Chapter 8

Question 1

7-Step Cyclical Budget Process

Answer 1

1. planning
2. gathering input/feedback
3. build consensus
4. present final plan
5. approve
6. implement
7. evaluate

Question 2

Budget process Step 1: Planning

Answer 2

• existing programs have a history on which budgets are based
• new programs do not have a history and must look to similar programs
• align the budget with program goals
• driven by questions about the program

Question 3

Budget process Step 2: Gather input/feedback

Answer 3

• extension of planning
• essential supplies and services
• survey the staff about budgetary needs and wishes

Question 4

Budget process Step 3: Build Consensus

Answer 4

• allow staff to contribute input on the final budget
• present budget to a higher level of administration with justifications

Question 5

Budget process Step 4: Present Final Budget

Answer 5

• presenting the final budget in clear terms
• utilize written and visual justifications as needed

Question 6

Budget process Step 5: Approval

Answer 6

• higher-level administrators will make final decisions

Question 7

Budget process Step 6: Implementing the budget

Answer 7

• judicious spending of funds
• avoid spending beyond budget
• have a contingency plan

Question 8

Budget process Step 7: Evaluation

Answer 8

• closes the feedback loop of the budget cycle and brings the process back to the planning phase
• ensures budget is meeting desired goals

Question 9

Short-Term Budget

Answer 9

• covers the day-to-day costs of operation
• may be shorter than 1 year

Question 10

Operational Budget

Answer 10

• included items like salaries, administrative costs, and office operations

Question 11

Expendable Items

Answer 11

items that cannot be reused (i.e. tape)

Question 12

Nonexpendable Items

Answer 12

reusable items but still have a predetermined minimum lifespan for replacement

Question 13

Fixed Expenses

Answer 13

expenses to purchase supplies, equipment, or services that have a known cost

Question 14

Variable Expenses

Answer 14

varies throughout the budget and may require an estimate to cover the cost

Question 15

Long-Term Budget

Answer 15

• items that exceed the annual budget
• items that are too expensive for annual budget
• these items are known as capital expenses/outlays

Question 16

Limited budget

Answer 16

• common in educational settings
• monies managed throughout the year
• end of fiscal year remaining funds are used in other parts of the organization

Question 17

Rollover Budget

Answer 17

rolls money not spent in one fiscal year over to the next

Question 18

Line Item Budget

Answer 18

• the budget is separated into various categories
• can be plotted over the course of the fiscal year
• transferring funds may not be allowed

Question 19

Program Budget

Answer 19

• line item budget with more categories (specific subdivisions of an overall system to have separate accountability)
• allows for greater prioritizing of items in the planning process
• can tie budget directly to goals

Question 20

Incremental Budget

Answer 20

uses an existing budget and either adds or subtracts a specific percentage based on available funds

Question 21

Zero-based budget

Answer 21

• require all budget items to be fully justified
• assume that many budgets have excess “fat” built in
• require ranking of budget areas to establish funding priorities
• once established hard to start over

Question 22

Planning Programming Budget System

Answer 22

• relies heavily on planning and linking expenditures to specific objectives
• designed for large institutions
• look at objectives and select best alternatives

Question 23

Revenue Center

Answer 23

generates profit

Question 24

Cost Center

Answer 24

• does not produce profit
• adds to the cost of running an institution
• often vital to the success of a company and has an effect on other revenue-producing areas of the company

Question 25

Bid

Answer 25

a document provided by a vendor for goods or services you may wish to purchase

Question 26

Competitive bids

Answer 26

a group of bids (3+) that are collected from vendors to determine best price and value for items you wish to purchase

Question 27

Lot

Answer 27

a group of items that vendors bid on in a group

Question 28

Requisition

Answer 28

a written document requesting to purchase specific items from a vendor

Question 29

Internal Requisition

Answer 29

a written document requesting goods or services from a group or department within your own organization

Question 30

Purchase order

Answer 30

a formal agreement to purchase items that have been requisitioned

Question 31

Invitation for bids (IFB)/Request for proposals (RFP)

Answer 31

a formal invitation by an organization to a variety of vendors to supply bids for specific purchases or services

Question 32

Blanket order or open account

Answer 32

an open purchase that can be used over a period of time for purchases as needed

Question 33

Shipping

Answer 33

determines how the items will be transported to your location from the vendor

Question 34

Freight on board (FOB)

Answer 34

used for who pays for shipping and when title to goods transfer

Question 35

Receiving

Answer 35

act of taking possession of a purchased item

Question 36

Invoice

Answer 36

a request for payment from the vendor to the purchasing organization

Question 37

Terms

Answer 37

outline how many days the organization has before they must pay the vendor

Question 38

Purchasing delegate

Answer 38

an individual authorized by the organization to issue purchase orders on behalf of that department

Question 39

Specifications

Answer 39

generic description of the items being bid on

Question 40

Substitutions

Answer 40

the unfortunate act of having one product substituted for the one you requested