Financial Operations Quiz

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Questions and Answers

How often should a reserve study be commissioned or updated?

Every year

Every five years

Every ten years

Every three years (correct)

What should be included in a long-term operating budget?

Expenses for the current year and the next year only

Only expenses for the current year

Only expenses for repairs and replacements

Reasonable reserves for future major repairs and replacements (correct)

How often should financial statements be requested from the manager or accountant?

Annually

Quarterly (correct)

Monthly

Bi-annually

What should be done with the annual financial statement?

Make it available for review by owners and prospective purchasers Signup and view all the answers

What is the purpose of a written collection policy?

To enforce owners' assessment obligations Signup and view all the answers

Who should approve all write-offs of delinquencies?

The board Signup and view all the answers

Why should the board solicit competitive bids for services?

To ensure the best value for the association's budget Signup and view all the answers

What is the purpose of requiring board authorization for expenditures over a certain amount?

To avoid overspending Signup and view all the answers

Who is the publisher of the Financial Operations Report?

The Foundation for Community Association Research Signup and view all the answers

Under what conditions can readers reproduce the Best Practices Reports?

If they agree not to sell copies of the report and reproduce it in its entirety Signup and view all the answers

What is the purpose of the Financial Operations Report?

To provide accurate and authoritative information on financial operations best practices Signup and view all the answers

Who are the intended users of the Financial Operations Report?

Community association managers, board members, individual homeowners, and industry professionals Signup and view all the answers

What is the address of the Foundation for Community Association Research?

6402 Arlington Blvd., Suite 500, Falls Church, VA 22042 Signup and view all the answers

What is the disclaimer about professional services in the report?

The publisher is not engaged in rendering legal, accounting, or other professional services Signup and view all the answers

Who are the panel members of the Financial Operations Report?

A mix of certified public accountants (CPAs), community association managers (CMCA), and industry professionals Signup and view all the answers

What is the copyright year of the Financial Operations Report?

2014 Signup and view all the answers

What should be ensured when collecting assessments from owners?

Uniform application of collection policies to all owners Signup and view all the answers

What is the purpose of specifying a timeline for collecting late assessments?

To ensure automatic and systematic escalation of collection steps Signup and view all the answers

What should be guaranteed by state statute or governing documents?

The right to recover attorney fees and costs from delinquent owners Signup and view all the answers

When should an account be referred to legal counsel?

Automatically once a delinquent assessment reaches a specific age or amount Signup and view all the answers

Why must all associations file a federal income tax return every year?

Because the lack of taxable income does not eliminate the need to file Signup and view all the answers

What should be provided for in the collection of delinquent assessments?

The collection of any costs associated with collecting delinquent assessments Signup and view all the answers

What should be ensured when communicating with delinquent owners?

All further communication should be between the association's attorney and the delinquent owner or the owner's attorney Signup and view all the answers

What should be guaranteed in special cases of delinquent assessments?

Discretionary power to the board of directors to consider special cases Signup and view all the answers

Study Notes

Financial Operations

Commission a reserve study and/or update the current reserve study at least every three years, and review the report annually.
Prepare a long-term operating budget covering the next three to five years, including reasonable reserves for future major repairs and replacement of common facilities.

Disclosure

Provide homeowners with reasonably detailed summaries of budget and reserve information annually, with further information readily available.
Request financial statements from the manager or accountant at least quarterly.
Inform homeowners that the annual financial statement is available for review, which may be a review, compilation, or audit.

Policies/Record Keeping

Develop a written, board-approved collection policy for enforcing owners' assessment obligations.
Establish that the board must approve all write-offs of delinquencies in a timely manner.
Solicit competitive bids for services and require board authorization for all expenditures over a predetermined amount.

Collection Policy

Outline the steps to be taken by the person(s) responsible for collecting assessments when a payment is late, with a specific timeline for each step of the process.
Provide proper advance notice of the due date for assessments to all members of the association.
Uniformly apply collection policies to all owners.
Ensure that steps taken to collect assessments are authorized by enabling statutes, governing documents, and fair debt collection requirements.
Allow for discretion in special cases, with the burden of requesting special consideration placed upon the owner.

Federal Income Tax Filing Responsibilities

All associations must file a federal income tax return every year, regardless of taxable income.
Filing a tax return does not necessarily mean that the association owes the government money.

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Description

Test your knowledge on condo association financial operations, including reserve studies, long-term operating budgets, and assessments for future repairs and replacements.