CGFO Budgeting Practices 5 — Questions and Answers
Question 1: Which document formally communicates a government's budget request from the executive branch to the legislative body?
- Comprehensive Annual Financial Report (CAFR)
- Executive budget proposal (Correct answer)
- Single Audit report
- Management Discussion and Analysis
Correct answer: Executive budget proposal
The executive budget proposal is submitted by the chief executive (mayor, county manager, governor) to the legislative body recommending appropriations for the upcoming fiscal year.
Question 2: When a government transfers money from the General Fund to the Debt Service Fund to pay debt principal, this is recorded as:
- An expenditure in the General Fund and a revenue in the Debt Service Fund
- A transfer out in the General Fund and a transfer in in the Debt Service Fund (Correct answer)
- An interfund loan requiring repayment
- A reduction of fund balance in both funds
Correct answer: A transfer out in the General Fund and a transfer in in the Debt Service Fund
Interfund transfers are recorded as 'transfers out' in the sending fund and 'transfers in' in the receiving fund, not as revenues or expenditures.
Question 3: The 'base budget' in incremental budgeting typically refers to:
- The minimum funding required to provide core mandated services
- The prior year's adopted budget used as a starting point (Correct answer)
- The budget amount approved by voters via referendum
- The lowest departmental budget request submitted
Correct answer: The prior year's adopted budget used as a starting point
In incremental budgeting, the base budget is the prior year's adopted budget, with new requests built on top of that existing level.
Question 4: Under what circumstance would a government typically use a 'continuing resolution' or 'continuing appropriation'?
- When the legislature fails to adopt a new budget before the start of the fiscal year (Correct answer)
- When a department overspends its annual appropriation
- When capital project costs exceed the original budget estimate
- When federal grant funding is delayed
Correct answer: When the legislature fails to adopt a new budget before the start of the fiscal year
A continuing resolution or continuing appropriation allows government operations to continue at prior-year funding levels when the new budget has not been adopted by the fiscal year start date.
Question 5: Which of the following is a characteristic of 'outcome measures' in performance budgeting?
- They measure the volume of services produced
- They indicate the impact or result of a government program on the community (Correct answer)
- They track the cost per unit of service delivered
- They count the number of employees assigned to a program
Correct answer: They indicate the impact or result of a government program on the community
Outcome measures assess the actual impact of government services on the community, such as reduced crime rates or improved graduation rates, rather than just counting service units.
Question 6: A government finance officer uses 'sensitivity analysis' in budget forecasting primarily to:
- Identify which revenue sources are most affected by changes in key assumptions (Correct answer)
- Calculate the exact tax rate needed to balance the budget
- Determine the credit rating impact of a new bond issuance
- Comply with GASB disclosure requirements for revenue recognition
Correct answer: Identify which revenue sources are most affected by changes in key assumptions
Sensitivity analysis tests how budget outcomes change when key assumptions (such as economic growth rates or property values) vary, highlighting the most vulnerable revenue forecasts.
Question 7: Which budget presentation format is MOST useful for citizens to understand what services the government provides and at what cost?
- Object-of-expenditure format
- Program or service-level format (Correct answer)
- Fund-based accounting format
- Chart of accounts listing
Correct answer: Program or service-level format
A program or service-level format organizes budget information around the services citizens actually receive, making it far more understandable to the public than technical accounting formats.
CGFO Budgeting Practices 5
Which document formally communicates a government's budget request from the executive branch to the legislative body?