CBS Compliance & Risk Assessment 2 — Questions and Answers
Question 1: A budget specialist discovers that a department has been consistently overriding approved budget limits without documentation. Which internal control failure does this BEST represent?
- Lack of segregation of duties
- Absence of authorization controls (Correct answer)
- Inadequate variance reporting
- Poor cash flow forecasting
Correct answer: Absence of authorization controls
Authorization controls require approvals before budget limits are exceeded; their absence allows unauthorized overrides.
Question 2: Under the Federal Anti-Deficiency Act, a U.S. federal agency that obligates funds in excess of its appropriation is subject to which consequence?
- Mandatory budget sequestration
- Civil and criminal penalties for responsible officials (Correct answer)
- Automatic continuing resolution
- Reallocation from contingency reserves
Correct answer: Civil and criminal penalties for responsible officials
The Anti-Deficiency Act imposes civil and criminal penalties on officials who obligate or expend funds beyond appropriated amounts.
Question 3: Which risk appetite concept defines the maximum level of risk an organization is willing to accept before action is required?
- Risk tolerance
- Risk threshold (Correct answer)
- Risk capacity
- Risk velocity
Correct answer: Risk threshold
Risk threshold is the specific point at which risk levels trigger mandatory management action, distinguishing it from broader tolerance ranges.
Question 4: A CBS professional is reviewing a capital project budget. Which compliance check is MOST critical before funds are committed?
- Confirming vendor credit ratings
- Verifying legislative or board authorization for the project (Correct answer)
- Calculating net present value
- Reviewing prior-year actuals for the department
Correct answer: Verifying legislative or board authorization for the project
Capital commitments typically require explicit authorization from legislative bodies or governing boards before funds can be legally obligated.
Question 5: In enterprise risk management, a 'heat map' is used primarily to:
- Track employee overtime against budget
- Visually prioritize risks by likelihood and impact (Correct answer)
- Map budget variances to cost centers
- Display cash flow projections over time
Correct answer: Visually prioritize risks by likelihood and impact
A risk heat map plots risks on a matrix of likelihood versus impact, helping prioritize which risks demand the most attention.
Question 6: Which budget compliance mechanism ensures that spending does not exceed periodic allotments even if the annual appropriation is sufficient?
- Encumbrance accounting
- Allotment controls (Correct answer)
- Budget transfer authority
- Object-code restrictions
Correct answer: Allotment controls
Allotment controls divide annual appropriations into periodic spending limits, preventing front-loading or premature exhaustion of funds.
Question 7: When assessing compliance risk in a grant-funded program, which document establishes the primary legal obligations a budget specialist must verify?
- The organization's strategic plan
- The grant agreement and applicable OMB circulars or Uniform Guidance (Correct answer)
- The prior-year audit management letter
- The department head's spending priorities memo
Correct answer: The grant agreement and applicable OMB circulars or Uniform Guidance
The grant agreement combined with OMB Uniform Guidance (2 CFR 200) sets the binding compliance requirements for federally funded programs.
CBS Compliance & Risk Assessment 2
A budget specialist discovers that a department has been consistently overriding approved budget limits without documentation.
Which internal control failure does this BEST represent?