Budget planning can pose major challenges for condo board members. Not only must the board adequately allocate funds for short- and long-term expenses, but they must also plan for emergencies. There is real pressure to get things right.
Whether you’re a sitting board member, plan to become one, or are simply looking to be more informed about the budgeting process in your Chicago condo association, read on for some things to know when preparing the annual budget for your HOA.
Financial Planning for Your Condo Association
Board members must maintain a fiduciary responsibility to the association and make financial decisions based on the best interests of the community. As you approach your budget planning process, here are some things to keep in mind to help you adequately fund ongoing operational expenses as well as long-term projects.
- Review your associations governing documents and bylaws – Know what your association’s rules and regulations say in terms of preparing your budget and what to do if there are any surplus funds or shortages from the previous year.
- Separate your operating fund from your reserve fund – Planning for the long-term financial needs of your association should be separate from your ongoing operating expenses. If you have any planned expenses that might tap into your reserve fund, start soliciting bids for those services now so you can adequately budget for them. As a reminder, the ICPA requires Illinois condo associations to maintain “reasonable reserves.”
- Account for taxes – The party responsible for paying property taxes is the condo owners themselves. Real estate taxes are to be paid directly to the government and do not get paid by your HOA. One caveat is in instances where shared amenities or common areas within the condo community require additional taxation. When the HOA as a whole must pay property taxes for its common amenities, then this taxation amount may be included in your condo fees and should be included as an itemized expense in your budget. The same is true for any income tax payment your association may be responsible for.
To ask questions about HOA budget planning, get in touch with our team at First Community Management. We partner with more than 115 HOAs in the greater Chicago area and are here to help you and your association.