CPRP Administration & Finance 5 — Questions and Answers
Question 1: A parks agency experiences a significant revenue shortfall mid-year. Which budget action requires governing board approval?
- Freezing discretionary spending
- Transferring funds between line items within a department
- Amending the appropriations to reduce authorized spending (Correct answer)
- Deferring non-essential purchases
Correct answer: Amending the appropriations to reduce authorized spending
Amending appropriations is a formal legal action that changes the authorized spending limits and requires governing board approval.
Question 2: Which concept explains why a parks agency charges higher fees for tennis lessons than for open-court access?
- Economies of scale
- Tiered pricing based on service exclusivity and direct benefit (Correct answer)
- Full cost recovery mandate
- Supply-side pricing
Correct answer: Tiered pricing based on service exclusivity and direct benefit
Instructional programs provide exclusive, direct personal benefit to participants, justifying higher fees than general-access amenities that serve the broader public.
Question 3: An agency's accounts receivable aging report shows 35% of balances are over 90 days past due. The administrator should:
- Write off all overdue balances immediately
- Review collection policies and implement more aggressive follow-up procedures (Correct answer)
- Reduce program fees to encourage payment
- Transfer the receivables to a special revenue fund
Correct answer: Review collection policies and implement more aggressive follow-up procedures
High aging receivables signal collection process weaknesses; reviewing and strengthening collection policies is the appropriate administrative response.
Question 4: Which financial ratio best measures a park agency's ability to pay short-term obligations?
- Debt service coverage ratio
- Current ratio (Correct answer)
- Return on investment
- Cost recovery ratio
Correct answer: Current ratio
The current ratio (current assets divided by current liabilities) measures short-term liquidity and the ability to cover near-term financial obligations.
Question 5: A park district is creating a 5-year Capital Improvement Plan (CIP). Which criterion should receive the highest priority?
- Projects that generate the most revenue
- Projects addressing safety hazards, ADA compliance, and critical infrastructure (Correct answer)
- Projects most requested by residents in surveys
- Projects with the lowest construction costs
Correct answer: Projects addressing safety hazards, ADA compliance, and critical infrastructure
Safety, legal compliance (ADA), and critical infrastructure failures represent the highest obligation and risk, justifying top CIP priority.
Question 6: A parks manager uses encumbrance accounting. When a purchase order is issued, the encumbrance entry:
- Records the actual expense and reduces the fund balance
- Reserves budget authority to prevent over-commitment of funds (Correct answer)
- Credits the vendor's account until delivery
- Transfers cash to a restricted account
Correct answer: Reserves budget authority to prevent over-commitment of funds
Encumbrances reserve or earmark budget appropriations when a commitment is made, preventing the same funds from being spent elsewhere.
Question 7: When a parks agency applies for a federal Land and Water Conservation Fund (LWCF) grant, the funded project is subject to:
- A 10-year repayment schedule
- Section 6(f) conversion restrictions in perpetuity (Correct answer)
- Annual performance audits by the EPA
- A 50% cost-share with the state only
Correct answer: Section 6(f) conversion restrictions in perpetuity
LWCF Section 6(f) requires that funded parkland be preserved for outdoor recreation in perpetuity; converting the use requires federal approval and replacement land.
CPRP Administration & Finance 5
A parks agency experiences a significant revenue shortfall mid-year.
Which budget action requires governing board approval?