CMM Financial Management & Budgeting Flashcards

Which method of capital budgeting analysis calculates the time required for cumulative project savings to equal the initial investment?

Answer: Payback period

The payback period method determines how many years it will take for a project's savings or revenues to recover the upfront capital cost.

Under GASB Statement No. 34, what is the significance of government-wide financial statements?

Answer: They provide an accrual-basis view of all governmental and business-type activities

GASB 34 requires government-wide statements using accrual accounting to show the full economic cost of governmental and business-type activities.

Which type of municipal revenue bond is repaid solely from the revenues generated by the financed project?

Answer: Revenue bond

Revenue bonds are backed exclusively by the income generated by the specific project (e.g., a utility or toll road) and do not pledge the municipality's taxing power.

What is tax increment financing (TIF) primarily used for in municipal government?

Answer: Funding redevelopment projects using future property tax growth in a designated district

TIF captures the increase in property tax revenues that results from redevelopment within a designated district to repay bonds or fund improvements in that area.

Which purchasing method is most appropriate for a municipality acquiring a unique, highly technical engineering service?

Answer: Request for proposals (RFP)

An RFP is used when the scope of work is complex or technical and quality/methodology matter, allowing evaluation of qualifications beyond just price.

What is the primary distinction between an operating budget and a capital budget?

Answer: Operating budgets fund recurring day-to-day expenses; capital budgets fund long-lived assets and infrastructure

Operating budgets cover ongoing costs like salaries and supplies, while capital budgets finance major assets (buildings, roads, equipment) with useful lives exceeding one year.