A Sensible Budget Process

A Tucson HOA uses a budget process that makes a lot of sense.  In their newsletter it was stated:

            “The 2012 financial plan that will soon be approved by your Board of Directors will set the course for the upcoming calendar year.  Staff started developing early numbers for this budget during the summer.  A complete draft budget was submitted to the Budget Team, a sub-committee  of the Fianacial Affairs Committee.  This resident committee composed of seven homeowners diligently went about the task of delving into departmental detail of staff’s line item budget.  Once their input and adjustments were made, the budget next went to the entire Financial Affairs Committee for review before submission to the Board of Directors.  This brings more than twenty individuals contributing to development and review of the 2012 budget.

            November 3 will be your time as a homeowner to attend the community presentation of the 2012 budget.  Please come to hear the Association’s financial plan for next year and share your feeling as to the direction this budget will take our Association.  The Board will likely be voting on the 2012 budget and setting homeowner dues at their November 16 meeting.”

The advantages of this process are:

• The Budget Team, a resident committee, has a chance to dissect the budget early in the process.  This step is important because the initial budget is prepared by the Managers who have no fiduciary responsibility to the Association and little or no cost containment or reduction incentive in their reporting relationship.
• The resident community has a chance to voice their opinions twice before the budget is voted on by the Board.
• The Board does not vote on the budget at the same meeting when it is presented to the residents.

The HOA model timeline provides adequate time between the budget process dates for the community to study the proposed budget and make comments, i.e.

Step 1 – Proposed budget to the Resident Committee and the Financial Affairs Committee for review.   This step provides an opportunity for resident input.

Step 2 – proposed budget to the Board for review.

Step 3 – community wide meetingto present proposed budget.  Another opportunity for resident input.

Step 4 – budget voted on by Board.