CMCA CMCA - Certified Manager of Community Associations Budgeting and Reserve Studies Questions and Answers 2

Question 1

A straight-line depreciation method in a reserve study assumes:

Accepted Answer

Components are funded with equal annual contributions over their remaining useful life

Answer

Components lose value faster in early years

Answer

Replacement costs increase exponentially each year

Answer

All components are replaced simultaneously

Question 2

Which line item would appear in an operating budget but NOT in a reserve budget?

Accepted Answer

Landscaping contracts

Answer

Roof replacement

Answer

Parking lot resurfacing

Answer

Pool replastering

Question 3

What does it mean when an association's reserve fund is described as 70% funded?

Accepted Answer

The reserve fund balance is 70% of what it should be at this point in the components' life cycles

Answer

70% of reserve contributions have been collected this year

Answer

70% of components have been replaced

Answer

The association has funded 70% of next year's operating budget

Question 4

An association that consistently underfunds its reserves risks which primary consequence?

Accepted Answer

Lower property values due to deferred maintenance and potential special assessments

Answer

Higher monthly assessment income

Answer

Reduced need for a professional reserve study

Answer

Faster loan approval from lenders

Question 5

When preparing an annual budget, a manager should account for inflation primarily by:

Accepted Answer

Applying an inflation factor to both operating expenses and reserve component replacement costs

Answer

Reducing the reserve contribution to offset higher operating costs

Answer

Ignoring inflation since CC&Rs fix assessment amounts

Answer

Deferring capital projects until inflation subsides

Question 6

Which of the following best describes a threshold funding approach in a reserve study?

Accepted Answer

Keeping the reserve balance above a minimum floor to avoid reaching zero or going negative

Answer

Funding reserves to 100% at all times

Answer

Setting contributions at whatever owners are willing to pay

Answer

Funding only the most expensive components