Government Budgeting & Finance Flashcards

Under the single audit requirements (2 CFR Part 200), which entities are subject to a single audit?

Answer: Non-federal entities that expend $750,000 or more in federal awards in a fiscal year

The Uniform Guidance requires a single audit for non-federal entities (states, local governments, nonprofits) that expend $750,000 or more in federal awards during a fiscal year.

Which of the following best describes 'fiscal capacity' in the context of government finance?

Answer: A government's ability to raise revenues relative to the needs of its population

Fiscal capacity measures a government's potential to generate revenues (particularly tax revenues) in relation to the service demands of its population, reflecting its underlying financial strength.

What is the purpose of a budget allotment system?

Answer: To subdivide appropriations into smaller periodic spending authorizations to prevent funds from being exhausted too early

Allotment systems divide annual appropriations into monthly or quarterly spending limits to maintain budgetary control and prevent departments from spending their entire annual budget early in the year.

A public manager is evaluating a capital investment using cost-benefit analysis. If the net present value (NPV) of a project is positive, it means:

Answer: The present value of projected benefits exceeds the present value of costs, indicating the project adds value

A positive NPV means that, after discounting future cash flows to present value, the project's benefits outweigh its costs, generally indicating it is a worthwhile investment.

Which of the following actions would INCREASE a government's structural budget deficit?

Answer: Both B and C

A structural deficit is a long-term imbalance between recurring revenues and recurring expenditures; permanent tax exemptions reduce ongoing revenues while using one-time reserves masks but does not fix the underlying imbalance.

The Government Finance Officers Association (GFOA) recommends that governments maintain an unassigned general fund balance of at least:

Answer: Two months (16.7%) of regular general fund operating revenues or expenditures

GFOA's best practice recommends maintaining an unassigned fund balance of no less than two months (approximately 16.7%) of annual operating revenues or expenditures as a minimum reserve.

Which budgetary control mechanism allows a government to spend money that was not included in the original appropriation without going back to the full legislative body for approval?

Answer: Administrative transfer authority

Many jurisdictions grant the executive limited administrative transfer authority to move funds between line items or programs within defined thresholds without requiring full legislative action.