When preparing for next year’s budget, homeowners association boards need to be diligent about covering all the bases for a successful and budget-friendly 2020. Fiduciary responsibility is something that HOA boards have always needed to take seriously, making budgeting and financial planning even more crucial.
An HOA should review every part of their operation to make sure they are not wasting resources while also looking for ways to maximize what they have currently. Homeowners association fees, HOA insurance, and assessments all depend on how well everything is budgeted.
Here are some things to consider when outlining a budgetary plan for 2020.
1. Review All Contracts
Reviewing all contracts with outside parties gives the board a chance to see if the HOA is in a good position with its resources. This process may need an early start if some contracts need to be out for bid. Even if present vendors are providing satisfactory services, it still helps to see if an HOA is getting the best value for their money.
2. Examine Previous Budgets
To move forward, sometimes it helps to look back. By going over previous years’ budgets, HOAs can see expenditures they have made, giving them an idea of where the funds are going. This will also help to see how any trends are occurring. If an HOA doesn’t know how they spend their money, they won’t really know how to budget it.
3. Update HOA Insurance
HOA insurance should be in place at the current time, but if it’s not, it should be budgeted for and purchased for 2020. This kind of protection, which can provide coverage for cyber liabilities, claims against directors and officers, and errors and omissions, is an important safety net for HOA’s amid any claims from residents or vendors.
4. New Year’s Homeowner Fees
Calculating new year’s homeowner fees is a simple task and can help look at operating expenses and annual reserve contributions. This total will be divided among homeowners in the community, with few exceptions where assessments vary within some HOAs. Budgets and assessments are expected to rise up within a certain percentage.
5. Financial Statements
HOAs should also review both the income and balance sheet to look at the condition of its finances. These numbers provide important insights into how a new budget should be shaped heading into a new year. If an HOA is spending more than it’s bringing in, the new budget should be sure to address this.
6. Budget Within Limits
Budgeting responsibly can help determine how well an HOA will operate in the new year, avoiding financial problems and setting itself up for success. By budgeting correctly, an HOA can see how much homeowners pay in fees and assessments while also helping the HOA itself see that it has the right funds to operate and meet its responsibilities.
About Kevin Davis Insurance Services
For over 35 years, Kevin Davis Insurance Services has built an impressive reputation as a strong wholesale broker offering insurance products for the community association industry. Our president Kevin Davis and his team take pride in offering committed services to the community association market and providing them with unparalleled access to high-quality coverage, competitive premiums, superior markets, and detailed customer service. To learn more about the coverage we offer, contact us toll-free at (877) 807-8708 to speak with one of our representatives.