Vocabulary

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What is the primary purpose of an ad hoc committee in an organization?

To oversee the daily operations of the organization

To provide ongoing support to a specific department

To address a specific issue that is outside the scope of standing committees (correct)

To review and update the organization's bylaws

What is the primary goal of alternative dispute resolution?

To reduce the workload of the organization's board of directors

To impose penalties on parties that fail to comply with the organization's rules

To resolve conflicts with the help of a neutral third party (correct)

To resolve conflicts through a formal trial or hearing

What is the purpose of an appeal in an organization?

To establish a new policy for the organization

To challenge a decision made by the board of directors

To request a review of a case by a higher authority (correct)

To impose penalties on parties that fail to comply with the organization's rules

What is the primary function of articles of incorporation?

To bring the corporation into existence and define its basic purposes and powers Signup and view all the answers

What is the role of a board liaison in a committee?

To guide the committee on Board policy and procedures and report back to the Board Signup and view all the answers

What is the primary purpose of the business judgment rule?

To protect boards from liability if they have exercised reasonable business judgment Signup and view all the answers

What is the primary purpose of bylaws in a community association?

To establish the organization's governing structure and rules Signup and view all the answers

What is the primary purpose of CC&Rs (Covenants, Conditions & Restrictions) in a homeowners association?

To dictate how the homeowners association operates and what rules the owners—and their tenants and guests —must obey Signup and view all the answers

What is the primary purpose of a community association?

To provide a communal basis for preserving, maintaining, and enhancing homes and property Signup and view all the answers

What is the definition of a condominium?

A living unit fully owned by an individual with an undivided interest in the common elements Signup and view all the answers

What is the purpose of a default hearing?

To consider alleged violations when the violator fails to appear Signup and view all the answers

What is the main component of due process procedure?

Protecting the rights of all parties involved Signup and view all the answers

What is the primary purpose of an employee handbook?

To summarize company behavior requirements and outline benefits offered Signup and view all the answers

What is the definition of employment at will?

A statement that the community association retains the right to dismiss an employee without cause Signup and view all the answers

What is the primary component of fiduciary duty?

Avoiding conflicts of interest and acting as reasonable people Signup and view all the answers

What is the purpose of a management audit?

To review governing documents, policies, property condition, and owner satisfaction Signup and view all the answers

What is the purpose of a management plan?

To provide a statement of goals and objectives approved by the board Signup and view all the answers

What is the hierarchy of authority in a community association?

Governing documents take precedence over rules and architectural guidelines Signup and view all the answers

What is the main purpose of a performance evaluation?

To determine the extent to which an employee's established goals and standards have been met Signup and view all the answers

What is a mixed use development?

A development that mixes two or more 'uses' of land together Signup and view all the answers

What is the purpose of a public offering statement?

To disclose all material facts about a property offered for sale Signup and view all the answers

What is the main difference between a master association and a homeowners association?

A master association represents multiple homeowners associations Signup and view all the answers

What is the main purpose of a balance sheet?

To provide a summary of a community's financial position at a specific point in time Signup and view all the answers

What is the purpose of a personnel manual?

To summarize company behavior requirements and benefits Signup and view all the answers

What is a bad debt write-off?

An expense that the association must absorb Signup and view all the answers

What is an umbrella association?

A cluster of community association types Signup and view all the answers

What is the accrual basis of accounting?

A method that records income when it is earned Signup and view all the answers

What is the main goal of baseline funding?

To keep the reserve cash balance above zero Signup and view all the answers

What is an assessment in a community association?

The owner's financial obligation to the community association Signup and view all the answers

What is the purpose of a chart of accounts?

To organize titles, descriptions, and assigned numbers of all accounts Signup and view all the answers

What is the purpose of a progressive discipline system?

To bring performance problems to the employee's attention Signup and view all the answers

What is the Fair Debt Collection Practices Act?

A law that requires written notice to the person who owes a debt Signup and view all the answers

What is the main difference between Chapter 7 and Chapter 11 bankruptcy?

Chapter 7 involves liquidation, while Chapter 11 involves reorganization Signup and view all the answers

What is a statute?

A formal written enactment of a legislative authority Signup and view all the answers

What is the main purpose of an engagement letter?

To describe the nature of the work to be done by a CPA Signup and view all the answers

What is the main difference between cash basis and accrual basis of accounting?

Cash basis records expenses when they are paid, while accrual basis records expenses when they are incurred Signup and view all the answers

What is FHA?

Federal Housing Administration Signup and view all the answers

What is FICA?

Federal Insurance Contributions Act Signup and view all the answers

What is the primary purpose of a reserve study?

To determine a stable and equitable funding plan for future major common area expenditures Signup and view all the answers

What is the main difference between treasury bills and treasury bonds?

Treasury bills mature in 13, 26, or 52 week periods, while treasury bonds mature in more than 10 years Signup and view all the answers

What is the purpose of an action item list?

To track the progress of tasks and activities Signup and view all the answers

What is the purpose of a committee report?

To highlight matters to be decided and recommendations by the committee Signup and view all the answers

What is the purpose of threshold funding?

To set a minimum reserve cash balance at a predetermined dollar amount Signup and view all the answers

What is the purpose of zero-based budgeting?

To justify the amount of funds allotted to each line item Signup and view all the answers

What is the purpose of an agenda?

To list the meeting activities in the order in which they are to be taken up Signup and view all the answers

What is the purpose of abstention in a vote?

To indicate ambivalence about the measure or mild disapproval Signup and view all the answers

What is the purpose of a ballot?

To record choices made by voters Signup and view all the answers

What is the purpose of debate in an election?

To facilitate a formal discussion involving opposing candidates Signup and view all the answers

What is the purpose of an executive session in a community association?

To discuss sensitive or confidential matters Signup and view all the answers

What is the definition of a quorum in a community association?

The number of residents required to be present to transact business Signup and view all the answers

What is the purpose of a management report in a community association?

To report on the association's current management and administrative activities Signup and view all the answers

What is the definition of actual cash value (ACV) in insurance?

The depreciated value of an item Signup and view all the answers

What is the purpose of a notice of meeting in a community association?

To provide an official announcement of an upcoming meeting Signup and view all the answers

What is the definition of coinsurance in property insurance?

A standard element in most property policies that obligates the insured to maintain a certain limit of property insurance Signup and view all the answers

What is the purpose of a financial report in a community association?

To report on the community's financial condition and activities Signup and view all the answers

What is the definition of cross liability in insurance?

A type of insurance that allows an owner to bring a claim against the community association Signup and view all the answers

What is the purpose of a motion in a community association?

To formally propose a course of action Signup and view all the answers

What is the purpose of tabling a motion in a community association?

To postpone discussion of a motion to a later time Signup and view all the answers

What type of 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?

Directors and officers liability insurance Signup and view all the answers

What is the main purpose of endorsements in insurance policies?

To expand, contract or clarify coverage Signup and view all the answers

What is the primary purpose of a federally established secondary mortgage institution?

To provide financing programs to community associations Signup and view all the answers

What is foreclosure in the context of community associations?

A legal proceeding to claim ownership of a unit Signup and view all the answers

What type of insurance protects against employee dishonesty?

Fidelity insurance Signup and view all the answers

What is the term for the process of obtaining resources to pay for any financial consequences of accidental loss?

Risk financing Signup and view all the answers

What is the goal of the full funding strategy in community associations?

To attain and maintain the reserves at or near 100% of the component inventory Signup and view all the answers

What is the purpose of GAAP (Generally Accepted Accounting Principles)?

To provide a uniform framework for financial reporting Signup and view all the answers

What is the term for the type of property that includes buildings, land, and intangible property?

Real property Signup and view all the answers

What is historical trend budgeting in the context of community associations?

A method of budgeting that begins with the assumption that existing line items are needed Signup and view all the answers

What is the term for the ability to respond to unpredictable problems, such as sewer backups and roof leaks?

Emergency services maintenance Signup and view all the answers

What is the term for the process of operating, maintaining, repairing, and replacing common property?

Facilities management Signup and view all the answers

What is the primary purpose of placing a lien on a delinquent owner's property?

To protect the community association's interests Signup and view all the answers

What is the primary purpose of a representation letter?

To certify the accuracy of the community association's financial statements Signup and view all the answers

What is the term for the waiver of an insurer's right to require the association to transfer recovery rights to the insurer regarding unit owners?

Waiver of subrogation Signup and view all the answers

What is the term for the duplication or separation of property exposures to loss?

Segregation of exposure Signup and view all the answers

What is the primary purpose of the operating budget in a community association?

To allocate funds to operating expenses and major improvement expenses Signup and view all the answers

What is the term for the type of insurance that covers the value of demolishing any undamaged portion of a building?

Extra demolition Signup and view all the answers

What is a net loss in the context of community associations?

When expenses are greater than income Signup and view all the answers

What is the primary purpose of notes to financial statements?

To provide additional information to help the reader understand the community association's financial situation Signup and view all the answers

What is the primary purpose of a work order/response form?

To track and record maintenance activities Signup and view all the answers

What is the purpose of a bid request?

To request proposals for a particular project Signup and view all the answers

What is the purpose of a responsibility chart?

To keep track of who is responsible for the maintenance of various property elements or areas Signup and view all the answers

What is the purpose of a scheduled replacement?

To replace physical assets as they wear out or break Signup and view all the answers

What is the purpose of a modification provision?

To state that the contract may not be modified in any way unless such modification is written and signed by both parties Signup and view all the answers

What is the purpose of a payment bond?

To guarantee that the contractor's suppliers and any subcontractors will be paid Signup and view all the answers

What is the purpose of a performance bond?

To guarantee that the contractor will perform or finish the work Signup and view all the answers

What is the purpose of a prospective bidder's questionnaire?

To determine if the bidder is technically and financially qualified to handle a job of this scope Signup and view all the answers

What is the purpose of a severability provision?

To state that if a court finds that any clause of the contract is illegal or unenforceable, that clause shall be severed Signup and view all the answers

What is the purpose of a waiver of lien?

To give up the right to make a claim against the community association for payments not received Signup and view all the answers

Study Notes

Governance and Compliance

An ad hoc committee is a temporary committee formed to address a specific issue or objective that cannot be absorbed by a standing committee.
Alternative dispute resolution involves resolving conflicts through mediation, arbitration, or other methods without a formal trial or hearing.
An appeal is a request to review a case by a higher authority, as permitted by governing documents or statutes.
Articles of incorporation define a corporation's purpose, powers, and structure, including whether it will issue stock and have a board of directors.
A board liaison system assigns directors to committees to guide policy and procedures and report back to the board.

Community Associations

A community association is a group of owners who work together to maintain and enhance their homes and property.
A condominium is a type of community association where owners have an undivided interest in common elements.
A cooperative is a type of community association where owners own stock or membership and hold a proprietary lease or occupancy agreement.
CC&Rs (Covenants, Conditions & Restrictions) are governing documents that dictate how a community association operates and the rules owners must follow.

Governance and Management

Bylaws are formally adopted governing regulations for a community association's administration and management.
A declaration is a document that outlines a community association's purpose, powers, and structure.
Governing documents provide the legal structure and operation of a community association.
A hierarchy of authority exists among governing documents, with rules and architectural guidelines subordinate to higher authorities.

Financial Management

Acceleration is the collection of all assessments due through the end of the fiscal year.
Accrual basis of accounting records income when earned and expenses when incurred.
An assessment is an owner's financial obligation to the community association during a given period.
Assets include anything owned by the community association that has value.

Meetings

Abstention is when a participant in a vote does not cast a ballot, either by not attending or by not voting.### Meeting and Voting Procedures
Abstention: a voting individual's ambivalence or mild disapproval that doesn't rise to the level of active opposition; does not count in tallying the vote.
Action item list: documented events, tasks, or activities that need to take place; reviewed at the next meeting and facilitator checks status.
Agenda: a list of meeting activities in the order they are taken up, beginning with the call to order and ending with adjournment.
Amend a motion: modify another motion; takes three basic forms: inserting or adding words/paragraphs, striking out words/paragraphs, and substituting an entire paragraph or resolution.
Ballot: a device used to record choices made by voters; each voter uses one ballot.
Committee report: highlights matters to be decided and recommendations by the committee; includes supporting research and clear actions requested from the board.
Debate: a formal discussion involving opposing candidates vying for the same position.
Executive session: a discussion or decision-making process of a sensitive nature; typically includes personnel issues, contract negotiations, lawsuits, and governing document violations.
Financial report: a report on the community's financial condition and activities, including general ledger, variance, accounts payable, income statement, and balance sheet.
Majority: over 50% of the votes needed to win an election; can come from owners who attend the meeting, in person or by proxy.
Management report: a report on the association's current management and administrative activities.
Minutes: a document of the decisions made during the meeting; provides a permanent public record of positions and actions taken by the board.
Motion: a formal proposal stating that the association took certain action.
Notice of meeting: an official announcement that a meeting will take place, sent in writing to board members at least a week before the meeting.
Parliamentary procedure: a body of rules, ethics, and customs governing meetings and other operations.
Plurality: awards the election to the candidate with the most votes, regardless of whether they received the majority.
Proxy: a person authorized to act or vote in place of another resident who could not be present.
Quorum: the number of residents required to be present to transact business legally, established in the association's by-laws.

Risk Management

Actual cash value (ACV): the depreciated value of an item.
Advertising injury: provisions in CGL (comprehensive general liability) include language providing coverage for damages resulting from "misappropriation of advertising ideas or style of doing business" or "infringement of copyright, slogan, or title."
Agreed amount endorsement: provides for an agreed-upon limit of property insurance.
Coinsurance: a standard element in most property policies that obligates the insured to maintain a certain limit of property insurance based on a stated percentage.
Common declarations: a section of the policy that includes information such as the name and address of the insured and the period of coverage.
Common policy conditions: basic provisions that apply to all insurance coverages in the package, including when to file proof of a loss or what happens when a premium is not paid.
Contingent liability: covers the value of any undamaged portion of a building that may have to be replaced due to building laws.
Contractual transfers: involves entering into a contract that transfers the community association's legal responsibility for any loss.
Cross liability: allows an owner to bring a claim against their community association; standard for owners to be insured in liability insurance for condominiums and cooperatives.
Directors and officers liability insurance: designed to pay for damages arising from wrongful acts that do not lead to property damage, bodily injury, advertising injury, or personal injury.
Direct writer system of insurance: comprised of employees of a single insurance company who only place the insurance of that company.
Electronic data processing (EDP): insurance may be needed for computer equipment, networks, websites, security systems, protection from hackers, and similar information technology exposures.
Endorsements: expand, contract, or clarify coverage.
Exposure avoidance: avoiding circumstances that would expose the community association to certain types of loss.
Extra demolition: covers the value of demolishing any undamaged portion of a building.
Fidelity insurance: protects against employee dishonesty that may lead to the theft of money, securities, or property.
HO-1, -2, -3, -4, -5, -6 policies: policies for owner-occupied units, tenants, and condominium or cooperative unit owners.
Liability exposure to loss: losses arise when a person or entity threatens or actually brings a legal claim against the community association, its members, or others whom it must indemnify by contract.
Personal injury (PI): injury arising from libel, slander, false arrest, invasion of privacy, wrongful entry, or malicious prosecution.
Personal property: inventory, furniture, fine arts, equipment, supplies, machinery, electronic data processing (EDP), and valuable papers and records.
Policy forms: define the type of insurance coverage provided, including property, liability, and boiler and machinery.
Property exposure to loss: property losses can be to tangible community association property (buildings and contents) or to intangible association property (information, proprietary Web site, etc.).
Real property: includes buildings, land, and the newest type of property exposure.
Risk financing: the process of obtaining resources to pay for any financial consequences of accidental loss.
Segregation of exposure: involves the duplication or separation of property exposures to loss.
Third-party insurance: liability coverage purchased by an insured from an insurer for protection against claims of another.
Waiver of subrogation: the insurer waives its right to require the association to transfer recovery rights to the insurer regarding unit owners.

Property Maintenance

Emergency services maintenance: the ability to respond to unpredictable problems, such as sewer backups, slope failures, roof leaks, and frozen pipes.
Facilities management: the process of operating, maintaining, repairing, and replacing common property.
Inspection report: a compilation of all maintenance needs identified during an inspection.
Maintenance contact sheet: a useful management control to record various maintenance services and information needed in case of an emergency.
Maintenance record: a record of when maintenance was done, as opposed to the maintenance calendar which tells when it ought to be done.
Management control: any means used to track, record, remind, or command attention, usually forms or documents.
Preventive maintenance: periodic maintenance to avoid disruptive breakdowns and prolong the useful life of physical assets.
Requested or corrective maintenance: maintenance requested by an owner, a tenant, or the board, or identified during routine inspection of the property.
Responsibility chart: a management control to keep track of who is responsible for the maintenance of various property elements or areas.
Scheduled replacement: replacing physical assets as they wear out or break, considered a part of maintenance.
Work order/response form: a form for assigning work to be done in any one of the five maintenance programs described earlier.

Contracting

Assignability provision: a provision that states neither party may assign its obligations under the contract to any other person without the express written consent of the other party.
Bid request: an announcement that an organization is interested in receiving proposals for a particular project.
Bid specifications: detailed instructions about the products or services requested through the bid request.
Contract: an agreement between two or more parties, enforceable by law, by which each party promises to do or not to do something.
Default: failure of either party to fulfill the terms of the contract.
Entire obligation provision: a provision that states the written, signed contract constitutes the entire obligation of the parties.
Modification provision: a provision that states the contract may not be modified in any way unless such modification is written and signed by both parties.
Payment bond: a bond that guarantees the contractor's suppliers and any subcontractors will be paid if the contractor does not pay them.
Performance bond: a guarantee by a surety to protect the community association if the contractor fails to perform or finish the work.
Progress payments: partial payments based on some demonstrable progress in completing the work involved.
Prospective bidder's questionnaire: a document that asks for certain types of information to determine if the bidder is technically and financially qualified to handle a job of this scope.
Qualification sheet: a document that asks for certain types of information to determine if the bidder is technically and financially qualified to handle a job of this scope.
Request for proposal (RFP): an announcement that an organization is interested in receiving proposals for a particular project.
Severability provision: a provision that states if a court finds that any clause of the contract is illegal or unenforceable, that clause shall be severed from the rest of the contract.
Waiver of lien: a document that gives up the right to make a claim against the community association for payments not received.
Waiver provision: a provision that states a waiver by one party of any breach of contract by the other party shall not act as a general waiver of future breaches.
Warranty: a warranty should state what is covered, for how long, and what the contractor will do if the work or product proves defective.

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