Why Transparent Communication Matters in Your HOA Budget Committee
Before you plan and deploy next year's budget, it's essential to carefully examine how HOA budget transparency adequately prepares residents for what's to come and how their money will make the difference.
It goes without saying that preparing an HOA or COA budget and tough decisions about handling funds go hand in hand, and sometimes those decisions can, unfortunately, lead to contention. Having clear resident communication about your association's budget should be provided to all homeowners throughout the year to address problems before they begin and smoothly pave the way for needed changes.
By consistently keeping residents in the know, they'll feel connected to the budgeting process, be less likely to object to final decisions and have a better understanding of the proposed updates. Not to mention, it makes residents feel happier and a more satisfied members of the community.
What budgetary requirements does Texas law place on associations?
Texas law empowers associations to adopt and amend budgets for common expenses to be funded through assessments paid by members. Tex. Prop. Code §§ 204.010(2), 82.102 (2). (Code 204 refers to HOAs; code 82 refers to COA).
Annual budgets and budget amendments increasing a budget by more than ten percent may only be considered and voted upon by a board at an open meeting for which notice has been provided to members. Tex. Prop. Code § 209.0051(h)(12).
Specific standards and methods for adopting budgets and calculating assessments are normally set forth in an association’s declaration, bylaws, and/or articles of incorporation, and the board has a duty to comply with those requirements. In the event your board’s proposed budget is finalized, it could also face ratification.
Keep in mind that even with these laws in place, some HOA or COA governing documents may place extra stipulations on certain budget line items.
How to communicate during the budgeting process.
There are ways to help maintain harmony within your association during budget season, before and after the new fiscal year begins. Learn more about how you can craft an effective, inclusive HOA budget while also keeping resident communication a priority.
"Some homeowners think that a veil exists over the budget process, that the board doesn't share the budget until it's final and they have no knowledge of, or influence on, the process," said Mary Signorella, general manager for FirstService Residential.
To avoid this, consider a quarterly or semi-annual communication that lets homeowners know how the association is doing on budget compared to actuals – if you're over budget, let homeowners know what's going on so that it's not so much of a shock that there's an increase for the following year.
Signorella recommends frequent, shorter communications rather than an annual dissertation that homeowners won't want to read or possibly won't understand.
If your association communicates the budget without open transparency, it could create turmoil and mistrust among residents. It's best to clearly lay out the budget for residents, especially if your association has had to implement a significant assessment increase. Remember, while being a board member comes with increased responsibility, it shouldn't be viewed as a secret society.
In other instances, it's better (and safer) to overcommunicate instead of leaving questions unanswered. Find the right channel to reach your community, whether it's through meeting announcements, email, letters or private social media groups. Whatever method your association chooses, it’s important to remember that some governing documents legally require communities to stick with the medium named in CC&Rs. On the other hand, if you want to choose another form of communication, be sure to amend those changes in the governing documents. Here’s how to get started.
Residents need to know that their involvement in the budgeting process goes far beyond attending the annual meeting. Your property management company should have similar resources to ensure residents stay informed, not just about the decisions, but by giving access to financial records. Once boards know these reports are available, it's best to notify homeowners of these online financials and encourage them to understand what will be affected.
It's equally important that homeowners get involved in finance and budget committees. Do you know of any residents who have a knack for numbers and want to play a part in further bridging the gap between homeowners and board members? Seek them out! The more residents are involved in the process, the less likely you’ll receive negative feedback from the community once the budget is finalized and approved.
How do you communicate an assessment increase to the shareholders?
Let's say your new budget includes a 2 percent increase in homeowner fees. Start your communication with a notice to the shareholders. Usually, this notice comes from the board, but the management team composes the overall message. Think of it as a joint effort. Bear in mind that notices of any increase must always be in writing as early as possible (at least 30 days before the increase goes into effect).
The amount of effort that board members put forth to communicate an increase to their homeowners may vary. For example, some associations also have open meetings with all residents to explain budget changes and their rationale behind their decision. If possible, consider using a text messaging system to encourage attendance at the budget meeting. For instance, some communities arrange a proof of address so they're confident every resident is aware of the budget updates.
Are these the only requirements for board members to ensure resident cooperation?
Not completely. Even if each of these measures are taken, you may still get various questions about the proposed changes. Additionally, while these notices are approved and signed by the board, all resident questions should be redirected to the management company. As a community, board members and homeowners can feel confident in their property management partner's ability to be well-versed about the issues and prepared to address any homeowner concerns.
For example, if there's a specific line item that residents don't see eye-to-eye on, we, as your management partners, will leverage our expertise to clearly explain the rationale. Keep in mind that even if your property management company steps in, it's still up to the board to ensure that any information related to the budget ultimately reflect the rules stated in the governing documents. To that end, any unresolved concerns should be shared with the community manager who will then pass it along to the board.
Need more examples? Read on about the common follow up questions related to association budgets.
There's no question that preparing a new budget for your community can be laborious and challenging. Knowing that your association's future depends on the decisions youmake can add even more pressure to the role of board members. So before you get started, think small. Think strategically. Carefully outline the basics of what your community needs, seek help from committee members and your property management company, and build a foolproof resident communication plan.
Oh, and one more thing! Don’t forget to include these line items in your budget.