CGFO Budgeting & Fiscal Policy Management 4

Question 1

A city government uses prior-year actual expenditures as the starting point and adjusts upward or downward. This describes which budget method?

Accepted Answer

Incremental budgeting

Answer

Incremental budgeting uses the existing budget as a base and applies adjustments, which is common in government but criticized for perpetuating inefficiencies.

Question 2

Which of the following is a characteristic of a 'revenue bond' compared to a 'general obligation bond'?

Accepted Answer

Repayment depends on revenues generated by a specific project

Answer

Revenue bonds are repaid solely from income generated by the specific project or facility they finance, such as a toll road or water utility.

Question 3

GFOA recommends that governments maintain a minimum unassigned fund balance in the general fund of at least:

Accepted Answer

5% of annual revenues or expenditures

Answer

GFOA best practices recommend governments maintain an unassigned general fund balance of no less than two months (approximately 16.7%) of regular general fund operating revenues or expenditures, but many cite the 5% floor as the minimum floor guidance.

Question 4

In government accounting, modified accrual basis recognizes revenues when they are:

Accepted Answer

Available and measurable

Answer

Under modified accrual, revenues are recognized when they are both measurable and available (collectible within the current period or soon enough to pay current liabilities).

Question 5

Which scenario would most likely trigger a mid-year budget amendment in a local government?

Accepted Answer

An unexpected federal grant award requiring matching funds

Answer

An unexpected grant requiring a local match creates a new revenue source and expenditure obligation not included in the original budget, necessitating a formal amendment.

(CGFO) Certified Government Finance Officer Practice Test

(CGFO) Certified Government Finance Officer Practice Test

CGFO Budgeting & Fiscal Policy Management 4