CMM Financial Management & Budgeting Flashcards

Which budgeting approach requires each department to justify all expenditures from a base of zero each fiscal year?

Answer: Zero-based budgeting

Zero-based budgeting requires every department to justify all budget requests from scratch rather than using prior-year allocations as a baseline.

What is the primary purpose of a municipal general obligation bond?

Answer: To borrow money backed by the full faith and credit of the municipality

General obligation bonds are backed by the taxing authority and full faith and credit of the issuing municipality, making them a primary long-term borrowing tool.

Under GAAP for governmental entities, which fund type is used to account for activities supported primarily by taxes and intergovernmental revenues?

Answer: General fund

The general fund accounts for most core governmental services funded by taxes, licenses, fines, and intergovernmental revenues.

What does a fund balance reserve for 'rainy day' purposes typically represent in municipal finance?

Answer: Unrestricted reserves to stabilize budgets during revenue shortfalls

A rainy day fund holds unrestricted reserves that local governments draw on to maintain services when revenues unexpectedly decline.

Which financial statement provides a snapshot of a government's assets, liabilities, and net position at a specific point in time?

Answer: Statement of net position

The statement of net position (balance sheet equivalent) presents assets, liabilities, and net position as of the reporting date.

What is the purpose of an appropriation ordinance in municipal budgeting?

Answer: It legally authorizes the spending of funds up to specified amounts

An appropriation ordinance is the legislative act that legally authorizes municipal departments to expend funds up to the amounts specified in the adopted budget.