Financial Operations & Budgeting Flashcards
7 cards from real CCS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Financial Operations & Budgeting flashcards as text
A condominium association's fidelity bond (crime insurance) primarily protects against:
Answer: Theft or embezzlement of association funds by directors or employees
A fidelity bond protects the association's financial assets against dishonest acts such as theft or embezzlement by those who handle funds.
When preparing the annual budget, which cost category is MOST likely to fluctuate significantly due to market conditions?
Answer: Utility costs such as electricity and water
Utility costs are subject to rate changes, weather variations, and consumption fluctuations, making them among the most volatile budget line items.
A 'threshold funding' reserve strategy aims to keep the reserve balance:
Answer: Above a minimum floor to avoid special assessments
Threshold funding targets a minimum reserve balance that prevents the fund from dropping to zero, minimizing but not eliminating the risk of special assessments.
Which accounting basis is most commonly required for audited financial statements in larger condominium associations?
Answer: Accrual basis
GAAP-compliant audited financial statements require accrual-basis accounting, which most state statutes mandate for associations above certain size thresholds.
An association board that approves expenditures significantly exceeding the approved budget line items without owner approval may be violating:
Answer: Fiduciary duty and governing document spending limits
Board members owe a fiduciary duty to act within their authority; exceeding budget limits without proper authorization breaches that duty and may violate the governing documents.
The 'replacement cost value' used in a reserve study component analysis differs from 'market value' because it represents:
Answer: The estimated cost to replace the component with a like-kind item at current prices
Replacement cost value is the projected cost to replace a component with a similar item at future prices, which is what the reserve fund must accumulate.
Petty cash funds maintained by a condominium association should be:
Answer: Reconciled regularly and supported by receipts for each expenditure
Proper internal controls require petty cash funds to be reconciled periodically and documented with receipts to prevent misuse and ensure accountability.