Knowledge Check - Budgeting
Select the appropriate response to complete the statement and then, select the Submit button.
1. Budgeting is important for the following reasons:
A. Serves as a tool for planning
B. Forecasts revenues and expenses for the year
C. Helps control expenses
D. All of the above
The correct answer is ‘D.’ Budgeting is important because it serves as a planning tool, it forecasts revenue and expenses, and it helps to control spending.
2. Budgeting revenues to cover expenses guarantees that the organization will have sufficient cash.
The correct answer is ‘False.’ Budgeting is a planning tool; it does not guarantee that forecasts will materialize.
3. It is better for finance managers to develop budgets internally and only share them with program managers when they are complete
The correct answer is ‘False.’ Budgeting should be inclusive, engaging both agency leadership and program managers early in the budgeting process.
4. When presenting a budget, management should be sure to:
A. Communicate how the budget aligns with organizational goals, annual action plans or strategies
B. Compare the budget to prior year actual revenues and expenses
C. Ensure the organization has cash to operate in a stable environment
D. All of the above
The correct answer is ‘D.’ Management must ensure due diligence in all aspects of operations and communications.
5. All of the following are purposes of budget controls EXCEPT:
A. Determine the likelihood that an activity can be completed within the amount budgeted for that activity
B. Verify that the cost per unit is aligned with identified expectations
C. Ensure that resources are being used for the proper purposes and are going to the correct projects
D. Identify sources that can be used to complete a project if the amount budgeted for an activity will be insufficient.
The correct answer is ‘C.’ Ensuring that resources are being used for the proper purposes and are going to the correct projects is a purpose of an internal control system rather than a budget control. Determining the likelihood that an activity for which funds are budgeted can be completed within the budgeted amount, verifying that the cost per unit is aligned with identified expectations, and identifying sources that can be used to complete a project if the amount budgeted for an activity will be insufficient (answer choices A, B, and D) are all purposes of budget controls