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

Money collected through a special assessment for a specific project should be:

Answer: Tracked separately and used only for that project

Special assessment funds are restricted to the stated purpose and need separate accounting.

An accounts payable aging report shows:

Answer: Unpaid vendor invoices grouped by how long they have been outstanding

The AP aging report lists unpaid bills by age category to manage cash and payment timing.

Whether owners can veto a proposed annual budget is determined by:

Answer: The governing documents and applicable state statutes

Budget ratification and rejection rights vary by governing documents and state law.

A key weakness of cash-basis accounting for an association is that it:

Answer: Does not record receivables and payables

Cash basis ignores amounts owed to and by the association, which can distort financial position.

The three elements of the fraud triangle are:

Answer: Pressure, opportunity, and rationalization

Fraud generally occurs when someone has pressure, a perceived opportunity, and a way to rationalize.

Under IRS Revenue Ruling 70-604, how can an association avoid taxation of excess member income at year end?

Answer: Have members vote to apply it to the following year's assessments

Applying excess membership income to the next year's assessments, as members decide, prevents it from being taxable.

Which practice best protects association funds held by a management company?

Answer: Holding funds in accounts in the association's name with board-level oversight

Accounts titled in the association's name with oversight and reporting protect funds from commingling.