CMCA (3-4) Budgets Reserves Investments
and Assesments/Financial Controls
Assessment -answer The 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, also known as "common expense liabilities" in some states.
Baseline funding -answer The goal of this funding strategy is to keep the reserve cash
balance above zero.
Chart of accounts -answer An organized list of titles, descriptions and assigned
numbers of all accounts in an organization's general ledger. The assigned number helps you
locate the account. The title describes the purpose of the account.
Discretionary budget line items -answer These are 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, and picnic areas).
Expenses -answer Cost of goods and services used to operate and maintain the
community's property.
Federal Housing Administration (FHA) -answer Regulates and influences such items as
the amount of insurance a community association must carry, procedures for financial
operations and requirements for the upkeep of property.
Federal Home Loan Mortgage Corporation (FHLMC) -answer Buys mortgages from
lenders and in doing so require certain types of insurance to be in place.
,Federal National Mortgage Association (FNMA) -answer Federally established
secondary mortgage institution that may set requirements that your community association will
have to meet if owners are to participate in their financing programs
Full funding -answer The goal of this funding strategy is to attain and maintain the
reserves at or near 100 percent as called for on the component inventory.
Historical trend budgeting -answer 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.
Major improvement expenses -answer Consist of items that are not necessarily
required, but are added to improve the overall welfare, safety or life of the residents—or to
enhance the value of the community association as reflected in the resale value of units.
Operating budget -answer The section of a budget devoted to operating activities
includes operating expenses and major improvement expenses—but not the replacement fund.
Operating expenses: Operating expenses are those items that occur on a regular basis—day to
day, week to week, month to month, and year to year.
Reconciliation of expenses and revenue -answer After you draft both your operating
and replacement fund budgets for the coming year, you must reconcile your estimated
expenses with your community's anticipated revenue. To reconcile means to bring together
after a difference.
Replacement fund -answer Consists of funds put aside—in reserve—for the
replacement of major components of a community's common property.
Reserve cash flow statement -answer Shows the amount to be funded and the
amount to be expended from the replacement fund over a given period of time.
, Reserve study -answer A budget planning tool that considers the current status of the
replacement fund and determines a stable and equitable funding plan to offset the anticipated
future major common area expenditures.
Revenue -answer Consists of the collective items or amounts of income which, in the
case of a community association, are appropriated for public expenses.
Threshold funding -answer This method is based on the baseline-funding concept.
The minimum reserve cash balance in __________ is set at a predetermined dollar amount.
Zero-based budgeting -answer With this method, all line items are set to zero and the
amount of funds allotted to each must be justified.
Acceleration -answer The collection of all assessments due through the end of the
fiscal year. For example, if an owner's payments on the annual assessment are due monthly and
become delinquent at the end of March, all monthly payments through December of that year
are due immediately.
Bad debt write-off -answer Consists of recording an uncollectible debt as an expense
that the association must absorb. This usually requires a resolution of the board.
Chapter 7 bankruptcy -answer Called straight bankruptcy or liquidation. It involves the
prompt conversion of all the individual's or corporation's non-exempt property to cash, and
payment of creditors to the extent possible.
Chapter 11 bankruptcy -answer Called a reorganization because it is designed to allow
for an orderly payment to creditors that enable a corporation to continue.
and Assesments/Financial Controls
Assessment -answer The 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, also known as "common expense liabilities" in some states.
Baseline funding -answer The goal of this funding strategy is to keep the reserve cash
balance above zero.
Chart of accounts -answer An organized list of titles, descriptions and assigned
numbers of all accounts in an organization's general ledger. The assigned number helps you
locate the account. The title describes the purpose of the account.
Discretionary budget line items -answer These are 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, and picnic areas).
Expenses -answer Cost of goods and services used to operate and maintain the
community's property.
Federal Housing Administration (FHA) -answer Regulates and influences such items as
the amount of insurance a community association must carry, procedures for financial
operations and requirements for the upkeep of property.
Federal Home Loan Mortgage Corporation (FHLMC) -answer Buys mortgages from
lenders and in doing so require certain types of insurance to be in place.
,Federal National Mortgage Association (FNMA) -answer Federally established
secondary mortgage institution that may set requirements that your community association will
have to meet if owners are to participate in their financing programs
Full funding -answer The goal of this funding strategy is to attain and maintain the
reserves at or near 100 percent as called for on the component inventory.
Historical trend budgeting -answer 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.
Major improvement expenses -answer Consist of items that are not necessarily
required, but are added to improve the overall welfare, safety or life of the residents—or to
enhance the value of the community association as reflected in the resale value of units.
Operating budget -answer The section of a budget devoted to operating activities
includes operating expenses and major improvement expenses—but not the replacement fund.
Operating expenses: Operating expenses are those items that occur on a regular basis—day to
day, week to week, month to month, and year to year.
Reconciliation of expenses and revenue -answer After you draft both your operating
and replacement fund budgets for the coming year, you must reconcile your estimated
expenses with your community's anticipated revenue. To reconcile means to bring together
after a difference.
Replacement fund -answer Consists of funds put aside—in reserve—for the
replacement of major components of a community's common property.
Reserve cash flow statement -answer Shows the amount to be funded and the
amount to be expended from the replacement fund over a given period of time.
, Reserve study -answer A budget planning tool that considers the current status of the
replacement fund and determines a stable and equitable funding plan to offset the anticipated
future major common area expenditures.
Revenue -answer Consists of the collective items or amounts of income which, in the
case of a community association, are appropriated for public expenses.
Threshold funding -answer This method is based on the baseline-funding concept.
The minimum reserve cash balance in __________ is set at a predetermined dollar amount.
Zero-based budgeting -answer With this method, all line items are set to zero and the
amount of funds allotted to each must be justified.
Acceleration -answer The collection of all assessments due through the end of the
fiscal year. For example, if an owner's payments on the annual assessment are due monthly and
become delinquent at the end of March, all monthly payments through December of that year
are due immediately.
Bad debt write-off -answer Consists of recording an uncollectible debt as an expense
that the association must absorb. This usually requires a resolution of the board.
Chapter 7 bankruptcy -answer Called straight bankruptcy or liquidation. It involves the
prompt conversion of all the individual's or corporation's non-exempt property to cash, and
payment of creditors to the extent possible.
Chapter 11 bankruptcy -answer Called a reorganization because it is designed to allow
for an orderly payment to creditors that enable a corporation to continue.
