"Why Most HOA Budgets Are Useless"

One of the best HOA newsletters I receive is The Governance Ledger, from Common Interest Advisors, LLC. 

The latest edition leads off with,

It is supposed to be a financial plan.

Yet every year, thousands of condominium and homeowners associations approve budgets that bear little resemblance to what actually happens. Twelve months later, expenses exceed the budget, reserves are underfunded, assessments increase, and owners are told that nobody could have seen it coming.

In many cases, somebody should have.

The problem is not that boards fail to approve budgets. The problem is that many associations treat budgeting as a compliance exercise rather than a financial management tool.

A budget should help directors answer a simple question:

Where will we likely end the year, and what should we do about it today?

Doesn't this accurately describe how The Summit's HOA operates?

Every month the Board approves thousands of dollars in expenses, without informing Members whether those are previously-budgeted expenses or "new" expenses. I wasn't the only one wondering that.

Expenses exceeded budget categories. The monthly Results no long include a section called Variances (over-spending). Contributions to Reserves in 2021, 2022, 2023, 2024 were reduced, but the Annual Assessment remained unchanged. Dues were used to pay for increasing operating expenses without informing Members.

The Annual Assessment was finally increased by $50.00, which was far below the true amount needed for fiscal responsibility. However, it was the maximum allowable increase without approval by the Voting Members, of which there had been none except one.

Yet the Finance Committee, the Treasurers, the Presidents, and the managements companies never sounded the alarm. NOTE: the management company works for the HOA (the Members), not the Board of Directors.

The HOA kept on spending like there was no tomorrow. Tomorrow has arrived. It's today.

Why is the Board hiding behind unpublished monthly Financial Operating Results? None has been published online since August 2025!

An annual subscription to The Governance Ledger costs only $80.00. © 2026 Michael Novak
548 Market Street PMB 72296, San Francisco, CA 94104

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