CMCA Budgeting and Reserve Studies 2

Question 1

Which reserve funding method maintains a constant dollar contribution that does not increase year over year?

Accepted Answer

Baseline funding

Answer

Baseline funding sets a fixed dollar amount that keeps reserves above zero but does not grow contributions annually.

Question 2

A community's reserve study shows a percent funded ratio of 35%. This is generally considered:

Accepted Answer

Poorly funded with significant risk

Answer

A percent funded ratio below 70% is typically considered underfunded, and 35% represents significant financial risk.

Question 3

What is the primary purpose of a Level III reserve study (update without site visit)?

Accepted Answer

Revise prior study estimates using current financial data without reinspecting components

Answer

A Level III update adjusts financial projections using updated costs and balances without a new physical inspection.

Question 4

When preparing the operating budget, which cost is most appropriately funded through reserves rather than operations?

Accepted Answer

Replacement of the community's roof

Answer

Major component replacements like a roof are capital expenditures funded through reserves, not recurring operating expenses.

Question 5

Which statement best describes the 'threshold funding' approach to reserve contributions?

Accepted Answer

Contributions are set so reserves never fall below a minimum target balance

Answer

Threshold funding sets contributions to ensure the reserve balance never drops below a specified floor amount.

CMCA - Certified Manager of Community Associations Practice Test