Condo associations of all sizes are tasked with managing and prioritizing spending for the HOA. When budgets are smaller, as is often the case for associations with fewer than 20 units, making prudent decisions that are in the best interests of the entire community can feel especially challenging.
Whether you sit on your HOA’s board of directors or are simply a unit owner in a Chicago condo association, it’s essential to be tuned in to the current and future financial needs of your community. Here are some budget-planning tips to help maximize your resources.
Key Considerations When Building Your HOA Budget
The budget planning process for each HOA is outlined with the association’s governing documents and bylaws. Before preparing the annual budget, be sure to review what your rules and regulations say in terms of budget responsibilities.
When planning for the upcoming fiscal year, here are some things to keep in mind:
- Identify your income and expenses: For most HOAs, income is generated via assessments and not much else. Expenses, on the other hand, consume numerous line items. Review the previous year’s budget to understand your baseline commitments (and expect those expenses to increase year-over-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.”
- Prioritize your spending: The board of directors will need to make a strong case for how they intend to allocate financial resources, and they will need to present their final budget to their members. In your planning, allocate resources to critical areas such as maintenance, security, and insurance and assess where there are any opportunities for savings.
In order for the condo association board to adopt the budget, all unit owners must receive a copy of the proposed annual budget at least 25 days prior to the board meeting. Per the Illinois Department of Financial and Professional Regulation, the budget must be approved by at least a majority of the board members present at a properly noticed open board meeting, at which a quorum of the board is present during the entire meeting.
If you have questions about preparing your association’s annual budget or need help with any of your association management needs in Chicago, contact us at First Community Management.