Program Management Professional Program Financial Management 1 — Questions and Answers
Question 1: What is a program budget baseline used for in PgMP?
- To track stakeholder satisfaction scores
- To serve as the approved reference point against which actual program expenditures are measured (Correct answer)
- To replace the program charter
- To assign financial responsibility to project managers only
Correct answer: To serve as the approved reference point against which actual program expenditures are measured
The program budget baseline is the approved financial plan used to measure, monitor, and control actual costs throughout the program lifecycle.
Question 2: Earned Value Management (EVM) in program management uses which three core values to measure performance?
- Budget, Forecast, and Variance
- Planned Value (PV), Earned Value (EV), and Actual Cost (AC) (Correct answer)
- Scope, Time, and Cost baselines
- Return on Investment, NPV, and IRR
Correct answer: Planned Value (PV), Earned Value (EV), and Actual Cost (AC)
EVM tracks Planned Value (what was planned to be done), Earned Value (the value of work actually completed), and Actual Cost (what was actually spent).
Question 3: A Cost Performance Index (CPI) of 0.85 in a program indicates:
- The program is 15% under budget
- The program is spending $1.00 for every $0.85 of value delivered — over budget (Correct answer)
- The program will complete 15% early
- The program has a 15% schedule variance
Correct answer: The program is spending $1.00 for every $0.85 of value delivered — over budget
A CPI below 1.0 means the program is over budget, with $1.00 being spent for every $0.85 of earned value delivered.
Question 4: Which financial document provides a long-range view of program expenditures mapped to the program timeline?
- Program Business Case
- Program Budget Forecast (Correct answer)
- Project Risk Register
- Stakeholder Register
Correct answer: Program Budget Forecast
The Program Budget Forecast maps expected expenditures to the program timeline, providing visibility into when funds will be needed across the program lifecycle.
Question 5: What is 'management reserve' in the context of program financial management?
- Funds specifically allocated for identified risks
- An amount held by management for unplanned, unknown risks outside the program scope baseline (Correct answer)
- The program manager's discretionary spending budget
- Funds reserved for contract payments
Correct answer: An amount held by management for unplanned, unknown risks outside the program scope baseline
Management reserve is withheld by management to address unknown risks (unknown unknowns) and requires management approval to access.
Question 6: Which financial metric best measures the overall value an investment will generate over a program's lifetime, adjusted for the time value of money?
- Return on Investment (ROI)
- Net Present Value (NPV) (Correct answer)
- Cost Performance Index (CPI)
- Benefit-Cost Ratio (BCR)
Correct answer: Net Present Value (NPV)
NPV calculates the present value of all future cash flows minus initial investment, accounting for the time value of money to determine overall investment value.
Program Management Professional Program Financial Management 1
What is a program budget baseline used for in PgMP?