M-206 EXAM QUESTIONS WITH VERIFIED ANSWERS LATEST UPDATE 2025/2026
Duty of Care - Answers Requires a board if director to act in a reasonable and informed manner
when participating in the Boards decisions and its oversight of the day to day operations
Duty of Loyalty - Answers Requires the Director to exercise power in good faith and in best
interest of the community rather than the directors own interest of the interest of another
person or entity.
Identify budget line items - Answers Obligation, need, expectation
Types of budget line items - Answers Mandatory, discretionary
Contingency planning rule of thumb minimum - Answers 2-5%
Contingency planning rule of thumb very good - Answers 10-15%
Historical trend budgeting - Answers Estimates line items based on past trends
Zero based budgeting - Answers Budgeting that ignores historical budgetary allocations and
identifies the cost that are necessary to implement agreed strategies- verified need for a
budgeted line item
RxQxTxN - Answers Ratexquantityxtimexnumber
Basis in estimating individual line items for zero based budgeted - Answers Rate, quantity, time,
number
Two parts of reserve study - Answers Physical and financial analysis
Baseline funding - Answers Reserve funding goal of keeping the reserve cash balance above
zero
Full funding - Answers 100% funded
Threshold funding - Answers Keeping the reserve balance above a specified dollar or precent
funded amount
Statutory funding - Answers Method based on local statutes
The concept of basic investment principles - Answers The board of directors, supported with
the advice of the manager, has a fiduciary responsibility to all unit owners to make sure reserve
funds are invested properly
Investment concepts - safety - Answers The likelihood that anticipated income from an
investment will continue to be paid in the amount expected and at the time expected
Investment concepts - liquidity - Answers Liquid investments can be converted quickly into cash
Duty of Care - Answers Requires a board if director to act in a reasonable and informed manner
when participating in the Boards decisions and its oversight of the day to day operations
Duty of Loyalty - Answers Requires the Director to exercise power in good faith and in best
interest of the community rather than the directors own interest of the interest of another
person or entity.
Identify budget line items - Answers Obligation, need, expectation
Types of budget line items - Answers Mandatory, discretionary
Contingency planning rule of thumb minimum - Answers 2-5%
Contingency planning rule of thumb very good - Answers 10-15%
Historical trend budgeting - Answers Estimates line items based on past trends
Zero based budgeting - Answers Budgeting that ignores historical budgetary allocations and
identifies the cost that are necessary to implement agreed strategies- verified need for a
budgeted line item
RxQxTxN - Answers Ratexquantityxtimexnumber
Basis in estimating individual line items for zero based budgeted - Answers Rate, quantity, time,
number
Two parts of reserve study - Answers Physical and financial analysis
Baseline funding - Answers Reserve funding goal of keeping the reserve cash balance above
zero
Full funding - Answers 100% funded
Threshold funding - Answers Keeping the reserve balance above a specified dollar or precent
funded amount
Statutory funding - Answers Method based on local statutes
The concept of basic investment principles - Answers The board of directors, supported with
the advice of the manager, has a fiduciary responsibility to all unit owners to make sure reserve
funds are invested properly
Investment concepts - safety - Answers The likelihood that anticipated income from an
investment will continue to be paid in the amount expected and at the time expected
Investment concepts - liquidity - Answers Liquid investments can be converted quickly into cash
