Chicago-area condo associations rely on regular assessments from residents to maintain the community, fund essential services and plan for future projects. Calculating these assessments fairly and transparently is essential to ensure both the financial stability of the association and the satisfaction of its members.
In this post, we’ll break down the process of calculating HOA assessment amounts and what board members must consider when making financial decisions for the association.
How Assessments are Calculated
The math for calculating individual assessment contributions is not hard, but what can be challenging is evaluating and determining overall budget needs as a whole.
The annual budget outlines all planned expenses for the upcoming year, including maintenance, utilities, insurance, landscaping, and amenities as well as reserves for future repairs. Properly forecasting these expenses ensures that the assessments will cover all necessary costs in the upcoming year. But keep in mind that many expenses will increase year-over-year.
Once the board has determined the total expected expenses for the year, they take that total and divide it by the number of units in the HOA. This calculation provides the basic assessment amount per unit per year. It can then be further divided by 12 months to offer the monthly assessment amount.
Maintaining Budget Transparency
HOA board members have a fiduciary responsibility to make financial decisions that are in the best interest of the association. When determining annual assessment amounts or levying a special assessment, they must remain transparent with how the assessments will be used.
If you have questions about serving on your condo association’s board or need help with any of your association management needs in Chicago, including financial management, contact us at First Community Management.