CPWM Budget and Finance 4 — Questions and Answers
Question 1: A public works department's revenue bond is backed by:
- Property tax levies
- The government's general taxing power
- Specific revenues generated by the funded project or enterprise (Correct answer)
- Federal transportation grants
Correct answer: Specific revenues generated by the funded project or enterprise
Revenue bonds are repaid solely from the revenues generated by the specific project or enterprise they finance, such as water or sewer fees.
Question 2: When preparing a budget request, a public works manager uses trend analysis to forecast future costs. Which data is LEAST useful for this purpose?
- Three-year history of maintenance expenditures
- Current year-to-date actual spending
- Peer agency benchmarking data
- The manager's personal opinion on future needs (Correct answer)
Correct answer: The manager's personal opinion on future needs
Trend analysis relies on objective historical data and benchmarks; personal opinions without data support are the least reliable forecasting input.
Question 3: Under GASB standards, infrastructure assets such as roads and bridges must be reported on the government-wide financial statements at:
- Replacement cost
- Fair market value
- Historical cost less accumulated depreciation (Correct answer)
- Appraised value
Correct answer: Historical cost less accumulated depreciation
GASB standards require capital assets including infrastructure to be reported at historical cost (or estimated cost) net of accumulated depreciation on government-wide statements.
Question 4: A public works department uses an internal service fund. What is the primary purpose of this fund type?
- To account for services provided to external customers
- To centralize accounting for services provided to other departments within the same government (Correct answer)
- To manage bond proceeds for capital projects
- To track restricted grant revenues
Correct answer: To centralize accounting for services provided to other departments within the same government
Internal service funds account for activities that provide goods or services to other departments or agencies of the same government on a cost-reimbursement basis.
Question 5: A public works director reviews a budget variance report showing a 15% unfavorable variance in fuel costs. What is the FIRST step in responding to this variance?
- Immediately request a budget amendment
- Investigate the cause to determine whether it is a price, volume, or efficiency issue (Correct answer)
- Cut other budget line items to compensate
- Report the variance to the governing board without analysis
Correct answer: Investigate the cause to determine whether it is a price, volume, or efficiency issue
Understanding the root cause of a variance—whether driven by price changes, higher usage volume, or inefficiency—is essential before deciding on a corrective action.
Question 6: Which procurement method is typically used for public works construction contracts to ensure the lowest responsible competitive price?
- Sole-source procurement
- Request for Proposals (RFP)
- Invitation for Bids (IFB) / sealed bidding (Correct answer)
- Cooperative purchasing agreement
Correct answer: Invitation for Bids (IFB) / sealed bidding
Sealed bidding (Invitation for Bids) is the standard competitive method for construction contracts, awarding to the lowest responsive and responsible bidder.
Question 7: What financial metric measures the number of days it takes for a public utility to collect its outstanding accounts receivable?
- Current ratio
- Days Sales Outstanding (DSO) (Correct answer)
- Debt service coverage ratio
- Operating ratio
Correct answer: Days Sales Outstanding (DSO)
Days Sales Outstanding (DSO) measures the average number of days between billing and collection, indicating the efficiency of accounts receivable management.
CPWM Budget and Finance 4
A public works department's revenue bond is backed by: