CFM - Certified Facility Manager Finance and Business Flashcards

What is the purpose of a facility condition assessment (FCA) from a financial planning perspective?

Answer: To quantify deferred maintenance and capital renewal needs, enabling multi-year capital planning and budget prioritization

An FCA provides a financial roadmap of capital needs, preventing reactive spending and enabling strategic capital budgeting.

What is chargeback in facility management financial management?

Answer: A system that allocates FM service costs back to the business units that consume them, creating accountability for space and service usage

Chargeback systems create cost visibility and incentivize efficient use of FM services by making consuming departments pay for what they use.

A new HVAC system costs $500,000 and is projected to save $75,000 per year in energy costs. What is the simple payback period?

Answer: 6.7 years

$500,000 divided by $75,000 per year equals 6.67 years, approximately 6.7 years.

What is the purpose of a variance report in FM financial management?

Answer: To compare actual spending against budgeted amounts and explain significant differences

Variance reports identify where actual spending is tracking above or below budget, prompting investigation and corrective action.

Which financial concept describes the principle that money available today is worth more than the same amount in the future?

Answer: Time Value of Money

The time value of money is the foundational concept underlying NPV, IRR, and other discounted cash flow analysis tools.

What is an internal service fund in public sector facility management?

Answer: A revolving fund that finances FM services provided to other government departments, recovering costs through user charges

Internal service funds allow public FM organizations to operate like a business, recovering costs from the departments they serve.