CMCA - M100 DETAILED QUSTIONS AND EXPERT
VERIFIED ANSWERS
55 and older community - Correct Answer Must have one person who is 55 years of age or older living
in at least 80% of its occupied units. The community must be designated "55 and older" to qualify as this
type of housing that legally prohibits children and limits occupancy to a certain age span. The
designation process involves submitting applications and obtaining approval before any enforcement of
the ages of residents commences. Approval from the Department of Housing and Urban Development
(HUD) must be received before construction begins.
Abstention - Correct 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 - Correct 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 - Correct 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 - Correct 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) - Correct Answer ACV is the depreciated value of an item, commonly used in
property insurance coverage.
Workers' Compensation Insurance - Correct 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 - Correct 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 - Correct 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 - Correct 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 - Correct 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 - Correct 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 - Correct 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.
Waiver of subrogation - Correct Answer A common insurance contract endorsement designed to
minimize a community association's property exposure to loss, the waiver of subrogation prohibits the
insurer from attempting to seek restitution from a third party who causes any kind of loss to the insured.
This type of arrangement is allowable under certain circumstances where the insured could be held
liable for a claim that is paid. In other words, a waiver of subrogation is the endorsement that deletes
the right of the association to seek reimbursement for a covered loss from the owner who caused the
damage. Also commonly known as a "waiver of the transfer of recovery rights."
Waiver of the transfer of recovery rights - Correct Answer A common insurance contract endorsement
designed to minimize a community association's property exposure to loss, the waiver of the transfer of
recovery rights prohibits the insurer from attempting to seek restitution from a third party who causes
any kind of loss to the insured. This type of arrangement is allowable under certain circumstances where
the insured could be held liable for a claim that is paid. In other words, a waiver of the transfer of
recovery rights is the endorsement that deletes the right of the association to seek reimbursement for a
covered loss from the owner who caused the damage. Also commonly known as a "waiver of
subrogation."
Waiver provision - Correct Answer Contract provision that states that a waiver (permission) by one
party of any breach of contract (failure to fulfill a provision) by the other party shall not act as a general
waiver of future breaches. In other words, each party says to the other, "If we let you slide on any
contract requirement at any time, it doesn't mean we're letting you slide on any other requirements, or
even on that one a second time— unless we decide to let you do it again."
Work order/response form - Correct 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 satisfaction •
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.
, Treasury bonds - Correct Answer Investment option that matures in more than 10 years. Treasury bonds
are issued in denominations from $1,000 to $100,000. They are also interest-bearing with interest paid
every six months. When the bond matures, the buyer receives the full face value. Treasury bonds are
among the safest investment options for community associations because payment is guaranteed by the
government.
Treasury notes - Correct Answer Investment option that matures in one to 10 years. Treasury notes are
issued in denominations from $1,000 to $100,000. They are also interest-bearing with interest paid every
six months. When the note matures, the buyer receives the full face value. Treasury notes are among the
safest investment options for community associations because payment is guaranteed by the
government.
Turnover - Correct Answer That date upon which homeowners gain control of their association from the
developer. Typically, turnover occurs at an annual or special meeting of the homeowners.
U. S. Bankruptcy Code - Correct Answer The purpose of bankruptcy laws is to help honest people and
businesses find a way to pay their debt or get a fresh start. Bankruptcy laws help people who can no
longer pay their creditors start anew—by liquidating assets to pay their debts or by creating a repayment
plan. Among many other corrections and revisions, and with the strong lobbying efforts of CAI staff and
volunteers, the Bankruptcy Prevention and Consumer Protection Act passed in 2005 contained a small
provision benefitting community associations. It clarified that associations have the authority to collect
assessments that come due after the date the homeowner filed for bankruptcy.
Umbrella association - Correct Answer Governance structure where there is more than one residential
community association grouped together. Often there is a hierarchy with independent subassociations
under an umbrella association Also known as a Master Association. Words Definition
Veterans Administration (VA) - Correct Answer One of four entities—including Fannie Mae, Freddie
Mac, FHA and VA—that have an impact on community association insurance obligations.
Federallyestablished secondary mortgage institution that sets requirements that community associations
have to meet if owners are to participate in their financing or repurchase programs. Federal agency
regulates and influences such items as the amount of insurance a community association must carry,
procedures for financial operations, procedures an association must follow to dissolve, and requirements
for the upkeep of property.
