GIPA Final1 by 34G2ESH


									                                           BUDGETING & FINANCIAL MANAGEMENT
                                         Name: ____________________________________
1. A public produces the following pattern of individual benefits and      6. Which is not a reason for privatizing government services?
    costs for the people influenced by the project.
                                                                                     a.   To increase production efficiency.
     Individual               Benefit              Cost Share                        b.   To improve service to the public.
                                                                                     c.   To raise cash.
     A                        $ 8,000              7,000                             d.   All of the above are reasons for privatization.

     B                        $ 6,000              5,000                   7. Agency X has an appropriation of 10 million GEL in 1991 and of
                                                                               11.5 million GEL in 1992 (an increase of 1.5 million GEL or
     C                        $10,000              9,000                       15%). According to the Incrementalist view, what is the 1993
                                                                               budget base for the agency?
     D                        $ 4,000              6,000
                                                                                     a.   10 million GEL
     E                        $ 2,000              6,000                             b.   13 million GEL (11.5 million GEL plus 1.5%)
                                                                                     c.   11.5 million GEL
     Total                    $30,000              $33,000
                                                                           8. What best describes an executive budget?

The project:                                                                         a.   A forecast of expenditures and receipts for the next year.
                                                                                     b.   A report of recent operating conditions.
          a.   passes the Pareto criterion but is not economically                   c.   An executive plan for fiscal operations for an upcoming
               feasible.                                                                  period.
          b.   would pass a majority note but not the Pareto criterion.              d.   A law defining the fiscal environment for an upcoming
          c.   passes the criterion of economic feasibility, but would                    year.
               not pass majority vote.
          d.   passes the Pareto criterion but would not pass a majority   9. Place these stages in the budget cycle in the order in which they
               vote.                                                       normally occur:

2. A pure public good is characterized by:                                           a.   agency request, executive consideration, legislative
                                                                                          consideration, audit, service delivery.
          a.   both nonrivalry in use and failure of exclusion.                      b.   executive consideration, agency request, legislative
          b.   either nonrivalry in use or failure of exclusion.                          consideration, service delivery, audit.
          c.   nonrivalry in use and ability to exclude.                             c.   executive consideration, agency request, legislative
          d.   rivalry in use and failure of exclusion.                                   consideration, audit, service delivery.
                                                                                     d.   Agency request, executive consideration, legislative
3. If a good characterization by easy exclusion but many may                              consideration, service delivery, audit.
     concurrently use it without reducing the amount available for
     others, the good is a:                                                10. You, now the head of the Immigration and Naturalization Service,
                                                                                find that the agency has spent through half the fiscal year more
          a.   private good.                                                    than the plan envisioned in the agency’s appropriation. The
          b.   common property resource                                         problem has emerged because of the unexpected influx of Haitian
          c.   toll good.                                                       refugees. Which of these actions is most reasonable?
          d.   public good.
                                                                                     a.   Prepare a request for a supplemental appropriation.
4. Which of the following is not an advantage of using a market system               b.   Prepare a request for a continuing resolution.
    to allocate goods and services?                                                  c.   Pack your bags; you’re going to jail.
                                                                                     d.   Prepare a request for a rescission.
          a.   Marginal decision making results in mutual advantage
               for both parties in a transaction?                          11. Which of the following would not be a concern of a financial
          b.   The desire to maximize returns produces impersonal and      audit?
               non-biased transactions.
          c.   Competitive markets provide buyers the best product at                a.   Whether the department of Environmental Services
               the lowest price.                                                          actually spent the 150,000 GEL its reports say it did.
          d.   None-all are advantages.                                              b.   Whether the 700 gallons of gasoline purchased by the
                                                                                          Department were actually delivered.
5. Markets will fail to produce an efficient outcome when all of the                 c.   Whether the 14 street cleaners employed by the
    below occur EXCEPT when:                                                              Department could be replaced by a motorized sweeper
                                                                                          to save 75,000 GEL per year.
          a.   externalities arise.                                                  d.   Whether permit fees collected by the Department are
          b.   the good is non-rival and non-exclusive.                                   remitted in their entirety to the city Treasurer.
          c.   monopolies arise.
          d.   the good or service is a necessity.
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12. An effective public budgeting system should:                                    b.   describe the current operation’s workload productivity
                                                                                         staffing and funding.
          a.   provide accurate and relevant information to decision                c.   if additional funding is requested, describe the specific
               makers.                                                                   reason and uses of the additional funding.
          b.   recognize competing claims on resources and alternative              d.   All of the above.
          c.   provide incentives for public officials to respond to       18. Break-even analysis attempts to determine:
               public demands.
          d.   All of the above.                                                    a.   levels of transfer payments.
                                                                                    b.   levels of grant payments.
13. The Appropriation to the State Library System (fiscal year starts               c.   the point at which total costs equal total revenues.
     January 1) for fiscal 1993 was 15 million GEL. On June 30,                     d.   the point at which variable costs equal variable
     2001, its budget reports showed expenditures of 7.5 million GEL                     revenues.
     and encumbrances outstanding of .5 million GEL. Quarterly
     allotments were as follows: Q1-3.75 million GEL; Q2-4.5               19. Internal control standards do not include which of the following?
     million GEL; Q3-3.75 million GEL; and Q4-3 million GEL.
     What was the status of system operations at that point?                        a.   Separation between operational transactions and
                                                                                         accounting record keeping.
          a.   Operation consistent with plan; half the year elapsed and            b.   Maintain qualified personnel and rotate duties.
               half the money spent.                                                c.   Use sequentially numbered purchase orders.
          b.   Over plan by .25 million GEL.                                        d.   Require regular external audit.
          c.   Under plan by .25 million GEL.
          d.   Under plan by .75 million GEL.                              20. Which of the following is not a problem associated with traditional
                                                                                line-item budgets?
14. Which of the following is not a “rule of thumb” used by budget
     analysts in review of agency budgets?                                          a.   The fallacy of appellation.
                                                                                    b.   Single-year cost orientation.
          a.   Cut departments with “bad” reputations.                              c.   Absence of program value measurement.
          b.   Compare proposed budget with prior year and current                  d.   Inability to control input usage.
               year budget and actual expenditures to identify areas
               which may be reduced without great trouble.                 21. Performance budgets?
          c.   Recommend repair and renovation rather than
               replacement of facilities.                                           a.   link performance objective to requests for funds.
          d.   None of the above; all are “rules of thumb.”                         b.   do not focus on measurable activities.
                                                                                    c.   classify the budget by goals or objectives (e.g.,
15. A requirement that the Governor’s operating budget be balanced                       Protection of Persons and Property, Safe and Speedy
usually means that:                                                                      Transportation).
                                                                                    d.   None of the above.
          a.   All expenditures proposed in that document must be
               covered either by revenue raised currently, available       22. Traditional budgets:
               from prior year surpluses, or by borrowing on the
               promise to repay from future revenues.                               a.   lack structures for expenditure control.
          b.   All expenditures proposed in that document must be                   b.   distribute spending authority through organization chart
               covered either by revenue raised currently or available                   structures.
               from prior year surpluses.                                           c.   have a multi-year focus for expenditure proposals.
          c.   The state can have no debt.                                          d.   require crosswalks to identify appropriations to
          d.   State expenditure cannot exceed state revenue for the                     agencies.
                                                                           23. Traditional line-item budgets:
16. A budget request based on full financing would be correct only if:
                                                                                    a.   focus attention on the value of public services provided.
          a.   the agency had received much less than requested in                  b.   require crosswalks to identify appropriations to
               earlier years.                                                            agencies.
          b.   the agency expected substantial increases in workload.               c.   provide mechanisms for expenditure control.
          c.   the agency had started new operations at some point                  d.   estimate the costs of accomplishing measurable tasks or
               during the prior fiscal year.                                             activities.
          d.   None of the above.
                                                                           24. A feature that distinguishes a performance budget from other
17. Budget justification is the key to a successful request and should:         budget classification structures is:

          a.   be geared to decision makers who are less                            a.   unit cost estimates for tasks or activities.
               knowledgeable about the operations of the agency.                    b.   quantitative performance objectives for agencies and

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          c.   cost estimates for each agency.                            32. Which of the following would be a reasonable component of a
          d.   measurement of worth of agency functions to society.       capital budget?

25. Which of the following is a special problem associated with object              a.   The salaries of the state planning agencies, because the
     of expenditure budget systems?                                                      impact of their efforts endures for many years.
                                                                                    b.   The cost of recurring purchases of motor vehicles.
          a.   Officials often do not understand their complexities.                c.   The cost of a new chair in the prime minister’s office.
          b.   Operating agencies have unclear responsibility for                   d.   None of the above.
          c.   Budgets are relatively expensive to prepare in that        33. Why are the capital costs of long-term projects discounted to
               format.                                                    present value?
          d.   None of the above.
                                                                                    a.   because money that is received in the future has a
26. Which is not a disadvantage of the focus on input use incremental                    greater value than money received now.
budgeting?                                                                          b.   To better account for the resource yield that will be
                                                                                         foregone by a long-term investment.
          a.   It impedes the consideration of alternative.                         c.   Because the amount of money that is spent in interest
          b.   It interferes with financial controls                                     payments for the project should not be incorporated into
          c.   It constrains operations toward current process and                       the capital budget.
               discourages innovation.                                              d.   To better account for the relative stability of tax-free
          d.   It doesn’t incorporate explicit cost benefit analysis.                    government investments as compared to private sector
27. The focus of a incremental budget is:
                                                                          34. What is the Benefit Cost Ratio for a project costing 200,000 GEL
          a.   input use and control.                                          in the first year (no discount) that produces a net benefit of
          b.   output produced and control.                                    50,000 GEL/year for five years when the discount rate is 5%?
          c.   output produced and management.
          d.   outcome and planning.                                                a.   216,475 GEL
                                                                                    b.   16,475 GEL
28. The budget process which emphasizes the achievement of goals                    c.   1.0824
     and competition between alternatives is:                                       d.   4 years

          a.   incremental budgeting.                                     35. When evaluating the viability of a project, the test of economic
          b.   performance budgeting.                                          efficiency requires that:
          c.   program budgeting.
          d.   target based budgeting.                                              a.   NPV and BCR are greater than or equal to 0.
                                                                                    b.   NPV is greater than or equal to 0 and BCR is greater
29. Benefits received in the future are adjusted to their present value                  than or equal to 1.
     (discounted) because:                                                          c.   NPV is greater than or equal to 1 and BCR is greater
                                                                                         than or equal to 0.
          a.   they are uncertain.                                                  d.   NPV and BCR are greater than or equal to 1.
          b.   the future may never come, or may come under
               unforeseen circumstances.                                  36. The payback period is the:
          c.   markets indicate that people need to be compensated for
               postponing the enjoyment of benefits.                                a.   present value of benefits less the present value of costs.
          d.   None of the above is true.                                           b.   present value of benefits divided by the present value of
30. To what value would 20,000 GEL compound in five years,                          c.   total capital costs divided by the annual cash in-flow.
     assuming an interest rate of 5%?                                               d.   interest rate that equates the present value of benefits to
                                                                                         the present value of costs.
          a.   25,526 GEL
          b.   21,000 GEL                                                 37. Which of the following is not a strength of cost benefit analysis?
          c.   20,000 GEL
          d.   19,048 GEL                                                           a.   It can augment the power of politically weak groups.
                                                                                    b.   It identifies the cost of pursuing goals other than
31. What is the present value of 20,000 GEL received five years from                     efficiency.
     now, assuming a rage of 4%?                                                    c.   If focuses attention on alternative resource uses.
                                                                                    d.   None of the above.
          a.   24,333 GEL
          b.   20,000 GEL
          c.   16,439 GEL
          d.   15,671 GEL

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38. Real property taxes tend to have significantly lower compliance               GEL per 100 GEL of assessed value. What will the property tax
     cost per dollar of revenue raised than do individual income taxes            bill equal on this property?
                                                                                      a.   750 GEL
         a.   local governments administer property taxes.                            b.   700 GEL
         b.   real property taxes are taxpayer passive while income                   c.   650 GEL
              taxes are taxpayer active.                                              d.   600 GEL
         c.   individual income taxes yield vastly more revenue than
              do real property taxes.                                       45. Revenue bonds generally require higher interest rates than full
         d.   the statement is inaccurate: real property compliance              faith and credit bonds because:
              costs are actually higher.
                                                                                      a.   revenue bonds are subject to more severe political
39. The Laffer curve:                                                                      checks and legislative review than are full faith and
                                                                                           credit bonds.
         a.   indicates the relationship between the rate of inflation                b.   revenue bonds pledge only revenue from the project
              and the rate of unemployment in an economy.                                  financed for service of debt while full faith and credit
         b.   converts tax exempt municipal bond yields into their                         bond pledge tax revenues as well.
              corporate bond equivalents.                                             c.   revenue bonds are not permitted to be “called” (repaid)
         c.   estimates the relationship between increases in                              prior to their maturity.
              economic activity and increases in the tax base.                        d.   revenue bonds have higher face value than do full faith
         d.   shows the relationship for a particular tax between                          and credit bonds.
              increases in the tax rate and change in revenue from the
              tax.                                                          46. A government issues 25-year bonds with a coupon rate of 8%. If
                                                                                 the market rate currently available on comparable bonds is 10%,
40. Which of the following is most crucial in determining behavior               what has happened to the market value?
     changes that can cause losses in efficiency?
                                                                                      a.   The value is higher than when issued.
         a.   the marginal tax rate.                                                  b.   The value is lower than when issued.
         b.   the average tax rate.                                                   c.   It is impossible to tell, because the initial bond value is
         c.   the degree of progressivity.                                                 not given.
         d.   the number of tax brackets.                                             d.   It is impossible to tell, because the coupon structure is
                                                                                           not given.
41. The percept that people who are equals in all relevant ways should
     be taxed equally is known as:                                          47. A bond issue has a serial component when:

         a.   nondistortionary taxation                                               a.   holders of the bonds must report the serial numbers of
         b.   horizontal equity.                                                           the bonds to the Internal Revenue Service (also called
         c.   specific equalitarianism.                                                    registered bonds).
         d.   vertical equity.                                                        b.   tax revenues are pledged for repayment.
                                                                                      c.   the issue has bonds of varying terms to maturity.
42. Indexation of individual income taxes is designed to:                             d.   only a single coupon rate will be paid.

         a.   prevent bracket creep.                                        48. Notes or Treasury obligations are appropriately used to:
         b.   increase the progressivity of the tax system.
         c.   increase horizontal equity within the tax system.                       a.   permanently finance capital projects.
         d.   reduce the individual tax burden and increase corporate                 b.   manage cash flow problems.
              income tax revenues.                                                    c.   finance the lease of equipment.
                                                                                      d.   raise money to reduce taxes.
43. Which statement about the value added tax is not accurate?
                                                                            49. A Treasury note or obligation is:
         a.   It is an important source of revenue for many central
              governments in the European Community.                                  a.   a device that governments use to delay payment of bills
         b.   Because the tax is “hidden” in the price of the product, it                  they owe.
              may encourage higher tax rates than the American retail                 b.   a loan that a state makes to an economic development
              sales tax.                                                                   entity.
         c.   The value added tax is the sales tax form currently used                c.   another term for a loan to a bank
              by the United States government.                                        d.   a short-term loan to the government.
         d.   None of the above-all are accurate.
                                                                            50. Centralized cash pools:
44. A residence in Gori has gross assessed value of 15,000 GEL. Its
     owner qualifies for an old age exemption of 1,000 GEL and a                      a.   increase the risk of technical default.
     homestead exemption of 2,000 GEL. The property tax rate is 5                     b.   reduce treasury control of disbursements.
                                                                                      c.   facilitate investment in risky investment instruments.

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      d.   allow investment in longer maturity, larger
           denomination instruments.


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