Deck 12: Budgeting and Performance Measurement

Question 1

Service efforts and accomplishments (SEA) reporting helps citizens, elected officials, appointed officials, investors and creditors, and other interested parties evaluate the government's performance in the absence of a "bottom line" measure such as exists for for-profit entities.

Answer 1

True

Question 2

Under service efforts and accomplishments (SEA) reporting, outcome measures gauge accomplishments, or the results of services provided, such as the percentage of lane-miles of road in excellent, good, or fair condition.

Answer 2

True

Question 3

In governments, the budget has always played a role in external financial reports through the required budget-to-actual comparison schedules or statements for those funds that have a legally approved budget.

Answer 3

True

Question 4

Under service efforts and accomplishments (SEA) reporting input measures are quantity measures that reflect the quantity of a service provided, such as the number of lane-miles of road repaired.

Question 5

Despite its initial popularity, service efforts and accomplishments reporting has lost favor in recent years.

Question 6

Budget appropriations for governmental funds ordinarily cover only one year, while capital budgets are often multi-year.

Question 7

Public hearings must be held to provide adequate opportunity for citizens' input to government budgets, prior to legislative adoption of the budget.

Question 8

Under GASB standards, every government, regardless of its size, is instructed to prepare a cash budget for each month of the fiscal year.

Question 9

Budgeting is an important part of a manager's planning and control responsibilities in both public and private organizations.

Question 10

Popular budgeting approaches employed by governments include incremental budgeting, performance budgeting, program budgeting, planning-programming-budgeting systems, and zero-based budgeting.

Question 11

To determine which costs are allowable for charging to a federal assistance program, accountants and auditors refer to the GASB cost circular.

Question 12

A major advantage of activity-based costing (ABC) is that it reduces unit cost distortions arising from overhead allocations that often occur using traditional cost accounting systems.

Question 13

When planning, budgeting, and performance measurement are related, good performance is rewarded, and consequences exist for substandard performance.

Question 14

The sole purpose of preparing a government budget is to show compliance with laws and regulations.

Question 15

Cash planning and budgeting are important in government because the timing of cash inflows often does not necessarily coincide with the timing of cash outflows.

Question 16

Service efforts and accomplishments measures suffer from the same problem as line-item or object-of-expenditures budgeting; that is, focusing only on resource inputs while ignoring outputs and outcomes of governmental activities.

Question 17

Total quality management (TQM) seeks to continuously improve an organization's ability to meet or exceed customers' demands, and, as such, is useful in a government setting as well as a business setting.

Question 18

Government budgets must be voted upon by citizens for approval in an annual general election.

Question 19

A major disadvantage of activity-based costing (ABC) in a government setting is the very limited number of activities for which it can be used.

Question 20

The type of budgeting that relates input of resources to output of services is zero-based budgeting.

Question 21

The schedule of legally required events in the budgeting process is generally referred to as the:

A) Budget docket.
B) Legal timetable.
C) Hearing schedule.
D) Budget calendar.

Question 22

Which of the following statements is not True?

A) A balanced scorecard is an integrated set of performance targets, both financial and nonfinancial, that are derived from an organization's strategies about how to achieve its goals.
B) Total quality management (TQM) seeks to continuously improve the government's ability to meet or exceed demands from customers who might be external, such as taxpayers and service recipients, or internal, such as the customers of an internal service fund.
C) Service efforts and accomplishments (SEA) reporting links customer (taxpayer and other resource provider) satisfaction to improvements in the operating systems and processes used to provide goods and services.
D) Customer relationship management (CRM) systems create an integrated view of a customer to coordinate services from all channels of the organization with the intent to improve the long-term relationship the organization has with its customer.

Question 23

Effective capital budgeting for general capital assets of a government requires:

A) Intermediate and long-range capital improvement plans for general capital assets.
B) Nonfinancial information on physical measures and service condition of capital assets of component units.
C) Consideration of how proprietary fund capital projects will be financed.
D) Information about the capital asset needs of a motor pool accounted for as an internal service fund.

Question 24

A common approach to budgeting line-items whereby the current year's budget is constructed by adding or subtracting amounts expected to be required by line items is:

A) Performance budgeting.
B) Zero-based budgeting.
C) Program budgeting.
D) Incremental budgeting.

Question 25

Which of the following statements regarding service efforts and accomplishments (SEA) is not True?

A) SEA information includes indicators of a government's actual performance in providing services to its citizens.
B) As governments integrate strategic planning, budgeting, and performance measurement, information on SEA is available and often provided to the public.
C) SEA reporting may take the form of a published report, an electronic report posted on a government's website, or a pamphlet designed to summarize an entity's SEA measurement results.
D) SEA reporting is required by governments with populations greater than 500,000.

Question 26

The number of lane-miles of road repaired to a specified minimum condition is an example of an:

A) Output measure.
B) Input measure.
C) Outcome measure.
D) Efficiency measure.

Question 27

Which of the following statements regarding government budgets is not True?

A) A budget should be enacted before the fiscal year begins and be integrated with the financial accounting system so that actual results can be compared to budgets at regular intervals.
B) The budget's role is limited to inclusion in internal financial reports and budgetary compliance monitoring for those funds that have a legally approved budget.
C) Integrating the budget into the accounting system allows management to oversee individual unit performance and react quickly to variances between actual results and budgeted plans.
D) A budget is a plan of financial operation embodying an estimate of proposed expenditures for a given period of time and the proposed means of financing them.

Question 28

Under certain circumstances a cost generally unallowable under a grant agreement may be allowable.

Question 29

In budgeting revenues, state and local government administrators should:

A) Be cautious not to utilize unauthorized sources or exceed authorized ceilings on revenues from specific sources.
B) Ensure that at least the amount of revenues needed to meet spending needs are raised, even if authorized ceilings on some revenue sources must be exceeded.
C) Utilize all authorized revenue sources at the maximum amount allowed by law.
D) Ignore "other financing sources" since these resource inflows are not available for appropriation.

Question 30

A budgeting method that derives the subsequent year's budget from the current year's budget is called:

A) Planning-programming-budgeting.
B) Incremental budgeting.
C) Zero-based budgeting.
D) Performance budgeting.

Question 31

Cash disbursement budgets:

A) Are prepared to facilitate the preparation of government-wide financial statements.
B) Are usually prepared for each month of the year, or for shorter intervals, in order to facilitate planning short-term borrowings and investments.
C) Are prepared only for funds not required to operate under legal appropriation budgets.
D) Are prepared only for each fiscal year because disbursements for each month are approximately equal.

Question 32

Governments receiving federal grants and contract funds are expected to have an accounting information system with adequate internal controls that can deliver reliable information to compare the actual amount spent with budgeted amounts.

Question 33

Which of the following statements is not consistent with the GASB's "Budgeting, Budgetary Control, and Budgetary Reporting Principle"?

A) An annual budget must be adopted using generally accepted accounting principles.
B) The accounting system should provide the basis for appropriate budgetary control.
C) Budgetary comparisons should be presented for the General Fund and each major special revenue fund for which an annual budget has been adopted.
D) The budgetary comparisons should present both the original and the final appropriated budgets for the reporting period.

Question 34

Service efforts and accomplishments reporting is also referred to as citizen-centric reporting.

Question 35

The United States Office of Management and Budget (OMB) publishes uniform guidance, which provides streamlined guidelines for grant accounting and reporting.

Question 36

The GASB "Budgeting Principle" states that an annual budget should be adopted by (for) every:

A) Fiduciary fund type.
B) Fund of a government.
C) Governmental unit.
D) Governmental fund type except special revenue funds.

Question 37

GASB Concepts Statement No. 2 requires state and local governments to include service efforts and accomplishments measures within the comprehensive annual financial report.

Question 38

Which of the following is not a typical step in the budgeting process for a state or local government?

A) Request by management for input on the budget.
B) Review and revisions of the budget by the administrative staff of each unit.
C) Public hearings for citizen input.
D) Approval by a majority vote of the citizenry.

Question 39

Cash receipts and cash disbursement budgets for a government:

A) Should be prepared for all funds for the entire fiscal year.
B) Should be prepared monthly or as needed to enhance cash management, investment management, and short-term debt management.
C) Should be prepared for only those funds for which appropriations budgets are required by law to be prepared on the accrual basis or the modified accrual basis.
D) Should be prepared for only those funds for which appropriations budgets are not required by law.

Question 40

Which of the following might appropriately be termed an outcome indicator for a police department that reports service efforts and accomplishments (SEA) indicators?

A) Number of crimes investigated.
B) Decrease in burglaries.
C) Hours of patrol.
D) Number of personnel hours expended.

Question 41

State and local governments and not-for-profit organizations that receive grants or contracts from the federal government should charge costs of these grants or contracts in conformity with:

A) Cost Accounting Standards Board standards.
B) Office of Management and Budget circulars.
C) Financial Accounting Standards Board standards.
D) Governmental Accounting Standards Board standards.

Question 42

Service efforts and accomplishments (SEA) information:

A) Includes indicators of a government's actual performance in providing services to its citizens.
B) Aids users in assessing the economy, efficiency, and effectiveness of government.
C) Is required for all governments that issue a CAFR.
D) Both includes indicators of a government's actual performance in providing services to its citizens and aids users in assessing the economy, efficiency, and effectiveness of government are True.

Question 43

Explain how strategic planning, budgeting, and performance measurement can be integrated in a government and why this integration is desirable.

Question 44

Under federal guidelines, when is a cost considered reasonable?

Question 45

Which of the following statements regarding service efforts and accomplishments (SEA) is not True?

A) Measures of service efforts, or input measures, relate to the amount of financial and nonfinancial resources (such as money and materials) used in a program or process.
B) Effort measures relate service efforts to outputs of service and to outcomes or results of services.
C) Output measures are quantity measures that reflect either the quantity of a service provided or the quantity of service provided that meets a specified quality requirement.
D) Outcome measures gauge accomplishments, or the results of services provided.

Question 46

The finance officer of a small city has heard that certain items of cost may be allowable under federal grants, even though they were not incurred specifically for the grant. To what source could the finance officer go to determine what costs are allowable under federal grants? Why do you think the federal government specifies the allowability of costs?

Question 47

For each of the following definitions, indicate the key term from the list that best matches by placing the appropriate definition.
A. Allowable costs
B. Cost principle
C. Cost objective
D. Indirect costs
E. Direct costs
F. Activity-based costing
________ 1. A system that identifies specific costs that drive the cost of service or production activities
________ 2. Costs incurred that cannot be identified specifically with a cost objective
________ 3. Costs that meet specific criteria determined by the resource provider
________ 4. A program, function, activity, award, organizational subdivision, contract, or work unit established for the accumulation of costs

Question 48

Which of the following is not one of the criteria for an allowable cost under a federal grant?

A) A cost that is necessary and reasonable for the performance of the federal award and allocable thereto under the OMB cost principles.
B) A cost that conforms to any limitations or exclusions set forth in the OMB cost principles or in the federal award as to types or amount of cost items.
C) A cost that has been approved by the FASB or GASB as an allowable cost.
D) A cost that is adequately documented.

Question 49

Balanced scorecards integrate all of the following into a document that can be shared with employees and stakeholders except:

A) GASB financial reporting standards.
B) Internal business processes measures.
C) Nonfinancial measures, such as customer satisfaction.
D) Financial performance measures.

Question 50

Efficiency measures, as the term is used in the service efforts and accomplishments (SEA) literature, can be described as:

A) Measures that relate the quantity or cost of resources used to units of output.
B) Measures that relate to the amount of financial and nonfinancial resources used in a program or process.
C) Measures that relate costs to outcomes.
D) Measures that reflect either the quantity or quality of a service provided.

Question 51

Which of the following has contributed most to governments' interest in activity-based costing?

A) GASB standards.
B) Implementation of innovative management approaches (such as TQM and SEA measures) in response to public demand for greater accountability and productivity.
C) Increased demand for high profile management tools to bolster the image of government.
D) The enactment of Sarbanes-Oxley legislation.

Question 52

What budgeting approach requires justification for the inclusion of every activity each year? Briefly describe this method and how it can be effective.

Question 53

Describe what is meant by the direct costs of a program (for example, a fire prevention program) and why it is important to distinguish direct costs from indirect costs.

Question 54

Are governments required to report their budgets externally? Explain.

Question 55

Explain what is required to develop an effective total quality management (TQM) program for a government.

Question 56

All of the following are objectives of activity-based cost (ABC) accounting in government except:

A) To preserve, at a minimum, the present quality and availability of services.
B) To help find lower cost alternatives to providing services.
C) To link customer (taxpayer) satisfaction to improvements in the operating systems used to provide goods and services.
D) To make increases in the volume of services dependent on reducing costs.

Question 57

The GASB identifies which of the following three broad categories of service efforts and accomplishments (SEA) measures:

A) Measures of service efforts, measures of service accomplishments, and measures of efficiency.
B) Measures of service efforts and accomplishments, measures of service efficiency, and measures of service effectiveness.
C) Measures of service efforts, measures of service accomplishments, and measures of the costs of service efforts and accomplishments.
D) Measures of service efforts, measures of service accomplishments, and measures that relate efforts to accomplishments.

Question 58

For each of the following definitions, indicate the key term from the list that best matches by placing the appropriate definition.
A. Efficiency measures
B. Effectiveness measures
C. Planning-programming-budgeting system
D. Zero-based budgeting
E. Program budgeting
F. Flexible budgeting
G. Incremental budgeting
H. Budget calendar
________ 1. A budget in which each activity and the amounts of resources requested for each activity must be justified each year
________ 2. A budget that is derived from the current year budget by adding or subtracting amounts expected to be required by line-items
________ 3. A budgeting approach that integrates various elements of planning for programs
________ 4. Measures that relate efforts to accomplishments
________ 5. A budget in which resource inputs and service outputs are identified by programs

Question 59

Which of the following statements regarding costs under federal awards is not True?

A) Only items of cost specifically mentioned in a grant, contract, or other agreement document are allowable.
B) Several costs are allowable under highly restrictive conditions and generally require the explicit approval of the grantor agency.
C) For major not-for-profit organizations and institutions of higher learning, indirect costs must be classified within two broad categories termed "facilities" and "administration."
D) Direct costs are those that can be identified specifically with a particular cost objective.

Question 60

Identify and define the three broad categories of service efforts and accomplishments (SEA) measures.