HOA glossaryMoney

What is Operating Budget?

The operating budget is the association's annual plan of expected income and day-to-day expenses, and the basis for setting assessments.

The operating budget lists recurring costs — insurance, utilities, landscaping, snow removal, management fees, repairs, administrative expenses — plus the annual reserve contribution. Total expenses divided by the allocation formula produces each owner's assessment.

Budgets are usually drafted in the fall, reviewed at an open meeting, and adopted before the fiscal year starts. Most statutes and documents require distributing the adopted budget to owners.

Line items are where resident questions concentrate: what did we actually spend on snow removal, why did insurance jump 40%, how much is landscaping. Answering those accurately requires citing the adopted budget document, not paraphrasing from memory or email threads.

Drives the assessment amount for the coming year.
Must generally be distributed to owners after adoption.
Budget questions should always be answered from the adopted budget document itself.

Go deeper

How Melo answers budget questions Melo for management companies

Related terms

AssessmentAn assessment is the mandatory payment each owner owes the association to fund shared expenses, usually billed monthly, quarterly, or annually.Reserve FundThe reserve fund is savings the association sets aside for predictable major repairs and replacements, kept separate from the operating account.Audit, Review, and CompilationThese are three levels of independent CPA examination of association finances, from a full audit down to a basic compilation of the numbers provided.Fiscal YearThe fiscal year is the twelve-month accounting period the association uses for budgeting, financial reporting, and audits.

Answers straight from your own documents

Melo tells residents what Operating Budget means in your community — citing the exact page of your CC&Rs, budget, or rules.