Operating Accounts are frequently used to fund improvements
Operating accounts are intended to make recurring payments for recurring services and fees incurred; funded by a portion the HOA’s monthly or yearly assessment . They are intended to pay for general, ongoing maintenance and utility bills etc.. Operating accounts are not typically used to fund projects to improve or replace a property’s assets . Improving or replacing property assets are usually funded by a reserve account; funded by a portion of the HOA’s monthly or yearly assessment. The amount of funding for the reserve account is determined by a reserve study.
Reviewing and updating landscape maintenance contracts will help to clarify responsibility for general ongoing maintenance. Clarifying responsibility can reduce the tendency to defer general ongoing maintenance that will require an “improvement” later. Review of landscape and irrigation maintenance contracts is one of the keys to success for Landscape Water Management. Landscape Master Plans should include review and recommendations for improving contracts that effect landscape water management.
Quite often, relatively small projects are undertaken by HOA’s to address deferred maintenance, billed as an improvement and funded by the operating account. While there may be exceptions, this scenario rarely “improves” the property or reduces water use; rarely is there a long term Return on Investment.
See WatrWise Consulting’s Page: Performance vs. Reducing Net ET°
Operating Cost Manual – California Department of Real Estate