CPRE Finance and Budgeting 1 — Questions and Answers
Question 1: Which budgeting approach requires each department to justify all expenditures from scratch each fiscal year?
- Incremental budgeting
- Zero-based budgeting (Correct answer)
- Line-item budgeting
- Performance budgeting
Correct answer: Zero-based budgeting
Zero-based budgeting requires all expenses to be re-justified each period rather than using prior-year figures as a baseline.
Question 2: A park district's capital improvement plan (CIP) typically covers what time horizon?
- 1 year
- 2 years
- 5–10 years (Correct answer)
- 20+ years
Correct answer: 5–10 years
Capital improvement plans typically span 5–10 years to allow for long-range infrastructure planning and funding allocation.
Question 3: Which financial ratio measures an agency's ability to meet short-term obligations?
- Debt-to-equity ratio
- Current ratio (Correct answer)
- Return on investment
- Operating ratio
Correct answer: Current ratio
The current ratio (current assets divided by current liabilities) indicates whether an agency can cover its short-term debts.
Question 4: Enterprise fund accounting is used in parks and recreation primarily to:
- Track grant expenditures separately
- Account for activities that are largely self-supporting through user fees (Correct answer)
- Manage endowment investments
- Record intergovernmental transfers
Correct answer: Account for activities that are largely self-supporting through user fees
Enterprise funds are used for government activities that recover costs primarily through charges to users, such as golf courses or aquatic centers.
Question 5: Which standards body governs the financial reporting requirements for local government agencies including park districts?
- FASB
- GASB (Correct answer)
- SEC
- OMB
Correct answer: GASB
The Governmental Accounting Standards Board (GASB) sets accounting and financial reporting standards for state and local governments.
Question 6: A park agency receives a $500,000 grant that must be spent on trail construction only. This is best classified as:
- General fund revenue
- Restricted revenue (Correct answer)
- Unrestricted contribution
- Capital lease proceeds
Correct answer: Restricted revenue
Restricted revenue is funding that must be used for a specific purpose as designated by the grantor.
CPRE Finance and Budgeting 1
Which budgeting approach requires each department to justify all expenditures from scratch each fiscal year?