What is an Operating Budget?

The Association must create a budget each year in order to know how much money it will take to run the Association. This is referred to as the Annual Budget. The Annual Budget consists of two parts:

1. Operating Expenses – Short term expenses; utilities, gardeners, pool service, etc.
2. Projected Reserve Expenses – Long term expenses; new streets, roofs, building painting.

The Operating Expenses are determined from previous bills for utilities, service contracts with the gardener or pool service company, insurance, etc. The Operating Expenses are usually recurring from month to month or year to year. The Operating Budget is a combination of the Operating Expenses and the Projected Reserve Expenses. Another term used for the Reserve Assessment is Reserve Contribution. The Annual Budget is prepared and ratified by the homeowners each year. The homeowners may pay a monthly assessment to their association which would equal the Total Annual Budget Amount, divided by twelve months, divided by the number of homes or units in the association. Included in this assessment is the Reserve Contribution Funding.