Association Budgets: Mapping Out Your Strategic Plan
In the previous article (Things to Consider When Creating Your Budget) we introduced GERT, a high-level process which helps set the framework for HOA boards to create an annual budget. In this article we get into the details of creating a strategic plan for your homeowners association.
The purpose.
It is important that everyone has the same long-term vision for the community. A strategic plan pushes the board to establish a clear set of goals and objectives for the association and assists the board in determining how to spend their time and when and where to allocate money. But the benefits don’t stop there, strategic plans also:
2.) What are the association’s discretionary needs? Meaning, the items required to maintain the current lifestyle and level of service for the members. These needs don’t directly affect property values, but instead they are added benefits above and beyond the mandatory needs. An example would be replacing basic landscaping with a lavish assortment of lush flowers at the main entrance; it’s more of desire than a necessity.
Create a master projects list based on the above for a detailed discussion to estimate the financial impact of each item and determine the order of importance based on priority drivers and a point system as shown
After prioritizing the association’s projects, evaluate current services and define which are required vs. those that can be eliminated. Account for your available resources when defining services that must be outsourced vs. those that can be effectively absorbed by your management company, sited-staff (if available) or resident volunteers.
The final stage is implementation. Incorporate the plan into your reserve study and also into your operating budget for the next 1, 3 and 5 years.
Remember, a strategic plan will assist the board in fulfilling its fiduciary duties to the association members. By going through the strategic planning process you identify the association’s goals that can help keep the big picture in sight while examining the details. Failing to properly plan your budget could put you at risk for reduced services, decreased property values, special assessments and having an underfunded replacement reserve plan.
The purpose.
It is important that everyone has the same long-term vision for the community. A strategic plan pushes the board to establish a clear set of goals and objectives for the association and assists the board in determining how to spend their time and when and where to allocate money. But the benefits don’t stop there, strategic plans also:
- Force the board to look beyond the next 12 months
- Drive more consistent action from the board
- Allow for proactively scheduling projects to take advantage of pricing opportunities and optimal timing
- Identify ways to allocate resources – such as volunteers or committees
- Forge a strong partnership and understanding between the board and management team
In our experience, the single-most common goal is for an association is to maintain, or better yet, increase property values and enhance the quality of life in the community. Once the goals are established, the strategic plan becomes the platform for mapping out the next 1, 3 and 5 years. To begin, ask yourself the following two questions:
1.) What are the association’s mandatory needs? In other words, define the necessary maintenance requirements to maintain or enhance the value of the property. An example would be regular preventative maintenance on a major infrastructure element such as an HVAC system in a condominium building or a private road in a townhome community. Your repairs and maintenance budget should provide sufficient funds for routine and preventative maintenance to prevent deterioration and allow the infrastructure to meet or exceed the element’s expected lifespan and push out the need to dip into reserve funds.2.) What are the association’s discretionary needs? Meaning, the items required to maintain the current lifestyle and level of service for the members. These needs don’t directly affect property values, but instead they are added benefits above and beyond the mandatory needs. An example would be replacing basic landscaping with a lavish assortment of lush flowers at the main entrance; it’s more of desire than a necessity.
Create a master projects list based on the above for a detailed discussion to estimate the financial impact of each item and determine the order of importance based on priority drivers and a point system as shown
| Order of Importance | Priority Driver | Weighting |
| 1 | SAFETY | 20 |
| 2 | COST | 18 |
| 3 | CURB APPEAL (AGING LANDSCAPE OR DESIGN ELEMENTS) | 16 |
| 4 | REQUIRED ANNUAL MAINTENANCE | 14 |
| 5 | REQUIRED SCHEDULED PROJECT | 12 |
| 6 | REQUIRED UNSCHEDULED MAINTENANCE | 10 |
| 7 | REQUIRED UNSCHEDULED PROJECT | 8 |
| 8 | UNREQUIRED UNSCHEDULED MAINTENANCE | 6 |
| 9 | UNREQUIRED UNSCHEDULED PROJECT | 4 |
After prioritizing the association’s projects, evaluate current services and define which are required vs. those that can be eliminated. Account for your available resources when defining services that must be outsourced vs. those that can be effectively absorbed by your management company, sited-staff (if available) or resident volunteers.
The final stage is implementation. Incorporate the plan into your reserve study and also into your operating budget for the next 1, 3 and 5 years.
Remember, a strategic plan will assist the board in fulfilling its fiduciary duties to the association members. By going through the strategic planning process you identify the association’s goals that can help keep the big picture in sight while examining the details. Failing to properly plan your budget could put you at risk for reduced services, decreased property values, special assessments and having an underfunded replacement reserve plan.