How to Implement Your Budget

Posted on Monday January 23, 2017 |


 
The homework is done. The numbers have been crunched. The reserve study is complete, vendor agreements have been double-checked and, finally, the budget is done!
 
Now what?
 
There’s an entire process to creating the budget, followed by implementing it, and Rebecca Sarnese, executive director at FirstService Residential, recommends clear communication from the board to the association membership, at every step of the budgeting process, as the best way to avoid problems.
 
“Homeowners sometimes feel that they aren’t part of budgeting, that they don’t know what goes into it and that they have no say in it,” Sarnese said. “To avoid this, consider creating a quarterly or semi-annual communication to update homeowners on the financial state of the association. If you’re over budget, make sure that homeowners understand that, and why, so that any increase isn’t a surprise.”
 
Experts suggest frequent, shorter communication, rather 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.
 
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 FSRConnect™, 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 get feedback about the budget, it usually comes in response to the letters announcing an annual fee increase,” Sarnese said. “Those letters are signed by the boards, but the questions come to management staff. We should be well-versed and able to answer those questions without issue.”
 
If there is a specific line item that homeowners don’t agree with, make sure that both staff and board members are able to clearly explain the reasoning behind it. A one-on-one conversation can make a lot of inroads. If the homeowner still has concerns or questions, ask them to communicate those to the board directly in writing for larger discussion, if appropriate.
 
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, Pennsylvania’s leading community association management company.

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