CMCA Knowledge 4 — Questions and Answers
Question 1: An association's insurance policy that covers claims arising from board members' decisions in managing the association is called:
- General liability insurance
- Directors and Officers (D&O) liability insurance (Correct answer)
- Workers' compensation insurance
- Fidelity bond
Correct answer: Directors and Officers (D&O) liability insurance
Directors and Officers (D&O) insurance protects board members from personal liability arising from their management decisions.
Question 2: When is a quorum required in a community association board meeting?
- Only during annual meetings when owners vote
- Whenever the board takes any official action or passes a resolution (Correct answer)
- Only for votes involving expenditures above the reserve threshold
- Quorum applies only to owner meetings, not board meetings
Correct answer: Whenever the board takes any official action or passes a resolution
A quorum — the minimum number of members needed to conduct business — is required before the board can officially act on any matter.
Question 3: Under the FHA's Housing for Older Persons Act (HOPA), a community may lawfully restrict residency to persons 55 and older if:
- At least 51% of units are occupied by a person 55 or older and the community publishes and follows policies demonstrating intent to be 55+ housing (Correct answer)
- All owners vote unanimously to restrict children
- The local municipality grants a special senior zoning variance
- The developer included the age restriction in the original plat
Correct answer: At least 51% of units are occupied by a person 55 or older and the community publishes and follows policies demonstrating intent to be 55+ housing
HOPA requires that at least 80% of occupied units have one resident 55+, and the community must publish and adhere to policies demonstrating its senior housing intent.
Question 4: A fidelity bond (employee dishonesty coverage) in a community association context primarily protects against:
- Property damage caused by natural disasters
- Theft or fraud by employees or board members who handle association funds (Correct answer)
- Slip-and-fall injuries in common areas
- Non-payment of assessments by delinquent owners
Correct answer: Theft or fraud by employees or board members who handle association funds
A fidelity bond covers financial losses due to dishonest acts, such as embezzlement, by those who handle the association's funds.
Question 5: Which of the following is typically considered a limited common element in a condominium?
- The community swimming pool open to all residents
- A balcony attached to and exclusively serving one unit (Correct answer)
- The association's maintenance equipment storage room
- Hallways and corridors used by all residents
Correct answer: A balcony attached to and exclusively serving one unit
A limited common element is a portion of the common area reserved for the exclusive use of one or more, but not all, unit owners.
Question 6: An association transitions from developer control to owner control. Which document typically specifies when and how this transition occurs?
- The management contract
- The community's declaration or state statute (Correct answer)
- The annual budget
- The reserve study
Correct answer: The community's declaration or state statute
The declaration and/or applicable state statute define the triggers and process for transitioning control from the developer to elected homeowners.
Question 7: What does 'accrual basis' accounting mean for a community association?
- Revenue and expenses are recorded only when cash is received or paid
- Revenue and expenses are recorded when earned or incurred, regardless of cash flow timing (Correct answer)
- The association uses a combination of cash and accrual methods
- All capital expenses are expensed immediately in the year incurred
Correct answer: Revenue and expenses are recorded when earned or incurred, regardless of cash flow timing
Accrual basis accounting recognizes revenue when earned and expenses when incurred, matching economic events to the period they occur rather than when cash changes hands.
CMCA Knowledge 4
An association's insurance policy that covers claims arising from board members' decisions in managing the association is called: