Financial Management & Budgeting Flashcards
7 cards from real CMO practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Financial Management & Budgeting flashcards as text
A municipality's debt service coverage ratio for a revenue bond is 1.05. This means the project's net revenue covers debt payments by:
Answer: 5% above the required amount
A coverage ratio of 1.05 means net revenues are 5% greater than required debt service payments, providing a thin but positive margin.
Which fund type accounts for resources held by a government in a trustee or custodial capacity for others?
Answer: Fiduciary fund
Fiduciary funds (pension trusts, investment trusts, private-purpose trusts, and custodial funds) hold resources for the benefit of parties outside the government.
A city manager wants to ensure that unspent appropriations in departmental budgets lapse at year-end rather than carry over. This practice:
Answer: Encourages responsible annual spending discipline
Annual appropriation lapse policies prevent departments from hoarding unspent funds, encouraging efficient use of resources within the budget year.
What is the function of an encumbrance in municipal budgeting?
Answer: To reserve budget authority for outstanding purchase orders and contracts
Encumbrances set aside a portion of appropriation authority when a purchase order or contract is executed, preventing over-commitment of the budget before actual payment.
Under GASB 87, how must municipalities account for most lease agreements lasting more than 12 months?
Answer: Recognize a right-of-use asset and corresponding lease liability
GASB 87 requires governments to recognize a right-of-use asset and lease liability on the statement of net position for leases exceeding 12 months.
A city levies a special assessment to fund a sidewalk improvement project. This cost is appropriately charged to:
Answer: A special assessment debt service fund
Special assessment funds account for the financing of public improvements or services where benefiting property owners are assessed a proportionate share of the cost.
Which financial metric best measures a municipality's ability to pay its current obligations from liquid assets?
Answer: Current ratio (current assets / current liabilities)
The current ratio compares current assets to current liabilities and measures short-term liquidity — a government's ability to cover near-term obligations.