CMM Financial Management & Budgeting Flashcards

Which financial indicator is most commonly used to assess a municipality's short-term liquidity?

Answer: Current ratio

The current ratio (current assets divided by current liabilities) measures a government's ability to meet its short-term obligations.

What is the purpose of a Comprehensive Annual Financial Report (CAFR) — now called the Annual Comprehensive Financial Report (ACFR)?

Answer: To provide a complete, audited overview of a government's financial condition

The ACFR is the full audited financial report that presents a government's financial position and results of operations in conformance with GAAP.

What is pension obligation bond (POB) issuance intended to address?

Answer: Borrowing to invest in pension funds and reduce unfunded liabilities

A municipality issues POBs to raise capital that is invested in the pension fund, theoretically closing the gap between assets and obligations.

Which budget format presents expenditures organized by department goals and measurable outcomes rather than object classes?

Answer: Performance budget

Performance budgeting links appropriations to measurable results and program objectives, making accountability and effectiveness central to resource allocation.

Under the GFOA's recommended fund balance policy, what minimum percentage of annual general fund expenditures should unrestricted fund balance represent?

Answer: 10% to 15%

GFOA recommends governments maintain unrestricted fund balance of no less than two months (approximately 16.7%) of general fund operating revenues or expenditures.

What is the role of the single audit requirement under the Uniform Guidance (2 CFR Part 200) for municipalities?

Answer: It mandates a comprehensive audit of federal program compliance when federal expenditures exceed $750,000

The single audit requires an independent audit of federal award compliance and internal controls for entities expending $750,000 or more in federal funds in a fiscal year.