respect for the Board of Directors - - - all of which will ultimately have a very positive effect in the operation of the Association over the years ahead.

Jeff Gourlie, AMS®, PCAM®, Association Times