CMCA - Certified Manager of Community Associations Financial Reporting and Controls Questions and Answers

Question 1

To establish strong internal controls and reduce the risk of financial mismanagement, what is a recommended best practice for handling an association's invoices?

Accepted Answer

The person who approves an invoice for payment should be different from the person who signs the check.

Answer

The community manager should approve the invoice, sign the check, and reconcile the bank statement.

Answer

The board treasurer should be the sole person responsible for receiving, approving, and paying all invoices.

Answer

All invoices should be paid immediately upon receipt by any available board member to ensure good vendor relationships.

Question 2

An association's manager prepares a financial report using the accrual basis of accounting. This report will show:

Accepted Answer

Income when it is earned and expenses when they are incurred, regardless of when cash is exchanged.

Answer

Income only when cash is received and expenses only when cash is paid out.

Answer

Only the cash transactions that have occurred during the reporting period.

Answer

A modified cash basis that includes reserve contributions as an expense.

Question 3

A community association's governing documents require the highest level of independent financial scrutiny. Which type of financial report should the board commission from a CPA?

Accepted Answer

An audit

Answer

A compilation

Answer

A review

Answer

A treasurer's report

Question 4

When investing a community association's reserve funds, which of the following is the MOST important objective for the board of directors?

Accepted Answer

Safety and preservation of principal.

Answer

Maximizing the rate of return on investments.

Answer

Investing in long-term growth stocks for capital appreciation.

Answer

Ensuring immediate liquidity for all funds.

Question 5

A community association's Balance Sheet shows 'Assessments Receivable' of $25,000. What does this line item represent?

Accepted Answer

Money owed to the association by homeowners for assessments that have been billed but not yet paid.

Answer

The total amount of assessments the association expects to collect for the entire fiscal year.

Answer

Pre-paid assessments from homeowners for the following fiscal period.

Answer

Funds that have been collected from homeowners but not yet deposited in the bank.

Question 6

A condominium association's board determines that an unbudgeted, emergency repair to the main water line costing $75,000 is necessary. The reserve fund is insufficient to cover the full cost. Which of the following is the board's most likely course of action, according to typical governing documents?

Accepted Answer

Levy a special assessment against all homeowners.

Answer

Immediately take out a bank loan without member input.

Answer

Use operating funds, even if it means deferring other essential services.

Answer

Wait until the next budget cycle to approve the funding for the repair.