CMO Financial Management & Budgeting 5

Question 1

A municipality discovers mid-year that revenues will fall $2 million short of projections. The appropriate corrective action is to:

Accepted Answer

Adopt a mid-year budget amendment reducing appropriations

Answer

A formal mid-year budget amendment approved by the governing body is the legally required mechanism to reduce appropriations when revenues fall short.

Question 2

The Governmental Accounting Standards Board (GASB) is responsible for:

Accepted Answer

Establishing GAAP for state and local governments

Answer

GASB establishes and improves Generally Accepted Accounting Principles (GAAP) for U.S. state and local governmental entities.

Question 3

What is the primary purpose of a municipal investment policy?

Accepted Answer

To establish guidelines for safety, liquidity, and yield of public funds

Answer

A municipal investment policy prioritizes preservation of principal (safety), then liquidity to meet cash flow needs, and finally yield — in that order.

Question 4

Which scenario best describes tax increment financing (TIF)?

Accepted Answer

Capturing the increase in property tax revenue within a redevelopment district to fund improvements

Answer

TIF districts capture incremental property tax growth above a baseline to fund public improvements within the district, without raising tax rates.

Question 5

A municipality's unassigned fund balance falls to 3% of annual revenues. Most financial best-practice guidelines recommend unassigned fund balance of at least:

Accepted Answer

5–15% of revenues (often 2 months of expenditures)

Answer

GFOA recommends governments maintain an unrestricted general fund balance of no less than two months (approximately 16%) of regular general fund operating revenues or expenditures.

(CMO) Certified Municipal Officer Practice Test

(CMO) Certified Municipal Officer Practice Test

CMO Financial Management & Budgeting 5