Committees are essential to the success of a homeowners’ association (HOA). Well-established committees support the efforts of the board of directors, reducing individual workloads and helping the association stay on top of its goals.
HOA committees are made up of volunteer homeowners who focus on specific community aspects, like budgeting. For many communities, the budget committee oversees the planning of yearly budgets and balances the annual income and spending. Here’s everything you need to know about the budget committee and its role within the association.
What’s a budget committee?
The HOA budget committee is a group of homeowners who help the board of directors assess and record the community's financial needs for the year. Usually chaired by the HOA treasurer, committee members collaborate to draft a budget based on estimated revenue, previous years’ budgets, and anticipated expenses for daily operations, community improvements, and reserve contributions.
The committee’s planned annual budget helps the association stay on track with finances and properly use funds to enhance the community. The volunteer members of the budget committee generally have experience or skills related to finance, accounting, and budgeting, which help them draft the most accurate and effective annual budget for the association.
What’s an HOA budget?
An HOA’s annual budget is the overall financial plan that estimates an association’s expenses and revenue for the year. It’s a record used to maintain financial stability by balancing the funds the HOA brings in and how much it spends to cover necessary expenses. The annual budget is drafted prior to the fiscal year to help the board better monitor its capital.
While there are several financial aspects to consider when planning an annual budget, some of the main factors to analyze include:
- HOA fees or assessments
- Reserve fund contributions
- Administrative costs
What does a budget committee do?
Budget committee members specifically focus on setting the association up for financial success in the upcoming year. A lot goes into creating, approving, and adhering to an HOA’s annual budget, and every community’s budget committee operates differently. Budget committee responsibilities often include:
- Reviewing budgets and financial documents from previous years
- Evaluating upcoming maintenance expenses
- Gathering estimates from vendors
- Estimating costs of special projects or services for the upcoming year
- Calculating HOA annual fees
- Assessing reserve fund levels and determining how much needs to be set aside
- Finding ways to cut costs and source funds
- Creating a budget that effectively balances income and spending
- Monitoring the HOA’s adherence to the annual budget
The budget committee also sets deadlines, presents the budget for board and/or membership approval, and makes adjustments when necessary. This team is crucial to an association’s operations and maintaining the community's financial health.
Who are the budget committee members?
The budget committee typically consists of three to five volunteer homeowners and HOA board members with financial or accounting backgrounds. The HOA treasurer is either the chair of the budget committee or heavily involved in the group's decision-making. And while a certified public accountant (CPA) may participate in an advisory role, they are not typically involved in creating the budget.
When putting together the committee, it's helpful to work with homeowners who have skills that can be useful when creating the budget. Some members may have professional accounting expertise, while others are excellent planners with a natural knack for budgeting. In any case, experienced homeowners and members of the board are a good combination for the budget committee.
What’s the purpose of a budget committee?
For an HOA board to make the best financial decisions for the community, it’s important to have a budget committee to create a balanced funding and spending plan. Like any HOA committee, the purpose of the budget committee is to support the board of directors. With the budget committee focusing on the details of the annual budget, the board has more time to oversee other projects and proactively manage the association.
What are the benefits of a budget committee?
Starting a budget committee can positively impact HOA operations and the overall community in many ways. Some benefits include:
- More freedom for the board. A budget committee frees up the board of directors to concentrate on their leadership roles and other vital aspects of the community.
- Responsible spending. Having a dedicated group of individuals tasked with budget planning means your HOA’s funds are spent more responsibly.
- Homeowner involvement. Every strong HOA has committed volunteers who foster a sense of community, engagement, and ownership that boosts resident satisfaction.
- Better preparation. With a planned budget, your association is less likely to run into financial trouble, including insufficient reserve funds or the inability to fund essential projects.
What are the most common HOA committees?
Besides a budget committee, there are many other committees that can help improve the functionality of the board. Board members must constantly juggle several community items at once—and it can quickly become an all-consuming job. Committees help share and divide the workload. Some of the most valuable committees include:
- Architectural review committee
- Welcome committee
- Social committee
- Landscape committee
- Homeowner education committee
- Neighborhood watch
- Contract review committee
With support from various committees, board members can focus on fulfilling their duties more efficiently and effectively.
Budgeting Best Practices for Your HOA
All businesses and professional organizations can benefit from responsible budgeting, and an HOA is no different. To help your HOA make the best financial decisions and create a balanced annual budget, check out our ebook, “The 3 Budgeting Best Practices Your Community Needs Most For Financial Stability,” for insightful budgeting tips.