CSET Financial Management & Budgeting 2 — Questions and Answers
Question 1: A school district receives an unexpected state grant mid-year. Which budget process should be used to incorporate these funds?
- Budget amendment (Correct answer)
- Carry-forward allocation
- Deficit financing
- Line-item transfer
Correct answer: Budget amendment
A budget amendment is the formal process for modifying an adopted budget to reflect new revenue sources such as unexpected grants.
Question 2: Which financial statement shows a school district's assets, liabilities, and net position at a specific point in time?
- Statement of revenues and expenditures
- Statement of net position (Correct answer)
- Statement of cash flows
- Budget variance report
Correct answer: Statement of net position
The statement of net position (balance sheet equivalent) presents assets, liabilities, and net position as of a specific date.
Question 3: An administrator notices that salary expenditures are 60% spent after only 40% of the fiscal year. What is the most appropriate immediate action?
- Request a budget amendment to increase the salary line
- Conduct a variance analysis to identify the cause (Correct answer)
- Transfer funds from another department
- Freeze all non-essential spending immediately
Correct answer: Conduct a variance analysis to identify the cause
Variance analysis identifies whether the overspending reflects timing differences, errors, or a real budget problem before taking corrective action.
Question 4: In governmental accounting, which fund type is used to account for resources restricted for a specific purpose by external parties?
- General fund
- Special revenue fund (Correct answer)
- Capital projects fund
- Debt service fund
Correct answer: Special revenue fund
Special revenue funds account for proceeds restricted or committed for specific purposes other than debt service or capital projects.
Question 5: What does the term 'encumbrance' refer to in school district accounting?
- Money already spent and recorded
- Funds reserved for outstanding purchase orders (Correct answer)
- Overdrawn budget line items
- Debt obligations due within one year
Correct answer: Funds reserved for outstanding purchase orders
Encumbrances represent commitments related to unperformed contracts or purchase orders, reserving budget authority before the actual expenditure occurs.
Question 6: Which approach to school budgeting requires every program to justify its entire budget from zero each cycle, rather than building from the prior year?
- Incremental budgeting
- Zero-based budgeting (Correct answer)
- Site-based budgeting
- Program budgeting
Correct answer: Zero-based budgeting
Zero-based budgeting requires each program to justify all expenditures from scratch each budget cycle, not just increases over the previous year.
Question 7: A school principal is managing a school-level budget. Which practice best demonstrates effective budget stewardship?
- Spending all funds before year-end to avoid budget reductions
- Monitoring expenditures monthly against the approved budget (Correct answer)
- Pooling restricted categorical funds with general discretionary funds
- Delegating all budget decisions to department chairs
Correct answer: Monitoring expenditures monthly against the approved budget
Regularly monitoring expenditures against the budget allows administrators to identify variances early and make informed financial decisions.
CSET Financial Management & Budgeting 2
A school district receives an unexpected state grant mid-year.
Which budget process should be used to incorporate these funds?