CMCA - Certified Manager of Community Associations Budgeting and Reserve Studies Questions and Answers

Question 1

A community association's reserve study is comprised of two main parts. What are they?

Accepted Answer

A physical analysis and a financial analysis.

Answer

An operating budget and a capital budget.

Answer

An income statement and a balance sheet.

Answer

A component inventory and a funding plan.

Question 2

A newly built community association has just transitioned from developer control. The initial budget provided by the developer did not include a reserve study. What is the BEST immediate course of action for the new board of directors?

Accepted Answer

Commission a full, professional reserve study to be completed.

Answer

Continue with the developer's budget for the first year to establish a baseline.

Answer

Immediately levy a special assessment to start a reserve fund.

Answer

Poll the homeowners to see if they want to fund reserves.

Question 3

Which of the following is typically funded from an association's operating budget rather than the reserve fund?

Accepted Answer

Annual landscape maintenance contract.

Answer

Asphalt repaving of the community roads.

Answer

Replacement of the clubhouse roof.

Answer

Major overhaul of the swimming pool pump system.

Question 4

An association is utilizing the 'component' method for its reserve funding. The board needs to pay for an unexpected, major repair to the swimming pool filtration system, which was not a listed component. However, the 'roof replacement' component fund has a surplus. How should the board proceed?

Accepted Answer

The funds cannot be used for any purpose other than roof replacement without a vote of the members.

Answer

Use the surplus roof funds for the pool repair, as it is an emergency.

Answer

Take a loan from the operating fund and pay it back later.

Answer

Immediately commission an updated reserve study to add the pool filter.

Question 5

The primary purpose of a community association's annual budget is to:

Accepted Answer

Provide a financial plan for the association's anticipated revenues and expenses for the coming year.

Answer

Guarantee a surplus of funds at the end of the fiscal year.

Answer

Justify the salaries of the community manager and staff.

Answer

Set the schedule for all major capital replacement projects for the next decade.

Question 6

Which of the following describes the 'Baseline Funding' goal in a reserve study funding plan?

Accepted Answer

A minimal funding plan where the reserve cash balance is projected to remain above zero.

Answer

Keeping the reserve balance at or near 100% of the association's calculated deterioration.

Answer

A plan where the reserve cash balance is kept at a specified dollar or percentage funded level.

Answer

Funding reserves only after all operating expenses for the year have been paid in full.