What basis are the expenses budgeted in the operating budget determined?

The correct answer is determined by what is required in the governing documents. In community management, the governing documents outline the specific rules, regulations, and financial structures that a community must operate within. These documents often include details about the budgetary process, including what expenses are necessary to maintain the community effectively and what services must be provided to residents.

Budgeting expenses based on governing documents ensures compliance with established standards and community expectations. It reflects the needs of the association while adhering to legal frameworks, ultimately supporting the governance structure of the community and safeguarding the interests of homeowners.

In contrast, while factors like reserve studies and assessment amounts can influence financial decisions and projections, they do not solely dictate how the operating budget is formulated. The level of service expected by homeowners, although important, does not drive the budget directly in a way that overrides the stipulations set forth in the governing documents. Therefore, this choice emphasizes the foundational role of governance in the budgeting process.