CCS CCS Reserve Studies & Capital Planning 2

Question 1

A special assessment is typically levied when:

Accepted Answer

Reserve funds are insufficient to cover an unexpected major repair or replacement

Answer

Special assessments are charged to unit owners when a major expense arises that the reserve fund cannot cover, often due to underfunding or an unexpected catastrophic event.

Question 2

Which capital planning document outlines the schedule of major projects, their costs, and how they will be financed over a multi-year horizon?

Accepted Answer

Capital improvement plan (CIP)

Answer

A capital improvement plan (CIP) maps out all anticipated major projects, estimated costs, and proposed funding sources over a multi-year period, guiding reserve and assessment decisions.

Question 3

Inflation directly affects capital planning because:

Accepted Answer

The future cost to replace components will be higher than today's estimated cost

Answer

Inflation causes the actual replacement cost at the time of replacement to exceed today's estimates, so reserve studies must incorporate an inflation factor in their 30-year projections.

Question 4

What is the risk to a condominium association of maintaining an 'underfunded' reserve (below 30% funded)?

Accepted Answer

Increased likelihood of special assessments, deferred maintenance, and difficulty obtaining FHA/VA financing for unit sales

Answer

An underfunded reserve can lead to deferred maintenance, costly special assessments, and loss of FHA/VA certification — making units harder to sell and potentially lowering property values.

Question 5

The 'threshold funding' method sets reserve contributions at a level that ensures:

Accepted Answer

The reserve fund never drops below a predetermined minimum balance

Answer

Threshold funding aims to keep the reserve balance above a set floor (the threshold) throughout the projection period, preventing the fund from going negative while minimizing contribution amounts.

(CCS) Certified Condominium Specialist Practice Test

(CCS) Certified Condominium Specialist Practice Test

CCS CCS Reserve Studies & Capital Planning 2