CMO Financial Management & Budgeting 3

Question 1

Which budgeting approach requires each department to justify every dollar of expenditure from zero, regardless of prior year spending?

Accepted Answer

Zero-based budgeting

Answer

Zero-based budgeting (ZBB) requires departments to build their budgets from scratch each cycle, justifying all expenditures rather than just changes from the prior year.

Question 2

A city's internal auditor discovers that the same employee both approves purchase orders and reconciles vendor invoices. This violates which internal control principle?

Accepted Answer

Segregation of duties

Answer

Segregation of duties requires that no single individual control all aspects of a financial transaction to reduce fraud and error risk.

Question 3

What is the purpose of an actuarial valuation for a municipal pension fund?

Accepted Answer

To calculate the present value of future pension obligations and required contributions

Answer

An actuarial valuation uses demographic and economic assumptions to estimate the present value of future benefit payments and determine the annual required contribution.

Question 4

Under the modified accrual basis of accounting, revenues are recognized when they are:

Accepted Answer

Available and measurable

Answer

Modified accrual recognizes revenue when it is both measurable (can be reasonably estimated) and available (collectible within the current period or soon enough to pay current liabilities).

Question 5

A municipality issues tax anticipation notes (TANs) primarily to:

Accepted Answer

Bridge short-term cash flow gaps before property tax receipts arrive

Answer

TANs are short-term borrowings used to maintain operations during the period between the start of the fiscal year and the receipt of property tax collections.

(CMO) Certified Municipal Officer Practice Test

(CMO) Certified Municipal Officer Practice Test

CMO Financial Management & Budgeting 3