SSA School Finance & Budget Management 2 — Questions and Answers
Question 1: In governmental fund accounting, 'fund balance' is best defined as:
- The total outstanding bond obligations the district owes to creditors
- The difference between a fund's total assets and total liabilities at year-end (Correct answer)
- The amount of federal funds remaining after all annual expenditures
- The portion of the budget formally allocated to contingency reserve accounts
Correct answer: The difference between a fund's total assets and total liabilities at year-end
Fund balance represents the net resources available in a governmental fund at fiscal year-end, calculated as total assets minus total liabilities.
Question 2: Which type of school district bond is secured by the district's taxing authority and typically requires voter approval for an accompanying property tax increase?
- Revenue bonds
- General obligation bonds (Correct answer)
- Municipal certificates of participation
- Convertible lease bonds
Correct answer: General obligation bonds
General obligation bonds are backed by the district's full faith and credit and taxing authority, and are typically authorized by voters who also approve the associated property tax rate increase.
Question 3: A school district receives a grant specifically designated for purchasing science laboratory equipment. This funding is classified as:
- Unrestricted general revenue
- Capital outlay entitlement funding
- Categorical (restricted) aid (Correct answer)
- Discretionary block grant funding
Correct answer: Categorical (restricted) aid
Categorical or restricted aid must be used for the specific purpose designated by the grantor and cannot be redirected to other budget areas.
Question 4: Which financial statement provides a summary of a school district's assets, liabilities, and net position at a specific point in time?
- Statement of revenues, expenditures, and changes in fund balances
- Balance sheet or statement of net position (Correct answer)
- Statement of cash flows
- Budget variance report
Correct answer: Balance sheet or statement of net position
The balance sheet (or statement of net position in government-wide reporting) summarizes what the district owns and owes at a specific date, providing a financial snapshot.
Question 5: A superintendent identifies a significant structural budget deficit for the upcoming fiscal year. Which approach is MOST sustainable for long-term financial health?
- Borrowing through short-term tax anticipation notes each year until revenues recover
- Conducting a systematic program review to reduce costs while preserving educational priorities (Correct answer)
- Deferring all facility maintenance expenditures to free up operational funds immediately
- Drawing down the fund balance reserve until the local economy improves
Correct answer: Conducting a systematic program review to reduce costs while preserving educational priorities
A systematic program review that aligns spending reductions with educational priorities addresses the structural causes of the deficit and creates sustainable solutions rather than temporary fixes.
Question 6: What does GASB stand for, and why is it significant for school district finance?
- Government Accounting and Standards Board — sets rules for federal spending
- Governmental Accounting Standards Board — establishes financial reporting standards for U.S. state and local governments (Correct answer)
- General Accounting and Standards Bureau — oversees IRS audits of public entities
- Government Auditing Standards Bureau — certifies external auditors for public schools
Correct answer: Governmental Accounting Standards Board — establishes financial reporting standards for U.S. state and local governments
GASB (Governmental Accounting Standards Board) establishes the accounting and financial reporting standards that school districts and other U.S. state and local governments must follow.
Question 7: A school district's debt service fund is established to:
- Pay salaries and benefits for instructional and support staff
- Fund major capital improvements and new facility construction
- Accumulate resources for and make payments on long-term debt principal and interest (Correct answer)
- Maintain emergency reserves for unanticipated operational expenses
Correct answer: Accumulate resources for and make payments on long-term debt principal and interest
The debt service fund accounts for the accumulation of financial resources and the payment of principal, interest, and related costs on the district's general long-term debt.
SSA School Finance & Budget Management 2
In governmental fund accounting, 'fund balance' is best defined as: