CCS Financial Operations & Budgeting 3 — Questions and Answers
Question 1: Under the accrual method, when should a condominium association recognize assessment income?
- When the check clears the bank
- When the board approves the budget
- When the assessment becomes due per the governing documents (Correct answer)
- When the fiscal year ends
Correct answer: When the assessment becomes due per the governing documents
Accrual-basis associations recognize assessment income when it is legally due, creating an accounts receivable if unpaid.
Question 2: A condominium association's 'working capital fund' collected at closing from new buyers is typically used for:
- Immediate repair of the buyer's unit
- Supplementing the association's operating cash flow (Correct answer)
- Paying the real estate agent's commission
- Funding the reserve study
Correct answer: Supplementing the association's operating cash flow
Working capital funds collected at closing provide the association with initial liquidity so it can operate without cash shortfalls between assessment billings.
Question 3: Which of the following is NOT typically a line item in a condominium operating budget?
- Landscaping contracts
- Reserve contributions
- Roof replacement costs (Correct answer)
- Insurance premiums
Correct answer: Roof replacement costs
Roof replacement is a capital expenditure funded through the reserve fund, not the operating budget; the operating budget includes contributions to reserves, not the replacement cost itself.
Question 4: An association's accounts receivable aging report is most useful for:
- Projecting next year's assessment increases
- Identifying delinquent unit owners and the age of their debt (Correct answer)
- Calculating reserve fund interest earnings
- Determining vendor payment terms
Correct answer: Identifying delinquent unit owners and the age of their debt
The accounts receivable aging report categorizes outstanding balances by how long they have been overdue, helping management track and collect delinquencies.
Question 5: A condominium association has a $1,200,000 reserve fund balance. The reserve study estimates the fully funded target at $2,000,000. The percent funded ratio is:
- 40%
- 50%
- 60% (Correct answer)
- 80%
Correct answer: 60%
$1,200,000 ÷ $2,000,000 = 60% funded, meaning the association holds 60% of its ideal reserve balance.
Question 6: Which document authorizes the condominium board to levy assessments and establishes the assessment methodology?
- The reserve study
- The declaration and bylaws (Correct answer)
- The annual audit report
- The management agreement
Correct answer: The declaration and bylaws
The declaration (and supporting bylaws) grants the board authority to levy assessments and specifies how costs are allocated among unit owners.
Question 7: If a unit owner fails to pay assessments, the association's FIRST enforcement step is typically to:
- File a lien immediately
- Initiate foreclosure proceedings
- Send a formal delinquency notice per the collections policy (Correct answer)
- Suspend the owner's voting rights indefinitely
Correct answer: Send a formal delinquency notice per the collections policy
Most association collections policies require written notice of delinquency before escalating to liens or legal action, ensuring due process.
CCS Financial Operations & Budgeting 3
Under the accrual method, when should a condominium association recognize assessment income?