How to Execute Your New Association Budget
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!
There’s an entire process to creating the budget, followed by implementing it, and Donald Hucks, executive director at FirstService Residential, said that clear communication from the board to homeowners, at every step of the process, is the best way to avoid problems.
“Sometimes, homeowners think that budgeting is a hidden process; that it happens behind closed doors. They have little knowledge of the process and don’t think they have any influence on it either,” Hucks said. “To combat this, consider implementing a quarterly or bi-annual communication to let association members know about the association’s financial standing. If you’re not on budget, make sure that homeowners understand why, so that any future increases won’t be such a surprise.”
Rather than an annual budget dissertation that homeowners won’t want to read or possibly won’t understand, Hucks recommended shorter, more frequent communications. “Also consider more frequent meetings in addition to the annual meeting so that homeowners have the opportunity to ask questions,” he said.
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. 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 it comes to feedback, it usually comes in response to the letters announcing the increase,” Hucks said. “Letters are signed by the boards, but the questions come to management. Typically, if there’s a specific item that the homeowner doesn’t agree with, we, as the agents, try to clearly explain the rationale. A one-on-one conversation can make a lot of inroads. If they still have questions, we ask them to communicate in writing with the board 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 community association management company can help your association with budgeting and communication to your homeowners, contact FirstService Residential, South Carolina’s leading community association management company.