2025 CFO ACTUAL EXAM QUESTIONS EVALUATION WITH
ANSWERS 2025/2026 GRADED A+
Revenue - income statement account, budget is recorded as a debit entry, when
revenue is received the account is credited, at the close of the year they are closed to
operations, accounts include: taxes, grants, fees, permits, licenses
Appropriations - budget is recorded as a credit, encumbrances are recorded as a debit,
closed to appropriation reserves, accounts include: salaries & wages, other expenses,
debt service, statutory expenditures, and the reserve for uncollected taxes
GAAP - Generally Accepted Accounting Principles is the accounting method used by
many local units outside of NJ
OCBOA - Other Comprehensive Basis of Accounting method is used by NJ
municipalities and is a modified accrual basis
Modified Accrual - hybrid of cash basis and accrual basis, revenue is recorded when
received in cash, expenditures are recorded when committed through an encumbrance,
all receivables most have an offsetting reserve for receivables
Local Bond Law - N.J.S.A. 40A:2
Local Budget Law - N.J.S.A. 40A:4
Local Fiscal Affairs Law - N.J.S.A. 40A:5
Local Public Contracts Law - N.J.S.A. 40A:11
Local Finance Board - N.J.A.C. 5:30 empowered to study the entire field of local
government and promulgate rules for the interpretation and administration of state laws
included within the jurisdiction as well as the method scope and procedure of audits and
may conduct special inquiries of local government affairs
Encumbrance System - T.A.D. 85-1
Fixed Assets - T.A.D. 85-2
General Ledger - T.A.D. 85-3
Internal Control - comprises the plan of the organization and all of the coordinate
methods and measures adopted within a business to safeguard its assets check the
accuracy and reliability of its accounting data promote operational efficiency and
encourage adherence to prescribed managerial policies
checks and balances - internal control is primarily
,Examples of Internal Controls - Record Security, Computer System Security,
Segregation of Duties, Reports, Bank Account Reconciliation, Receipt of Funds, Cash
Management Plan, Pre-numbered documents, auditing of vouchers, levels of approval,
encumbrance system, surety and fidelity bonds, and inventory of equipment
surety bond - primarily an insurance policy used to replace lost funds to a
predetermined limit, all personnel associated with the handling of public funds should be
adequately covered or insured
Surplus - result from the closing of operations to the extent that the overall revenues
received were higher than anticipated and expenditures were less than amounts
appropriated, may be used in as revenue in the budget
cash surplus - results from collection of monies for which no expenditures were
necessary
non-cash surplus - results form deferred charges, cash deficits and receivables such as
due from NJ
Miscellaneous Revenue - budget category includes frequently collected revenues from
licenses fees and permits fines and costs from municipal court operations, interest and
costs on taxes, parking fees, energy receipts tax, and rental of public property
Receipts from Delinquent Taxes - maximum amount that may be anticipated in the
budget is based on a calculation of the prior year's collection percentage times the
delinquent tax balance
Amount to be Raised by Taxation - once the total appropriations are determined and the
total of all other revenues are deducted the difference is the amount to be billed to the
local unit's taxpayers (Appropriations-Anticipated Revs.)
MRNA - Miscellaneous Revenue Not Anticipated- various other revenues collected that
were not budgeted for
line items - two categories are salaries and wages or other expenses
Reserve for Uncollected Taxes - the amount that the local unit cannot anticipate
collecting, a non-spending appropriation used to increase total appropriations to cause
an increase in the tax levy to ensure that enough cash collections occur to support the
budget
Over expenditure - cannot occur based on NJSA 40A: 4-57
certification of availability of funds - to prevent over expenditures, LFB requires the CFO
to make certification before the adoption of any resolution awarding a contract for
,materials, supplies or services that there is sufficient appropriation balance available to
cover the amount of such contract and what accounts are to be charged
Temporary Budget - preliminary appropriation plan is to cover expenditures occurring
prior to adoption of the budget, the total of appropriations of this budget cannot exceed
26.25% of the total appropriations of the preceding fiscal year excluding appropriations
for interest and debt service capital improvement and public assistance, the debt
service is budgeted fully in this budget
Chapter 159 resolution - used for the insertion of grant awards for federal state and
local aid received after adoption of the budget
Budget Transfers - permitted during the last 2 months of fiscal year and first 3 months of
the appropriation reserve year, requires 2/3 vote of full membership of governing body
and transfers may only be made from in cap to in cap or outside of cap to out or in to
out
Cancellation of Unexpended Balances - by resolution of the governing body balances
may be cancelled to fund balance
Lapse of Appropriation Reserves - at the end of the reserve year unexpended balances
in appropriation reserves lapse to fund balance and any existing encumbrances are set
up as accounts payable
tax point - referred to as a penny or cent on the tax rate, 1/10000 of the total amount of
assessed valuations for the municipality
petty cash fund - established by resolution of the governing body and approval of the
DLGS should be secured by the custodian, used to make cash purchases and
monitored by the custodian who is bonded for the greater of the fund or $1000, before
the end of the year the fund is returned to the checking account and held until the close
of the year
encumbrance - expenses recorded when incurred, earmarks funds based on
commitments or obligations made by the local unit such time as payment is rendered
NJSA 40A: 5-14 - must adopt a cash management plan at least annually including the
designation of depositories
GUDPA - Government Unit Depository Protection Act- certifies that banking institution
may accept public funds, overseen by NJ Department of Banking and Insurance it
requires the bank to be NJ based and by fully collateralized
cash management plan - individual to municipality, outlines type of investments that
may be used
, Idle funds - must be invested in interest bearing account
cash flow analysis - provides the CFO with a tool to make decisions as to investing idle
funds and to make sure the funds are available for disbursement when the need arises
investment vehicles - bonds or obligations of USA, money market mutual funds,
obligations of federal agency, bonds or obligations of the local unit or school districts,
bonds with maturity date within 397 days, local government investment pools, State of
NJ cash management fund
change funds - small quantity of currency may be kept on hand at the start of business
day to make change
books of original entry - cash receipts journal, cash disbursements journal, general
journal, payroll journal
Cash Receipts Journal - records all cash taken in
Cash Disbursements journal - records all cash that goes out
General Journal - initial recording of accounting transactions not recorded in other
books need full explanation open accounts at beginning of accounting period post temp.
& adopted budgets, close rev & expense accounts, adjust or correct transactions,
record non-cash transactions
FCOA - Flexible chart of accounts
XX-XXX-XX-XXX-XXX
Fund-General Ledger/trial balance-NJCAFR code(budget category)- subsidiary
accounts for rev/app. reporting- detail line items (S&W v. OE)
Reserve for encumbrances - equal to the total of all encumbrances balance sheet
liability and cash liability
Appropriations ledger - provides a budget trial balance
Budget Adoption - must be adopted by the majority of the full membership of the
governing body and 2 certified copies must be filed with the division and 1 certified copy
must be filed with the county board of taxation
3 year special emergencies - damage to roads or bridges by snow ice frost or floods,
public exigencies caused by civil disturbances
5 year special emergencies - prep. of an approved tax map, revaluation of real property,
codification of ordinances, engagement of consultants in preparing a master plan, prep
of drainage maps for flood control, preliminary engineering for sanitary sewer system,
ANSWERS 2025/2026 GRADED A+
Revenue - income statement account, budget is recorded as a debit entry, when
revenue is received the account is credited, at the close of the year they are closed to
operations, accounts include: taxes, grants, fees, permits, licenses
Appropriations - budget is recorded as a credit, encumbrances are recorded as a debit,
closed to appropriation reserves, accounts include: salaries & wages, other expenses,
debt service, statutory expenditures, and the reserve for uncollected taxes
GAAP - Generally Accepted Accounting Principles is the accounting method used by
many local units outside of NJ
OCBOA - Other Comprehensive Basis of Accounting method is used by NJ
municipalities and is a modified accrual basis
Modified Accrual - hybrid of cash basis and accrual basis, revenue is recorded when
received in cash, expenditures are recorded when committed through an encumbrance,
all receivables most have an offsetting reserve for receivables
Local Bond Law - N.J.S.A. 40A:2
Local Budget Law - N.J.S.A. 40A:4
Local Fiscal Affairs Law - N.J.S.A. 40A:5
Local Public Contracts Law - N.J.S.A. 40A:11
Local Finance Board - N.J.A.C. 5:30 empowered to study the entire field of local
government and promulgate rules for the interpretation and administration of state laws
included within the jurisdiction as well as the method scope and procedure of audits and
may conduct special inquiries of local government affairs
Encumbrance System - T.A.D. 85-1
Fixed Assets - T.A.D. 85-2
General Ledger - T.A.D. 85-3
Internal Control - comprises the plan of the organization and all of the coordinate
methods and measures adopted within a business to safeguard its assets check the
accuracy and reliability of its accounting data promote operational efficiency and
encourage adherence to prescribed managerial policies
checks and balances - internal control is primarily
,Examples of Internal Controls - Record Security, Computer System Security,
Segregation of Duties, Reports, Bank Account Reconciliation, Receipt of Funds, Cash
Management Plan, Pre-numbered documents, auditing of vouchers, levels of approval,
encumbrance system, surety and fidelity bonds, and inventory of equipment
surety bond - primarily an insurance policy used to replace lost funds to a
predetermined limit, all personnel associated with the handling of public funds should be
adequately covered or insured
Surplus - result from the closing of operations to the extent that the overall revenues
received were higher than anticipated and expenditures were less than amounts
appropriated, may be used in as revenue in the budget
cash surplus - results from collection of monies for which no expenditures were
necessary
non-cash surplus - results form deferred charges, cash deficits and receivables such as
due from NJ
Miscellaneous Revenue - budget category includes frequently collected revenues from
licenses fees and permits fines and costs from municipal court operations, interest and
costs on taxes, parking fees, energy receipts tax, and rental of public property
Receipts from Delinquent Taxes - maximum amount that may be anticipated in the
budget is based on a calculation of the prior year's collection percentage times the
delinquent tax balance
Amount to be Raised by Taxation - once the total appropriations are determined and the
total of all other revenues are deducted the difference is the amount to be billed to the
local unit's taxpayers (Appropriations-Anticipated Revs.)
MRNA - Miscellaneous Revenue Not Anticipated- various other revenues collected that
were not budgeted for
line items - two categories are salaries and wages or other expenses
Reserve for Uncollected Taxes - the amount that the local unit cannot anticipate
collecting, a non-spending appropriation used to increase total appropriations to cause
an increase in the tax levy to ensure that enough cash collections occur to support the
budget
Over expenditure - cannot occur based on NJSA 40A: 4-57
certification of availability of funds - to prevent over expenditures, LFB requires the CFO
to make certification before the adoption of any resolution awarding a contract for
,materials, supplies or services that there is sufficient appropriation balance available to
cover the amount of such contract and what accounts are to be charged
Temporary Budget - preliminary appropriation plan is to cover expenditures occurring
prior to adoption of the budget, the total of appropriations of this budget cannot exceed
26.25% of the total appropriations of the preceding fiscal year excluding appropriations
for interest and debt service capital improvement and public assistance, the debt
service is budgeted fully in this budget
Chapter 159 resolution - used for the insertion of grant awards for federal state and
local aid received after adoption of the budget
Budget Transfers - permitted during the last 2 months of fiscal year and first 3 months of
the appropriation reserve year, requires 2/3 vote of full membership of governing body
and transfers may only be made from in cap to in cap or outside of cap to out or in to
out
Cancellation of Unexpended Balances - by resolution of the governing body balances
may be cancelled to fund balance
Lapse of Appropriation Reserves - at the end of the reserve year unexpended balances
in appropriation reserves lapse to fund balance and any existing encumbrances are set
up as accounts payable
tax point - referred to as a penny or cent on the tax rate, 1/10000 of the total amount of
assessed valuations for the municipality
petty cash fund - established by resolution of the governing body and approval of the
DLGS should be secured by the custodian, used to make cash purchases and
monitored by the custodian who is bonded for the greater of the fund or $1000, before
the end of the year the fund is returned to the checking account and held until the close
of the year
encumbrance - expenses recorded when incurred, earmarks funds based on
commitments or obligations made by the local unit such time as payment is rendered
NJSA 40A: 5-14 - must adopt a cash management plan at least annually including the
designation of depositories
GUDPA - Government Unit Depository Protection Act- certifies that banking institution
may accept public funds, overseen by NJ Department of Banking and Insurance it
requires the bank to be NJ based and by fully collateralized
cash management plan - individual to municipality, outlines type of investments that
may be used
, Idle funds - must be invested in interest bearing account
cash flow analysis - provides the CFO with a tool to make decisions as to investing idle
funds and to make sure the funds are available for disbursement when the need arises
investment vehicles - bonds or obligations of USA, money market mutual funds,
obligations of federal agency, bonds or obligations of the local unit or school districts,
bonds with maturity date within 397 days, local government investment pools, State of
NJ cash management fund
change funds - small quantity of currency may be kept on hand at the start of business
day to make change
books of original entry - cash receipts journal, cash disbursements journal, general
journal, payroll journal
Cash Receipts Journal - records all cash taken in
Cash Disbursements journal - records all cash that goes out
General Journal - initial recording of accounting transactions not recorded in other
books need full explanation open accounts at beginning of accounting period post temp.
& adopted budgets, close rev & expense accounts, adjust or correct transactions,
record non-cash transactions
FCOA - Flexible chart of accounts
XX-XXX-XX-XXX-XXX
Fund-General Ledger/trial balance-NJCAFR code(budget category)- subsidiary
accounts for rev/app. reporting- detail line items (S&W v. OE)
Reserve for encumbrances - equal to the total of all encumbrances balance sheet
liability and cash liability
Appropriations ledger - provides a budget trial balance
Budget Adoption - must be adopted by the majority of the full membership of the
governing body and 2 certified copies must be filed with the division and 1 certified copy
must be filed with the county board of taxation
3 year special emergencies - damage to roads or bridges by snow ice frost or floods,
public exigencies caused by civil disturbances
5 year special emergencies - prep. of an approved tax map, revaluation of real property,
codification of ordinances, engagement of consultants in preparing a master plan, prep
of drainage maps for flood control, preliminary engineering for sanitary sewer system,
