CPWM Budget and Finance 2

Question 1

Which budgeting approach requires managers to justify every expenditure from scratch rather than basing allocations on prior-year spending?

Accepted Answer

Zero-based budgeting

Answer

Zero-based budgeting requires each budget cycle to start from zero and justify all expenditures anew, rather than using the prior year's budget as a baseline.

Question 2

A public works department receives a $500,000 grant that must be spent on road resurfacing within 18 months. This is best classified as what type of fund?

Accepted Answer

Special revenue fund

Answer

Special revenue funds account for revenues legally restricted or committed to expenditures for specified purposes, such as grant-funded projects.

Question 3

What is the primary purpose of a fund balance reserve policy in public works finance?

Accepted Answer

To ensure adequate liquidity for emergencies and budget shortfalls

Answer

Fund balance reserve policies establish minimum reserve levels to maintain liquidity, cover unexpected costs, and protect against revenue shortfalls.

Question 4

Which type of cost does NOT change with the volume of services provided by a public works department?

Accepted Answer

Fixed cost

Answer

Fixed costs remain constant regardless of service volume, such as facility lease payments or full-time employee salaries.

Question 5

A city issues $2 million in general obligation bonds to finance a new public works facility. What pledges repayment of these bonds?

Accepted Answer

The full faith and credit of the government

Answer

General obligation bonds are backed by the full faith and credit of the issuing government, meaning the government's taxing power guarantees repayment.

(CPWM) Certified Public Works Manager Practice Test

(CPWM) Certified Public Works Manager Practice Test

CPWM Budget and Finance 2