Which statement best describes the influence of a federal agency on a community association?

• A. Setting local property tax rates.
• B. Designing association bylaws.
• C. Regulating the amount of insurance the association must carry.
• D. Administering reserve studies.

Answer: (C)

Federal agencies influence community associations most clearly through insurance requirements tied to federal programs and financing. For example, the federal flood insurance program (administered by FEMA) creates minimum insurance expectations for properties located in flood zones, and lenders with federally backed loans require that insurance be in place. That means the association may need to carry or ensure adequate insurance coverage to meet those federal-backed financing terms, making the statement about regulating the amount of insurance the association must carry the best fit.

The other options reflect functions that federal agencies don’t typically control for a community association: local property tax rates are set by local governments, bylaws are internal governance documents shaped by state law and association rules, and reserve studies are financial planning tasks governed by state statutes and professional standards rather than federal regulation.