Boards are required to annually prepare a pro forma operating budget. As provided for in Civil Code §1365(a), the budget must include the following:

• Estimated revenues and expenses on an accrual basis.

• A summary of the association's reserves.

• A statement as to whether the board has determined or anticipates that the levy of one or more special assessments will be required to repair, replace, or restore any major component or to provide adequate reserves for such work.

• A general statement addressing the procedures used for the calculation and establishment of those reserves.

• Information regarding construction defect litigation (if any).

Includes Reserves. An operating budget includes all expenses for the fiscal year. That includes reserve contributions.

Operating Account. All monies received by the association are deposited into an operating account established in the association's name. Allocated reserve contributions are then transferred monthly from the operating account to the reserve account. Allocation of reserve interest depends on the association's funding plan.