Financial

Question 0

What is the role of a budget?

Answer 0

• what services and programs the community will provide
• when they will be done
• how they will be done

Question 1

What is a budget?

Answer 1

A financial plan for an organization.

Question 2

Sources of budget requirements -
• federal laws and regulations
• state statues , regulations and court decisions
• local laws and regulations
• governing docs

Answer 2

Federal-Fannie Mae, Freddie Mac, FHA , VA

State-require or regulate reserves, audits, insurance and conduct of financial operations

Local-

Question 3

2 budget components, revenue and expenses.

What are each?

Answer 3

Revenue - assessments, interest, penalty fees, user fees, other revenue.

Expenses - operating expenses, major improvement expense, replacement fund.

Question 4

What is a replacement fund?

Answer 4

Funds put aside in reserve for replacement of major components.

Question 5

5 reasons for maintaining a replacement fund?

Answer 5

1. Meets legal, fiduciary and professional requirements.
2. Provides for planned replacement of major items.
3. Equalizes the contributions of old and new owner.
4. Minimizes the need for special assessment.
5. Enhances resale value.

Question 6

3 ways of funding goals?

Answer 6

Baseline funding- keep reserve cash balance above zero. This is the riskiest.

Full funding - most used. Least likely to do special assessment.

Threshold funding - keeps balance above a specified dollar amount.

Question 7

Budget line items. Mandatory and discretionary.

Answer 7

Mandatory - the community is obligated to meet like repairs, maintenance, utilities, etc.

Question 8

2 methods to prepare a budget.

Zero-base and historical trend.

Answer 8

Zero base - all line items are set to zero and each must be justified.

Historical trend - there are existing line items that are expected to change. Contracts, bills from past year.

Question 9

Purpose of reserve study?

Answer 9

Is a budget planning tool that considers status of the replacement fund and determines a stable and equitable funding plan to offset the anticipated future major common area expenditures.

Question 10

5 benefits for a reserve study

Answer 10

1. Fulfilling fiduciary responsibility
2. Meet state requirements
3. Compliance with AICPA audit
4. Reduce liability from claims
5. Save time with prioritized plan
6. Effective communication tool to owners
7. Can turn up items that were not budgeted

Question 11

What are the 3 authorities to collect assessments?

Answer 11

1. Federal laws and regulations
2. State statues
3. Governing documents

Question 12

Federal fair debt collection practiced act required 5 things.

Answer 12

1. Amount of debt
2. Name of creditor (association)
3. Statement the debt to be valid
4. Statement of verification of debt unless disputed by 30 days
5. Statement to provide name & address of creditor if different

Question 13

Under state statues - gives the board the power to collect assessments and what procedures to follow.
True or false

Answer 13

True

Question 14

Under the governing documents, there are 7 items in collection:

Answer 14

1. Mandatory nature of assessments
2. Authority to collect
3. Purpose of assessments
4. Basis for calculating assessments
5. Reasons for levying fines, fees, etc.
6. Payment procedures
7. Collection procedures foe delinquent payments