Operating Expenses

The recurring, day-to-day costs of running the association, funded by regular assessments and tracked against the operating budget. Major operating expense categories typically include property management fees (often $15–$25 per unit per month for professional management), property and liability insurance premiums, common area utilities (water, electricity, gas, internet), landscaping and grounds maintenance, janitorial and cleaning services, pool and amenity maintenance, administrative costs (office supplies, postage, software), legal and accounting fees, and routine repairs that do not extend the useful life of a component. Operating expenses are distinguished from capital expenditures, which are significant outlays for long-lived assets funded from reserves. They also exclude reserve contributions, which are a transfer between funds rather than an expense. The board should review monthly financial statements comparing actual operating expenses to the budgeted amounts, investigating any line item that deviates by more than 10% to 15%. Common causes of budget overruns include unexpected insurance premium increases, emergency repairs (such as a plumbing leak), rising utility costs, and contract renewals with price escalations. Understanding the distinction between operating expenses and reserve-funded expenditures is essential for accurate budgeting, proper accounting, and avoiding the misuse of reserve funds for day-to-day costs — a practice restricted under California Civil Code Section 5515.