There is no such thing as a one size fits all budgeting guideline for HOAs. As community size, features, type and complexity contribute to specific requirements, it’s impossible for the budget to be generalized. However, in this article, we will take a closer look at the types of budget required for operation and how to create them. Most importantly, protect your operation with a comprehensive LA HOA Insurance program.
The types of budgets.
The “operating budget” includes line items for annually recurring expenses such as landscaping, management, utilities, insurance and other services. The “reserve fund” is money collected as part of each lot owner’s assessment for the repair and replacement of major capital items. These include painting, renovations, signage, etc., says CAM.
Review governing documents and statutes for critical projects and the budget timeline associated with each. This is where a budget calendar comes in handy for your HOA. Depending on the documents, your HOA might require a specific quorum or a ratification process to make these budget decisions, so plan ahead. Ideally, the budget will be addressed in the beginning of the year, or at least annually, to review what needs to be prioritized.
Depending on the size of the association, your HOA might be held responsible for more than originally anticipated. Some states require that a reserve study be conducted to determine a specific percentage of your operating budget that must be stashed in reserve funds. Remember, the infrastructure of your HOA depends on the leadership and budgeting capabilities of your members, so this should be taken seriously. What’s more, when residents are faced with “special assessments” and must pay more for the failure of their HOA, it could lead to a negative reputation and even litigation. In turn, these legal fees will only fall back on the HOA and the homeowners themselves.
About Scott Litman Insurance Agency
At Scott Litman Insurance Agency, we are dedicated to protecting HOAs like yours. We have a unique understanding of the industry and the common risk exposures that you face in your daily operations. In fact, we find that 90% of the policies we review are missing coverages that violate the Covenants, Conditions, and Restrictions (CC&R), exposing the board, HOA and management to lawsuits – which is why our comprehensive policies are tailored to meet your specific needs at competitive prices. For more information about our products, contact our experts today at (818) 879-5980 ext. 201, or fill out our online form.