Annual Homeowner Association (HOA) Pro Forma Budget
Per Davis-Stirling Act: Civil Code §1365. Financial Records and Reporting
The association must prepare and distribute to all of its members, 30 days nor more than 90 days immediately preceding the beginning of the association's fiscal year a pro forma operating budget with estimated revenue and expenses on an accrual basis.
Fiduciary Responsibility
The board members and property managers have a fiduciary responsibility to perform due diligence in the budgeting process so that their associations properly maintains their property. A reserve study and its recommended funding plan provide are often indispensable in this process and show due diligence on the part of the board or management company.
Operating Budget Expenses
To budget for the upcoming fiscal year, GCG will examine the previous 1 to 2 years history of each budgeted line item and the actual disbursements, not the annual budgeted item. GCG will research line items for future changes that might affect the annual disbursement for the upcoming fiscal year.
Reserve Contributions
Reserves are the funds monies you put away to fund future repair and replacement of the common major components. For this purpose, an annual reserve study update or reserve study will be necessary. The reserve study identifies the common area components (like roofs, painting, siding, paving, etc.) for which the association may have maintenance responsibility for. This study will assign a useful life and replacement or repair cost to each component, and a 30 year funding plan so that future maintenance can happen without the need for special assessments.
Homeowners Assocition Monthly Dues/Fees
Total Operating Expenses + Annual Reserve Contribution = Homeowner Fees
This figure is then based upon the governing documents (CC&R's) and may be divided equally or by percentage of ownership to determine the annual maintenance fee for each owner.
