M 100 UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS COMPLETE STUDY
GUIDE
●● Abstention
Answer: Is to not cast a vote. Board members should abstain from voting
only for clearly stated reasons such as a conflict of interest or ignorance
of the matter at hand.
●● Acceleration
Answer: The collection of all assessments due through the end of the
fiscal year. Acceleration is a technique used to collect assessments from
habitually delinquent owners.
●● Accrual basis of accounting
Answer: Records revenue when it is earned and expenses when they are
incurred. It provides an accurate picture of the association's financial
condition. GAAP (Generally Accepted Accounting Principles) requires
the use of accrual accounting.
●● Action item list
Answer: A list of actions to be taken before the next board of directors
meeting as a result of decisions made at the current one or between
meetings. An action item list contains the decisions to be implemented
,together with the names of those assigned implementation responsibility.
Excel, Google Docs and Microsoft Outlook Tasks may be useful
programs for helping you compile your action item list.
●● Actual cash value (ACV)
Answer: ACV is the depreciated value of an item, commonly used in
property insurance coverage.
●● Workers' Compensation Insurance
Answer: A common insurance coverage and endorsement for personnel
exposures to loss—in this case, loss of services due to injuries received
while working on behalf of the community association. State statutes
determine the classes of employees to be insured and coverage for loss
of services due to employment related injuries. In most states, workers'
compensation insurance is obtained from commercial insurers. Coverage
for associations with no employees is rated on an "if any employee"
basis and usually is a minimum premium. Every community association
should consider obtaining workers' compensation insurance.
●● Wrongful acts
Answer: Legal claims can be brought against a community association
based on the manner in which it conducts its business. Examples of
"wrongful acts" include the failure to file taxes, collect assessments,
maintain replacement reserves, or deliver core services to its residents
(member/owners and tenants). Directors and officers (D&O) liability
insurance is designed to pay for damages arising from wrongful acts that
,do not lead to property damage, bodily injury, advertising injury, or
personal injury.
●● Yield
Answer: One of three essential investment objectives for community
associations, yield is the amount of return on an investment. The other
two essential investment objectives are liquidity and safety.
●● Zero-base budgeting
Answer: A method of budget preparation where all amounts are set to
zero and the budget amount must be justified, instead of assuming the
line item is needed and adjusting the amount for the coming year. The
zerobase approach keeps you from accepting this year's figures at face
value. It requires you to analyze the reasons for the actual amounts
spent. The actual dollar figure may be less or more than the budgeted
figure because of circumstances you cannot assume will exist during the
coming year. For example, lawn maintenance costs during a dry season
will be low— but a community cannot assume that the coming year will
be just as dry.
●● Work order/response form
Answer: A form for assigning maintenance work to be done. With some
planning, it can be used— To document owner and tenant requests To
assign maintenance tasks to both maintenance staff and contractors As a
response form to be returned to an owner or tenant, indicating that work
was completed or confirming that it was assigned As a basis for
allocating charges, when appropriate A work order/response form has
, several benefits. It— Identifies whether the need is an emergency or not
Requires attention Allows follow-up to evaluate satisfactio Provides a
means of monitoring costs Provides a history of the repairs that have
been made Documents any problems with contractors reported by
owners or tenants Indicates if the work is a recurring problem
necessitating further evaluation Most software programs have work
order/response forms as part of their system.
●● Warranty
Answer: A promise or guarantee that parts, materials, or labor will last
for a designated period of time. Warranties required should be part of the
RFP (request for proposal) packet when a community association is
interested in receiving proposals for a particular project. In addition, any
contract the association signs should state the agreed upon warranties
clearly and in detail. A warranty should state: What is covered For how
long What is not covered What the contractor will do if the work or
product proves defective
●● Waiver of lien
Answer: Contract provision that gives up the right to make a claim
against the community association for payments not received. A waiver
of lien should be used when a project involves the heavy use of materials
or subcontractors—e.g., some type of construction project—and the
community association wants to avoid the risk of having to pay for
materials or subcontractors if the contractor fails to do so. A
performance bond, payment bond, and waiver of lien all provide for the
community association's financial protection if the contractor should
default.
CORRECT ANSWERS COMPLETE STUDY
GUIDE
●● Abstention
Answer: Is to not cast a vote. Board members should abstain from voting
only for clearly stated reasons such as a conflict of interest or ignorance
of the matter at hand.
●● Acceleration
Answer: The collection of all assessments due through the end of the
fiscal year. Acceleration is a technique used to collect assessments from
habitually delinquent owners.
●● Accrual basis of accounting
Answer: Records revenue when it is earned and expenses when they are
incurred. It provides an accurate picture of the association's financial
condition. GAAP (Generally Accepted Accounting Principles) requires
the use of accrual accounting.
●● Action item list
Answer: A list of actions to be taken before the next board of directors
meeting as a result of decisions made at the current one or between
meetings. An action item list contains the decisions to be implemented
,together with the names of those assigned implementation responsibility.
Excel, Google Docs and Microsoft Outlook Tasks may be useful
programs for helping you compile your action item list.
●● Actual cash value (ACV)
Answer: ACV is the depreciated value of an item, commonly used in
property insurance coverage.
●● Workers' Compensation Insurance
Answer: A common insurance coverage and endorsement for personnel
exposures to loss—in this case, loss of services due to injuries received
while working on behalf of the community association. State statutes
determine the classes of employees to be insured and coverage for loss
of services due to employment related injuries. In most states, workers'
compensation insurance is obtained from commercial insurers. Coverage
for associations with no employees is rated on an "if any employee"
basis and usually is a minimum premium. Every community association
should consider obtaining workers' compensation insurance.
●● Wrongful acts
Answer: Legal claims can be brought against a community association
based on the manner in which it conducts its business. Examples of
"wrongful acts" include the failure to file taxes, collect assessments,
maintain replacement reserves, or deliver core services to its residents
(member/owners and tenants). Directors and officers (D&O) liability
insurance is designed to pay for damages arising from wrongful acts that
,do not lead to property damage, bodily injury, advertising injury, or
personal injury.
●● Yield
Answer: One of three essential investment objectives for community
associations, yield is the amount of return on an investment. The other
two essential investment objectives are liquidity and safety.
●● Zero-base budgeting
Answer: A method of budget preparation where all amounts are set to
zero and the budget amount must be justified, instead of assuming the
line item is needed and adjusting the amount for the coming year. The
zerobase approach keeps you from accepting this year's figures at face
value. It requires you to analyze the reasons for the actual amounts
spent. The actual dollar figure may be less or more than the budgeted
figure because of circumstances you cannot assume will exist during the
coming year. For example, lawn maintenance costs during a dry season
will be low— but a community cannot assume that the coming year will
be just as dry.
●● Work order/response form
Answer: A form for assigning maintenance work to be done. With some
planning, it can be used— To document owner and tenant requests To
assign maintenance tasks to both maintenance staff and contractors As a
response form to be returned to an owner or tenant, indicating that work
was completed or confirming that it was assigned As a basis for
allocating charges, when appropriate A work order/response form has
, several benefits. It— Identifies whether the need is an emergency or not
Requires attention Allows follow-up to evaluate satisfactio Provides a
means of monitoring costs Provides a history of the repairs that have
been made Documents any problems with contractors reported by
owners or tenants Indicates if the work is a recurring problem
necessitating further evaluation Most software programs have work
order/response forms as part of their system.
●● Warranty
Answer: A promise or guarantee that parts, materials, or labor will last
for a designated period of time. Warranties required should be part of the
RFP (request for proposal) packet when a community association is
interested in receiving proposals for a particular project. In addition, any
contract the association signs should state the agreed upon warranties
clearly and in detail. A warranty should state: What is covered For how
long What is not covered What the contractor will do if the work or
product proves defective
●● Waiver of lien
Answer: Contract provision that gives up the right to make a claim
against the community association for payments not received. A waiver
of lien should be used when a project involves the heavy use of materials
or subcontractors—e.g., some type of construction project—and the
community association wants to avoid the risk of having to pay for
materials or subcontractors if the contractor fails to do so. A
performance bond, payment bond, and waiver of lien all provide for the
community association's financial protection if the contractor should
default.
