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Subject: HOA budget too much? Who can review it?
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CarlH6
(California)

Posts:1


01/23/2019 1:23 PM  
My gut feeling is that our HOA fee is way too much, the budget just doesn't seem right. Where can I go to get it reviewed? Anyone has any recommendation? This is California
BillH10
(Texas)

Posts:361


01/23/2019 2:04 PM  
Buy the Treasurer of the Association a cup of coffee and ask him/her to explain it to you--including how the expense projections for the budget year were made. In my experience budgets are a compilation of historical data, known changes for the year for which the budget has been prepared (rate hikes, etc.), and a factor for inflation. Contributions to Reserves should be based on a Reserve Study.

The bottom line will be the amount the Association will need in assessment income for the budget year. That figure is then allocated to each home or unit based on formulae described in the Bylaws or CC&Rs of the Association--often everyone pays the same amount or it is allocated on the basis of a percentage. The latter is often the number of square feet in a unit relative to the total square footage in a building. There can also be many variables.

So, tell us what's up--what makes you think the budget, an hence your assessment, is too high?
JohnC46
(South Carolina)

Posts:8273


01/23/2019 2:50 PM  
Are you under developer or owner control? Not sure in CA what a developer has to show. That said:

Do not be intimidated by a budget. A budget is a best guess but simply put, it shows anticipated Income (how much money should come in from dues primarily) and anticipated Expenses (how much money should go out and to where). The ideal situation is the association pays all its bills and sets some aside in Reserves (for future things needing repair/replacement) and breaks even at the end of the year.

As said earlier a budget is a guess and should be backed up by Financial Statements that show the Actuals.

Budgets and Financial Statements must be produced and presented at the Annual Owners Meeting. They are generally also available at anytime during the year, but must legally be done and given out once a year.

Our Budget (one page) shows 3 sources of Income. 98% from dues. A few dollars of interest from our Reserves. Some back collected dues typically from our Attorney. We have 27 line items listed for outgoing money. Our complete Financial Statement is over 40 pages long.

The one page Budget and Actual comparison might show we Budgeted $250.00 for Office Expenses and Actually spent $250.00 on Office Expenses. All well and good you might think but the Financial Statements will show where each dollar of that $250.00 was spent down to the penny. The Financial Statement will show if there was any funny business. If we see a check written to Al's Liquors, we would question it.......LOL

Look to compare Yearly Budgeted (the guess) with Yearly Actual to see if someone is playing games.

Again:

Budget is an educated guess of how we will financially run the association for the year.
Actual is the hard numbers of how we financially ran the association for the year.

It takes some work to understand this stuff and you would be surprised how many BOD Members do not know the difference between Budgeted and Actual.


KerryL1
(California)

Posts:6350


01/23/2019 3:19 PM  
In CA, the annual budget for the subsequent year is not required to be presented to the owners at the annual meeting & section. But it must be sent once approved by the board 30 or more days before your fiscal year before begins. It must be quite detailed and also tell you how much will be contributed to reserves.

If you have a property manager, s/he will be able to explain it to you. Otherwise, CA is r required to have an open forum at every open board meeting, so you can ak at the open forum. Or as Bill suggests, see if you can meet with the board treasurer for an explanation .

There are many expenses that surprise new owners and, for example, increases in expenses as in the mandatory minimum wage increase in CA, which affect what we pay some of our custodians & security personnel. Our electric rates always seem to go up.

What size is your HOA? Do you have many amenities, pools, clubhouse, etc.?
SheliaH
(Indiana)

Posts:2470


01/24/2019 5:27 AM  
All good advice. I was treasurer for five of the 10 years I served on the board and our newsletter always had quarterly reports summarizing our budget, with a reminder to homeowners that they could always contact the property manager for a detailed income/expense report. We would also note things like a tree fell and had to be removed, so that impacted our budget for landscaping.

It's always a good idea to look at income/expenses over a 3-5 year period and note what line items have gone up faster than others and find out why. You can also help keep the budget in line by looking out for good contractors the association might consider hiring. And don't forget inflation - 2016 dollars may not buy as much as what's needed for 2019 (it was always interesting to me how people forget about that tidbit).

One more thing - DO NOT assume that there's a problem because another community is paying a lot less in assessments than yours. You don't live in those other communities, so the budget needs to be based on YOUR community's needs, not community B or C. Some communities are newer or older than yours, may have more amenities (or fewer), their accounts receivable may be a lot higher than yours, etc.

BarbaraT1
(Texas)

Posts:159


01/24/2019 7:13 AM  
It sounds like the OP is asking if there is some third party entity that can review an HOA budget and render a decision as to whether its right nor not.

OP - no such entity exists.

As a member of the Association, you are entitled to know how funds are spent. Contact your property manager and/or Board of Directors with any budget questions you have. No one can tell you whether the budget is "right" or not, because each HOA is unique and budgets are subjective, based on what each individual Board prioritizes. Just bear in mind - the goal should not be to spend no money, or to spend the least amount of money, but to spend it wisely.
JohnC46
(South Carolina)

Posts:8273


01/24/2019 2:19 PM  
Posted By KerryL1 on 01/23/2019 3:19 PM
In CA, the annual budget for the subsequent year is not required to be presented to the owners at the annual meeting & section. But it must be sent once approved by the board 30 or more days before your fiscal year before begins. It must be quite detailed and also tell you how much will be contributed to reserves.

If you have a property manager, s/he will be able to explain it to you. Otherwise, CA is r required to have an open forum at every open board meeting, so you can ak at the open forum. Or as Bill suggests, see if you can meet with the board treasurer for an explanation .

There are many expenses that surprise new owners and, for example, increases in expenses as in the mandatory minimum wage increase in CA, which affect what we pay some of our custodians & security personnel. Our electric rates always seem to go up.

What size is your HOA? Do you have many amenities, pools, clubhouse, etc.?




We only have to do, and must do the above if we are raising dues for the upcoming year. Otherwise (no dues increase) we present the Budget at our Annual Meeting in April.

Our 40 page Financial Reports are available to any owner, at any time upon their request. We have only ever had 2 request such.
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