Program Management Professional Program Financial Management 2 — Questions and Answers
Question 1: When a program's Estimate at Completion (EAC) significantly exceeds the original Budget at Completion (BAC), the program manager should:
- Ignore the variance and proceed without action
- Analyze cost drivers, implement corrective actions, and communicate the revised forecast to stakeholders (Correct answer)
- Immediately terminate the program
- Request additional budget without analysis
Correct answer: Analyze cost drivers, implement corrective actions, and communicate the revised forecast to stakeholders
A significant EAC overrun requires root cause analysis, corrective actions to improve cost performance, and transparent communication of the revised financial outlook.
Question 2: Program financial reporting to executives should typically focus on:
- Detailed line-item expenditures for every work package
- High-level cost performance, forecast accuracy, and key financial decisions needed (Correct answer)
- Raw accounting data without context or analysis
- Individual contractor invoices
Correct answer: High-level cost performance, forecast accuracy, and key financial decisions needed
Executive financial reporting should be concise, highlighting overall cost performance trends, forecast accuracy, and decisions that require executive attention.
Question 3: In program financial management, 'funding authorization' refers to:
- Approving individual expense reports
- The formal approval of program funds aligned to program phases or milestones (Correct answer)
- The process of hiring financial controllers
- Generating purchase orders for equipment
Correct answer: The formal approval of program funds aligned to program phases or milestones
Funding authorization is the formal release of program funds, often tied to phase completions or milestone achievements to maintain financial control.
Question 4: Cost aggregation in program management means:
- Averaging costs across all component projects
- Rolling up individual project costs to create a total program cost view (Correct answer)
- Eliminating cost variances across components
- Allocating a single budget to all components equally
Correct answer: Rolling up individual project costs to create a total program cost view
Cost aggregation consolidates individual component project costs into a unified program cost baseline, enabling program-level financial monitoring.
Question 5: A program manager discovers a component project is significantly over budget. What is the appropriate program-level response?
- Take no action as it is solely the project manager's responsibility
- Assess the impact on the program budget baseline and benefits, then decide on corrective action or re-forecasting (Correct answer)
- Immediately cancel the component project
- Transfer the excess cost to another component's budget without analysis
Correct answer: Assess the impact on the program budget baseline and benefits, then decide on corrective action or re-forecasting
Program-level response requires assessing the overrun's impact on the overall program budget and benefit delivery before determining appropriate corrective action.
Question 6: Which financial technique is used to compare the financial benefits of a program against its costs to determine if it is worth pursuing?
- Critical Path Analysis
- Benefit-Cost Analysis (BCA) (Correct answer)
- Earned Value Management
- Monte Carlo Simulation
Correct answer: Benefit-Cost Analysis (BCA)
Benefit-Cost Analysis quantifies and compares the total expected benefits against all program costs to support investment decision-making.
Program Management Professional Program Financial Management 2
When a program's Estimate at Completion (EAC) significantly exceeds the original Budget at Completion (BAC), the program manager should: