CGFO Budgeting Practices 3 — Questions and Answers
Question 1: Which budget format presents expenditures organized by government programs and their goals rather than by object of expenditure?
- Line-item budget
- Program budget (Correct answer)
- Object classification budget
- Cash basis budget
Correct answer: Program budget
A program budget organizes spending by programs or activities and links resources to specific government goals and outcomes.
Question 2: A government finance officer calculates that revenues will fall $2 million short of the adopted budget mid-year. The FIRST recommended action is to:
- Issue short-term revenue anticipation notes
- Reduce discretionary expenditures or implement a spending freeze (Correct answer)
- Increase property tax rates immediately
- Borrow from another fund
Correct answer: Reduce discretionary expenditures or implement a spending freeze
A spending freeze or reduction in discretionary expenditures is the prudent first response to a mid-year revenue shortfall before pursuing borrowing options.
Question 3: What distinguishes 'appropriations' from 'allotments' in government budgeting?
- Appropriations are informal spending plans; allotments are legally binding
- Appropriations are legislative authorizations; allotments are executive subdivisions of those authorizations (Correct answer)
- Appropriations cover capital items; allotments cover operating expenses
- Appropriations are multi-year; allotments are always annual
Correct answer: Appropriations are legislative authorizations; allotments are executive subdivisions of those authorizations
Appropriations are the legal spending authority granted by the legislature, while allotments are the executive branch's internal subdivision of those appropriations into time periods or organizational units.
Question 4: Which of the following best describes a 'contingency appropriation' in a government budget?
- Funds set aside for anticipated debt service payments
- A reserve appropriation for unforeseen expenditures during the fiscal year (Correct answer)
- An appropriation that carries over automatically to the next fiscal year
- Funds budgeted for capital improvement projects
Correct answer: A reserve appropriation for unforeseen expenditures during the fiscal year
A contingency appropriation is a budgetary reserve set aside to handle unanticipated expenditure needs that arise during the fiscal year.
Question 5: Under GFOA best practices, what is the recommended minimum level for a government's unassigned general fund balance?
- 5% of general fund revenues or expenditures (Correct answer)
- Two months of general fund operating expenditures
- No minimum is recommended
- 10% of total governmental fund expenditures
Correct answer: 5% of general fund revenues or expenditures
GFOA recommends that governments maintain an unassigned general fund balance of no less than two months (approximately 17%) or at a minimum 5-15% of general fund revenues or expenditures.
Question 6: A 'budget amendment' in government finance typically requires:
- Only the CFO's approval to be effective
- Legislative or governing board approval to modify legally adopted appropriations (Correct answer)
- Federal approval when grant funds are involved only
- No formal action if under a materiality threshold
Correct answer: Legislative or governing board approval to modify legally adopted appropriations
Because the budget is legally adopted by the legislative body, amendments that change appropriation levels generally require legislative or governing board approval.
Question 7: Which forecasting method uses historical revenue and expenditure patterns over multiple prior years to project future budget amounts?
- Trend analysis (Correct answer)
- Scenario analysis
- Zero-based estimation
- Delphi method
Correct answer: Trend analysis
Trend analysis extrapolates future budget figures based on historical growth rates or patterns observed in prior fiscal years.
CGFO Budgeting Practices 3
Which budget format presents expenditures organized by government programs and their goals rather than by object of expenditure?