Beyond the numbers: How boards can build and communicate a stronger HOA budget

A community association budget is more than a financial document. It is a plan for maintaining the community, protecting its assets and delivering the experience residents expect.

That was the central message of Budget season bootcamp: From planning to presentation, a recent FirstService Residential board education webinar. Moderator Mathew Eberius, vice president at FirstService Residential, brought together three experienced leaders to discuss how boards can build needs-based budgets, plan for rising costs and communicate difficult financial decisions with greater clarity.

The panel featured Carli Gilchrist, senior training and development manager; Holly McNulty, vice president of high-rise; and Alfonso Schessler, vice president of client financial services.

While each speaker approached budgeting from a different perspective, they agreed on one important point: A strong community association or HOA budget should reflect what the community needs, not simply what it spent last year.
 

HOA budget tips: Expert insights

Treat HOA budgeting as a year-round conversation

Boards often think of budgeting as an annual exercise with a defined beginning and end. Carli encouraged boards to reconsider that mindset.

"Budgets shouldn’t be thought of as a once-a-year thing. It should be a conversation that we’re having continually throughout the year and being more strategic about."

Carli Gilchrist, senior training and development manager

That means reviewing financial performance regularly, monitoring meaningful variances and documenting information that can support the next budget cycle. It also means connecting financial decisions to the board’s broader goals for the community.

Alfonso reinforced that a budget should help drive the community’s direction.

"Focus on the priorities of the community, not just getting the numbers to balance or getting numbers on a spreadsheet,” he said. “They should have a priority and focus behind them and mean something when it’s all said and done."

Alfonso Schessler, vice president of client financial services

For example, a board that wants to reduce water consumption can connect that goal to specific utility, landscaping and capital planning line items. Doing so turns the budget into a practical tool for measuring progress.
 

Let community needs determine the assessment

One of the most important mindset shifts discussed during the webinar was where boards should begin the budgeting process.

"The assessment should be the result of your budgeting process, not the starting point."

Holly McNulty, vice president of high-rise

Beginning with the maximum assessment increase a board believes residents will accept can create long-term financial risk. Instead, Holly recommended examining the community’s actual operating performance, contractual increases, insurance costs, reserve requirements and upcoming projects.

She explains,

"Looking at last year’s budget really just tells part of the story. Budgeting should be based on what we know today and then reasonably anticipating what to expect in the next year."

Alfonso described this as a bottom-up, needs-based approach. Boards begin with recurring necessities such as water, electricity, staffing and contracted services. They then account for known repairs, planned projects and other needs expected within the next eight to 12 months.

Only after those costs are understood can the board determine how much revenue the association needs.
 

Build the HOA budget with facts, not assumptions

A responsible budget begins with a clear picture of the community’s current financial and operational position.

Holly recommended gathering:

• Current budget and year-to-date actuals
   
• Historical expenses and seasonal trends
   
• Contract renewal dates and expected increases
   
• Insurance and utility projections
   
• Staffing and maintenance costs
   
• Reserve study recommendations
   
• Planned projects and committee priorities
   
• Comparable information from similar communities

Holly adds,

"A good budget starts with the facts. The goal is to walk away from your first budget session focused on information gathering rather than making assumptions."

Boards should also look carefully for unusual expenses that could distort future projections. Alfonso offered the example of a water main break that caused one month’s utility expense to spike. Because that event may not represent an ongoing trend, boards should identify it as an outlier rather than automatically building it into the next budget.

Contract timing matters, too. Reviewing agreements 30 to 60 days before renewal can give the board time to evaluate performance, negotiate pricing or request competitive bids.
 

Recognize the warning signs of underfunding

Underfunding rarely begins with one dramatic event. More often, it appears through several smaller warning signs.

Holly encouraged boards to watch for recurring operating deficits, declining cash balances, reduced reserve contributions, growing delinquencies, deferred maintenance and repeated emergency repairs.

She says,

"Underfunding isn’t going to scream at you. It’s going to whisper and come along slowly."

Repeated emergency repairs to an aging system may indicate that the community needs a broader asset strategy, not another short-term fix. Similarly, using contingency funds for predictable expenses can signal that the operating budget no longer reflects actual needs.

Delaying necessary assessment adjustments can also reduce the board’s options later.

Holly explains,

"The longer you wait, the fewer options you have. A board that makes small adjustments consistently often has more flexibility."

Without those adjustments, future boards may face significant assessment increases, special assessments, financing needs or service reductions.
 

Connect operations, reserves and capital planning

The operating budget, reserve funding and capital plan should not be treated as separate conversations.

Holly says,

"They should really be viewed as one financial strategy. The operating budget funds the community today, reserves prepare for future replacements, and capital planning connects the two."

Reserve contributions should reflect the community’s current reserve study, planned project timing and actual asset conditions. If a major component is deteriorating sooner than anticipated, waiting for the date listed in an older study could leave the association without sufficient funding.

Borrowing from reserves or reducing contributions may provide temporary relief, but it does not eliminate the underlying expense.

Holly adds,

"You’re not solving the problem. You’re just transferring the problem to future homeowners."

Explain the why behind an assessment increase

Even a carefully developed budget can create concern if residents do not understand it. The panel emphasized early, clear and ongoing communication.

Alfonso recommended showing residents where the community has been financially, what has changed and where expenses are expected to go. Boards should rely on verifiable information, not guesses, and summarize the major assumptions behind the budget.

Carli suggested connecting association expenses to costs residents already understand.

She explains,

"You know how your power bill or water bill went up? Ours did too in the community."

Visuals can also make complex information easier to digest. Year-over-year comparisons, simple charts and a breakdown of where each assessment dollar goes can be more useful than presenting residents with pages of detailed line items.

As Alfonso noted,

"You’re not just announcing an assessment increase. You’re explaining the cost of operating the community, protecting its assets and moving it in the direction residents want it to go."

Keep the budget visible after approval

The budget process does not end when the board votes.

Boards should continue reviewing financial performance, discussing variances and communicating progress throughout the year. Project updates, newsletters, town halls and financial summaries can help residents see how assessment dollars are being used.

Holly advises,

"Don’t put that budget away."

That ongoing visibility builds trust, prepares residents for future decisions and gives the board better information for the next budget cycle.
 

Continue building your board’s financial knowledge

A thoughtful budget process can help your board protect community assets, plan more confidently and explain financial decisions with greater clarity.

If you were unable to attend the live webinar, you can watch it here.

You can also check out our webinar calendar for future events and links to past recordings.

This information is provided for general informational purposes only and is not intended to constitute, and should not be relied upon as, legal, regulatory, financial, or operational advice, or as a representation or guarantee of any specific services, capabilities, or outcomes. Property management needs, regulatory requirements, market conditions, and available services vary by jurisdiction, property type, and community. FirstService Residential provides services through locally based affiliates and associates, and services and results may vary by community, region, contractual terms, and applicable law.