You’ve done all the homework. Crunched the numbers. Your reserve study is complete, your vendor agreements have been checked and your budget is done!
Now what?
There’s an entire process to creating the budget, followed by implementing it. Joe Martinelli, executive director at FirstService Residential, emphasized the importance of clear communication to homeowners, throughout the entire budgeting process.
“Homeowners often feel that they aren’t part of the budgeting process, that it takes place behind closed doors and that they don’t have any input on it or even knowledge of it until it’s final,” Martinelli said. “To avoid this, more frequent communication that lets homeowners know where the association stands financially. If you’re over budget, let homeowners know that, and why, so that any increase for the following year is less of a shock to them.”
Experts recommended frequent, shorter communications than an annual dissertation that homeowners won’t want to read or possibly won’t understand. Consider more frequent meetings, in addition to the annual meeting, so that homeowners have the opportunity to ask questions and review budget information.
Tracie Blankenship, vice president of community management for FirstService Residential, agreed. “You, as the board, need to be transparent and communicate the ‘state of the union’ to association members. Homeowners shouldn’t get a budget package that includes a lot of surprises. The boards should send communication about any issues that affect that budget throughout the year.”
Blankenship also emphasized the need for regular communication. “Keep homeowners informed through multiple channels: quarterly updates in the newsletter, printed copy of the quarterly mini-financial statement, a treasurer’s report at each board meeting,” she said. “Connect the dots for homeowners. Explain what happened and its potential impact on the upcoming budget and assessment fees. There is no such thing as over-communicating when it comes to this type of information. In fact, communicating constantly is the only way to keep homeowners from feeling blindsided, and as a result getting upset,” Blankenship said.
Once the budget has been drafted, reviewed, marked up, drafted and reviewed again and approved by the board, it is presented to the homeowners. Let’s say that the budget includes a two percent increase in homeowner fees for the coming year.
How do you communicate that increase to the homeowners? Start by writing a notice to the homeowners. The level of involvement from each team -- the board and the management – depends on a lot of things. Sometimes the letter comes from the board, but the message is composed by the management team; sometimes it’s more of a joint effort. But the notice of any increase must always be put in writing, and it’s best to put that notice in writing as early as possible, but at least 30 days before the increase goes into effect.
The level of effort to which associations go to communicate an increase to their homeowners will vary. Some associations also have an open meeting with all residents to explain budget changes and the rationale for them. Some communities even do a proof of mailing, so they know everyone gets it, independent of electronic notices. Blankenship recommended using an SMS (text messaging) system, such as that provided by FirstService Residential Connect™, to encourage attendance at the budget meeting.
And when homeowners have questions or disagree with a line item in the budget or a fee increase? “When we are given feedback, it is usually in response to the letters announcing the increase,” Martinelli said. “Letters are signed by the boards, but the concerns come to management. We should be well-versed and able to answer those questions easily.”
If there’s a specific line item that homeowners don’t agree with, make sure that both board members and management staff are able to clearly explain the rationale for it. A one-on-one conversation can make a lot of inroads. If the homeowner isn’t satisfied, ask them to put their concerns into writing, if possible.
Budgeting is the time for making tough decisions for how your association spends its money, and sometimes those decisions can, unfortunately, lead to contention. Clear communication between the board and homeowners throughout the budgeting process can help solve problems before they begin and help to smoothly pave the way for needed changes.
To learn more about how partnering with a professional management company can help your association with budgeting and communication to your homeowners, contact FirstService Residential, New Jersey’s leading community association management company.
Monday January 23, 2017