Florida Community Association Manager Practice Exam

Which items must be excluded from budget calculations for percentage increase?

1. Reserves and annual expenses

2. Betterments and unforeseen expenses

3. Reserves, infrequent expenses, betterments

4. Capital expenditures and operational costs

The correct answer is: Reserves, infrequent expenses, betterments

In the context of budget calculations for percentage increase, certain items need to be excluded to provide an accurate reflection of the ongoing, operational budget changes. The correct choice highlights that reserves, infrequent expenses, and betterments should not factor into these calculations. Reserves are typically funds set aside for future repairs or replacements, and including them in percentage increase calculations could distort the true operational budget growth. These funds are not part of the regular operating expenses and can vary greatly from year to year. Infrequent expenses, which might include costs for one-time events or projects that do not occur annually, can also skew the percentage calculations. Regular operational expenses are more indicative of day-to-day management and should be the focus for understanding trends in budget increases. Betterments refer to improvements or enhancements to property that increase its value but are not regular maintenance or operational expenses. They should be excluded from operational budget analyses, as they do not reflect the usual cost increases that a community association experiences. This choice aligns with best practices in financial management by ensuring that budget assessments reflect ongoing operational costs rather than fluctuating or infrequent financial obligations. By excluding these items, stakeholders can gain clearer insights into the true fiscal health of the community association and make more informed decisions.