CGFO Budgeting Practices 4 — Questions and Answers
Question 1: In a performance budget, 'efficiency measures' are BEST described as:
- The ratio of inputs (cost/resources) to outputs (units of service delivered) (Correct answer)
- Total expenditures compared to prior year actuals
- The percentage of the budget allocated to personnel costs
- The number of programs funded per budget cycle
Correct answer: The ratio of inputs (cost/resources) to outputs (units of service delivered)
Efficiency measures relate the cost of inputs to the number of service units produced, such as cost per lane mile repaired or cost per permit issued.
Question 2: Which type of fund is typically used to account for resources legally restricted for debt repayment?
- General Fund
- Special Revenue Fund
- Debt Service Fund (Correct answer)
- Capital Projects Fund
Correct answer: Debt Service Fund
Debt Service Funds are used to accumulate resources for the payment of principal and interest on long-term debt.
Question 3: A government adopts a budget on October 1 but does not formally adopt it until December 15. The GASB requirement for budget-to-actual reporting:
- Does not apply because the budget was late
- Still requires reporting if a budget is subsequently adopted before year-end (Correct answer)
- Only applies if the budget was adopted before the fiscal year started
- Requires a restatement of the prior year's financial statements
Correct answer: Still requires reporting if a budget is subsequently adopted before year-end
GASB requires budget-to-actual comparisons for governmental fund types with legally adopted annual budgets, regardless of when during the year adoption occurs.
Question 4: Which budgeting concept allocates overhead or central service costs to individual departments or programs?
- Transfer pricing
- Cost allocation (Correct answer)
- Fund balance assignment
- Revenue sharing
Correct answer: Cost allocation
Cost allocation distributes indirect costs (such as IT, HR, or legal) from central service departments to operating departments that benefit from those services.
Question 5: A city manager proposes a 'priority-based budgeting' approach. This model primarily:
- Funds programs in order of their alignment with community priorities and available resources (Correct answer)
- Increases all department budgets by an equal percentage
- Eliminates all programs not required by state law
- Bases all budgets on competitive bids from service providers
Correct answer: Funds programs in order of their alignment with community priorities and available resources
Priority-based budgeting ranks programs and services according to community priorities, funding higher-priority items first as resources allow.
Question 6: What is the key difference between 'operating budgets' and 'capital budgets' in government finance?
- Operating budgets require voter approval; capital budgets do not
- Operating budgets cover recurring day-to-day expenditures; capital budgets fund long-lived assets and infrastructure (Correct answer)
- Capital budgets are always balanced; operating budgets may run deficits
- Operating budgets use cash basis; capital budgets use accrual basis
Correct answer: Operating budgets cover recurring day-to-day expenditures; capital budgets fund long-lived assets and infrastructure
Operating budgets fund recurring costs like salaries and supplies, while capital budgets fund long-lived assets such as roads, buildings, and equipment.
Question 7: A 'biennial budget' is adopted for a period of:
- One fiscal year
- Two consecutive fiscal years (Correct answer)
- Three fiscal years
- Five fiscal years
Correct answer: Two consecutive fiscal years
A biennial budget covers a two-year period, with the legislature or governing body adopting appropriations for both years in a single budget act.
CGFO Budgeting Practices 4
In a performance budget, 'efficiency measures' are BEST described as: