Wednesday, February 24, 2016

How the Budget Committee Works

The budget committee comprises members of our community association, which enables residents to have a say in how their money is spent. How does the budget committee work and who serves on it? 

The Treasurer’s and Accountant’s Roles

It makes sense for the board treasurer to chair the budget committee. As chair, it’s the treasurer’s job to keep everyone on track as the budget is prepared. The treasurer also presents the budget for approval to the board and members. If the association works with an accountant, he or she may offer consulting, but the accountant really has no significant role in the process of devising the budget.

Who Should Be on the Committee?

The owners who serve on the budget committee should represent a cross-section of the community. Of course, if there are members willing to serve who have expertise in areas such as insurance, that’s even better. When it comes to size, a good general guideline is that the committee shouldn’t be so large that it becomes unwieldy.

What the Committee Does

The treasurer will make sure that all committee members understand the three basic components of the budget:

1. Funds needed for daily operation of the community, such as common electricity and water, grounds maintenance, management, insurance, and general maintenance. These expenses are either contractual or can be reasonably estimated based on experience. An important consideration when looking at items in the operating budget is the expectations of the community—for example, do members want a landscaper who is a “blow, mow, and go” type, or do they want a landscaper who provides a higher level of service? Obviously, the latter requires more of an investment.

2. Funds needed to maintain our reserves at sufficient levels. Reserve funds provide money for the repair and replacement of the community’s assets—such as the pool, roofs, pavement, etc.

3. Funds for additions or enhancements to the existing property. This is a function of what members of the community want and are willing to pay for. The community should provide input and approval for this component.

Armed with this knowledge, the committee will estimate total expenses for the coming year and compare that sum to the association’s potential revenue (assessments, interest on investments, concession income, and so on). If expenses are greater than revenue, the committee will look for ways to lower expenses without compromising service. If that doesn’t balance the budget, the committee may have to make a tough decision—whether to increase assessments or levy a one-time special assessment.

Its not always an easy job - but its absolutely essential to the health and longevity of your association. Homeowners always want to know where their money (or dues) are being spent. Serving on the budget committee can be a very eye opening experience!


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