CMCA EVALUATION EXAM ACTUAL QUESTIONS AND
SOLUTIONS GRADED A+
✔✔Internal Resources for Enforcement - ✔✔Suspend voting rights, suspend use of
amenities, fines, eviction, and self-help corrections.
✔✔External Resources for Enforcement - ✔✔Police/fire, animal control, zoning,
building/planning, and health.
✔✔Cease and Desist - ✔✔Specific description of the alleged violation, the action
required to resolve the alleged violation, a specific time within which the alleged
violation must be corrected, and the penalty (sanction) which may be imposed after a
hearing if the alleged violation is not corrected within the stated time (specified by state
statute, your governing documents or board resolution).
✔✔Hearing Notice - ✔✔A written notice to an alleged violator that a hearing will be held
to consider his or her alleged violation.
✔✔Hearing - ✔✔This is a fact-finding session. It is an inquiry into the allegations and an
investigation of them.
✔✔Default hearing - ✔✔A default hearing is one held when the alleged violator fails to
appear.
✔✔Appeal - ✔✔An appeal is a request for a review of a case by a higher authority - if
permitted by the governing documents, resolution or statute.
✔✔Eviction - ✔✔The process of physically removing a tenant (not an owner) from a
property. This process involves a local court system and the use of an attorney. Do not
consider this alternative without consulting your community's attorney. Many
jurisdictions do not permit eviction as a remedy for violations.
✔✔Self Help - ✔✔The community association takes action to correct the violation itself.
Do not consider this potentially dangerous alternative without consulting your
community's attorney.
✔✔Budget - ✔✔An annual financial plan for an organization - in this case, a community
association. It provides an estimate of a community's revenue and expenses for a
specific period of time. it is the first step to managing your community's financial
operations.
✔✔Sources of Budget Requirements - ✔✔Governing documents, local laws and
regulations, federal laws and regulations, and state statutes, regulations and case law.
,✔✔Budget Components - ✔✔Revenue and Expenses
✔✔Revenue - ✔✔Consists of the collective items or amounts of income which, in the
case of a community association, are appropriated for common expenses.
✔✔Typical sources of revenue for a community association include: - ✔✔Owner
assessments, Interest, and Other revenue (late payment fees, fines, user fees - parking
space rentals/swimming pool use).
✔✔Assessment - ✔✔Owner's financial obligation to the community association during a
given period of time - usually one year. It covers the owner's share of the common
expense.
✔✔How often to pay assessments? - ✔✔Monthly, quarterly or annual basis depending
on what the governing documents dictate.
✔✔Special Assessment - ✔✔Is a onetime assessment often voted on by the owners to
cover a major expense that was not included in the annual budget or replacement
reserve.
✔✔Interest - ✔✔A typical source of revenue for communities is interest or dividends
earned on their cash savings and investments.
✔✔Expenses - ✔✔Consist of the goods and services used to operate and maintain the
association's common elements.
✔✔What are the three types of expenses for community associations? - ✔✔Operating
expenses, major improvement expenses, and reserve account.
✔✔Calculating Assessments for Condos - ✔✔Total Assessments Required in Annual
Budget x Percentage Interest as Found in the Declaration / Number of Installment
Payments in a Year
✔✔When should a community budget be approved? - ✔✔At least 45 days in advance of
the start of the fiscal or budget year.
✔✔What should a budget packet include? - ✔✔Operating budget, a summary of the
reserve budget, and a 3-5 year cash flow report combining the operating and reserve
budgets.
✔✔Mandatory Line Items - ✔✔Items based on a community and owner needs. They are
requirements that the community is obligated to meet, e.g. income taxes, management
fees, repairs, utilities, and maintenance.
, ✔✔Discretionary Line Items - ✔✔Items based on owner, board, and committee desires.
They are items people would like to have - given their values, lifestyle, and preferred
level of service, e.g. social and recreational expenses, picnic area, etc.
✔✔Chart of Accounts - ✔✔Organized list of the titles, descriptions, and assigned
number of all accounts in an organizational's general ledger.
✔✔Zero-base budgeting - ✔✔With this method, all line items are set to zero and the
amount of funds allotted to each must be justified.
✔✔Historical trend budgeting - ✔✔This method begins with the assumption that existing
line items are needed. The amount of funds allotted to each during the current year is
adjusted for expected changes in the coming year. Sources for this include: financial
reports, existing contracts, and bills from the past year.
✔✔Reserve Account - ✔✔Funds set aside for the replacement of major components of
a community's common property.
✔✔Reasons for Maintaining a Reserve Account - ✔✔1. Meets legal, fiduciary, and
professional requirements. 2. Provides for the planned replacement of major items. 3.
Equalizes the contributions of old and new owners. 4. Minimizes the need for special
assessments. 5. Enhances the resale value.
✔✔Percent Funded - ✔✔Allows an association to measure the relative size of their
replacement reserves compared to a 'fully funded' reserve balance.
✔✔Reserve Study - ✔✔Is a budget planning tool with which the association expects to
offset ongoing deterioration and prepare for inevitable future expenses.
✔✔Consequences of not having a reserve study - ✔✔Underfunding, Overfunding, and
Board member liability.
✔✔Benefits of a reserve study - ✔✔Fulfilling fiduciary responsibility, meet individual
state requirements (for regulated states), compliance with the American Institute of
Certified Public Accountants' (AICPA) audit guide for community associations, reduce
personal liability from claims of financial mismanagement, save valuable time with
prioritized business plan for capital repairs and replacements, effective communication
tool to keep owners informed, and can turn up maintenance issues that haven't been
budgeted in ongoing operations.
✔✔Reserve Specialist - ✔✔CAI established the designation program to help community
managers and board members identify qualified reserve study providers to assist
communities in developing their reserve study.
SOLUTIONS GRADED A+
✔✔Internal Resources for Enforcement - ✔✔Suspend voting rights, suspend use of
amenities, fines, eviction, and self-help corrections.
✔✔External Resources for Enforcement - ✔✔Police/fire, animal control, zoning,
building/planning, and health.
✔✔Cease and Desist - ✔✔Specific description of the alleged violation, the action
required to resolve the alleged violation, a specific time within which the alleged
violation must be corrected, and the penalty (sanction) which may be imposed after a
hearing if the alleged violation is not corrected within the stated time (specified by state
statute, your governing documents or board resolution).
✔✔Hearing Notice - ✔✔A written notice to an alleged violator that a hearing will be held
to consider his or her alleged violation.
✔✔Hearing - ✔✔This is a fact-finding session. It is an inquiry into the allegations and an
investigation of them.
✔✔Default hearing - ✔✔A default hearing is one held when the alleged violator fails to
appear.
✔✔Appeal - ✔✔An appeal is a request for a review of a case by a higher authority - if
permitted by the governing documents, resolution or statute.
✔✔Eviction - ✔✔The process of physically removing a tenant (not an owner) from a
property. This process involves a local court system and the use of an attorney. Do not
consider this alternative without consulting your community's attorney. Many
jurisdictions do not permit eviction as a remedy for violations.
✔✔Self Help - ✔✔The community association takes action to correct the violation itself.
Do not consider this potentially dangerous alternative without consulting your
community's attorney.
✔✔Budget - ✔✔An annual financial plan for an organization - in this case, a community
association. It provides an estimate of a community's revenue and expenses for a
specific period of time. it is the first step to managing your community's financial
operations.
✔✔Sources of Budget Requirements - ✔✔Governing documents, local laws and
regulations, federal laws and regulations, and state statutes, regulations and case law.
,✔✔Budget Components - ✔✔Revenue and Expenses
✔✔Revenue - ✔✔Consists of the collective items or amounts of income which, in the
case of a community association, are appropriated for common expenses.
✔✔Typical sources of revenue for a community association include: - ✔✔Owner
assessments, Interest, and Other revenue (late payment fees, fines, user fees - parking
space rentals/swimming pool use).
✔✔Assessment - ✔✔Owner's financial obligation to the community association during a
given period of time - usually one year. It covers the owner's share of the common
expense.
✔✔How often to pay assessments? - ✔✔Monthly, quarterly or annual basis depending
on what the governing documents dictate.
✔✔Special Assessment - ✔✔Is a onetime assessment often voted on by the owners to
cover a major expense that was not included in the annual budget or replacement
reserve.
✔✔Interest - ✔✔A typical source of revenue for communities is interest or dividends
earned on their cash savings and investments.
✔✔Expenses - ✔✔Consist of the goods and services used to operate and maintain the
association's common elements.
✔✔What are the three types of expenses for community associations? - ✔✔Operating
expenses, major improvement expenses, and reserve account.
✔✔Calculating Assessments for Condos - ✔✔Total Assessments Required in Annual
Budget x Percentage Interest as Found in the Declaration / Number of Installment
Payments in a Year
✔✔When should a community budget be approved? - ✔✔At least 45 days in advance of
the start of the fiscal or budget year.
✔✔What should a budget packet include? - ✔✔Operating budget, a summary of the
reserve budget, and a 3-5 year cash flow report combining the operating and reserve
budgets.
✔✔Mandatory Line Items - ✔✔Items based on a community and owner needs. They are
requirements that the community is obligated to meet, e.g. income taxes, management
fees, repairs, utilities, and maintenance.
, ✔✔Discretionary Line Items - ✔✔Items based on owner, board, and committee desires.
They are items people would like to have - given their values, lifestyle, and preferred
level of service, e.g. social and recreational expenses, picnic area, etc.
✔✔Chart of Accounts - ✔✔Organized list of the titles, descriptions, and assigned
number of all accounts in an organizational's general ledger.
✔✔Zero-base budgeting - ✔✔With this method, all line items are set to zero and the
amount of funds allotted to each must be justified.
✔✔Historical trend budgeting - ✔✔This method begins with the assumption that existing
line items are needed. The amount of funds allotted to each during the current year is
adjusted for expected changes in the coming year. Sources for this include: financial
reports, existing contracts, and bills from the past year.
✔✔Reserve Account - ✔✔Funds set aside for the replacement of major components of
a community's common property.
✔✔Reasons for Maintaining a Reserve Account - ✔✔1. Meets legal, fiduciary, and
professional requirements. 2. Provides for the planned replacement of major items. 3.
Equalizes the contributions of old and new owners. 4. Minimizes the need for special
assessments. 5. Enhances the resale value.
✔✔Percent Funded - ✔✔Allows an association to measure the relative size of their
replacement reserves compared to a 'fully funded' reserve balance.
✔✔Reserve Study - ✔✔Is a budget planning tool with which the association expects to
offset ongoing deterioration and prepare for inevitable future expenses.
✔✔Consequences of not having a reserve study - ✔✔Underfunding, Overfunding, and
Board member liability.
✔✔Benefits of a reserve study - ✔✔Fulfilling fiduciary responsibility, meet individual
state requirements (for regulated states), compliance with the American Institute of
Certified Public Accountants' (AICPA) audit guide for community associations, reduce
personal liability from claims of financial mismanagement, save valuable time with
prioritized business plan for capital repairs and replacements, effective communication
tool to keep owners informed, and can turn up maintenance issues that haven't been
budgeted in ongoing operations.
✔✔Reserve Specialist - ✔✔CAI established the designation program to help community
managers and board members identify qualified reserve study providers to assist
communities in developing their reserve study.
