Budgeting

Budgeting answers to five layers of authority, not one

A board building a budget is not making one decision, it is making decisions inside five nested layers of authority, and they do not carry equal weight. Federal and state statute sits on top. Where a state law sets a disclosure deadline, an assessment cap, or a reserve study cycle, the association's governing documents cannot authorize anything less protective of members, though they can be stricter; California's reserve study rule is one example of a statute that sets a floor this way.

The declaration, articles, and bylaws come next, setting the fiscal year, how the board is elected, and any requirements beyond the statutory floor. The parliamentary authority the bylaws designate, usually Robert's Rules of Order or a specific edition of it, check your bylaws, governs how the budget motion itself is made, debated, and voted on at a meeting. Board policy, such as a reserve funding goal or a contingency-line target, operates inside whatever the first three layers allow. Professional guidance, from reserve study standards to a CPA's tax advice, is not legally binding by itself, but a board that ignores it carries more risk when a decision is later questioned.

Who votes on the budget is not the same everywhere

In most jurisdictions and under most governing documents, the board adopts the operating budget on its own; members do not get a routine vote. But that default breaks in two directions, and both are easy to miss.

First, some states cap how far a board can raise assessments without triggering a member vote, regardless of who approves the underlying budget. Second, a small number of states flip the structure entirely: the board still writes the budget, but it only takes effect if members do not vote it down.

"a proposed budget does not require approval from owners. The budget will be deemed approved by the owners unless a veto occurs at the meeting."

Source: How the CCIOA Budget Process Works, Altitude Community Law

Whether your association's budget is board-adopted, member-approved, or member-may-veto, and what threshold applies, depends on your state's common-interest-community statute and your own governing documents. Check both before assuming.

Three things boards get wrong most often

A surplus at year end is not automatically the board's money to redirect. Depending on how the association elects to treat it for tax purposes, an unspent surplus may have to be refunded to members or carried forward against next year's assessments, and it generally cannot simply be swept into reserves. Several states also require the board to disclose plainly, in the budget report members receive, whether the association is running a surplus or a deficit.

A reserve study number is not automatically the amount the budget must contribute this year. A reserve study measures how funded the reserve account is against a fully funded target, but full funding, threshold funding, and baseline funding are three distinct, legitimate policy choices a board can make, not three grades of correctness. A lender's minimum reserve allocation, such as the figure Fannie Mae sets for mortgage eligibility, is a separate number tied to assessment income, not a reserve study output, and the two can differ substantially.

Robert's Rules of Order does not set the vote threshold for adopting a budget. It governs how the motion is made, debated, and voted on, and establishes simple majority of votes cast, not of the full board or membership, as the default for ordinary motions.

"The word 'majority' in this context means, simply, more than half."

Source: Frequently Asked Questions, The Robert's Rules Association

The threshold that actually applies to your association's budget, and whether members get a vote at all, comes from state statute and your governing documents, which frequently override the parliamentary default entirely.