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, and Mark Walker, executive director for lifestyle and large scale communities at FirstService Residential, said that clear communication between the board and homeowners is the best way to avoid problems.
“Homeowners sometimes think that a veil exists over the budget process, that the board doesn’t share the budget until it is final and that they have no knowledge of or influence on the process,” Walker said. “To avoid this, make sure that homeowners know how the association is doing on budget compared to actuals. If you’re over budget, let homeowners know that, and why, so that it’s not a surprise that there’s an increase for the following year.”
Walker recommended frequent, shorter communications about the association’s financial standing, rather than an annual dissertation that homeowners won’t want to read or possibly may not understand. “Also consider holding more frequent meetings so that homeowners have the opportunity to ask questions about the association’s finances,” 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 that 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 getting feedback, we usually get that after the letters announcing an increase are sent,” Walker said. “Those letters are signed by the boards, but we, as management, get the questions. We need to be well-versed and able to answer any questions easily. Typically, if there’s a specific line item that homeowners don’t agree with, we try to clearly explain the reasoning for it. A one-on-one conversation can make a big impact. If the homeowner isn’t satisfied, we ask them to put their concerns in 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, Virginia’s leading community association management company.
Monday January 23, 2017