CPRP Financial Management and Budgeting 5 — Questions and Answers
Question 1: A park agency is considering issuing General Obligation (GO) bonds for a new aquatic center. What backs GO bonds?
- Revenue generated by the aquatic center
- The full faith and credit of the issuing government (Correct answer)
- A federal infrastructure grant guarantee
- The personal liability of elected officials
Correct answer: The full faith and credit of the issuing government
General Obligation bonds are backed by the issuing government's taxing power and full faith and credit, not the revenue of a specific project.
Question 2: Which financial statement shows a government's assets, liabilities, and net position at a specific point in time?
- Statement of revenues and expenditures
- Statement of cash flows
- Balance sheet (statement of net position) (Correct answer)
- Budget variance report
Correct answer: Balance sheet (statement of net position)
The balance sheet or statement of net position is a snapshot of financial position — assets minus liabilities — on a given date.
Question 3: A recreation manager notices that actual spending in the 'supplies' line item is 40% over budget at the midpoint of the fiscal year. What is the most appropriate immediate action?
- Transfer excess spending to the capital budget
- Conduct a variance analysis to identify the cause (Correct answer)
- Request a supplemental appropriation from the governing board
- Reduce staff hours to compensate
Correct answer: Conduct a variance analysis to identify the cause
Variance analysis identifies whether the overrun stems from increased enrollment, price increases, or poor controls before deciding on corrective action.
Question 4: In the context of parks and recreation finance, what is a 'tiered pricing' strategy?
- Charging different rates based on program cost categories
- Offering reduced fees for residents versus non-residents and further discounts for low-income participants (Correct answer)
- Setting prices based on peak versus off-peak usage times only
- Pricing programs higher to maximize revenue for the general fund
Correct answer: Offering reduced fees for residents versus non-residents and further discounts for low-income participants
Tiered pricing typically distinguishes resident/non-resident rates and includes income-based scholarships to balance access with cost recovery goals.
Question 5: What does the term 'fund balance' represent in governmental accounting?
- The amount of cash in the agency's checking account
- The difference between fund assets and fund liabilities (Correct answer)
- The total debt outstanding for a fund
- The approved budget amount for the fiscal year
Correct answer: The difference between fund assets and fund liabilities
Fund balance is the residual of assets over liabilities within a governmental fund, analogous to equity in the private sector.
Question 6: A parks department receives a Community Development Block Grant (CDBG) for park improvements in a low-income neighborhood. Which compliance requirement is most critical?
- Spending funds within 30 days of receipt
- Ensuring the project primarily benefits low-to-moderate income persons (Correct answer)
- Matching the grant dollar-for-dollar with local funds
- Bidding the project exclusively to local contractors
Correct answer: Ensuring the project primarily benefits low-to-moderate income persons
CDBG funds must primarily benefit low-to-moderate income individuals, which is the core national objective of the program.
Question 7: Which depreciation method allocates an equal expense amount each year over an asset's useful life?
- Declining balance method
- Units of production method
- Straight-line method (Correct answer)
- Sum-of-years-digits method
Correct answer: Straight-line method
The straight-line method divides the asset's cost (minus salvage value) equally across its estimated useful life.
CPRP Financial Management and Budgeting 5
A park agency is considering issuing General Obligation (GO) bonds for a new aquatic center.
What backs GO bonds?