CCMT – Certified California Municipal Treasurer |
Comprehensive Study Guide, Practice Exam, Exam
Questions & Answers, Exam Prep Test Bank, Municipal
Finance, Treasury Management, Public Funds
Investment, Cash Flow Management, Government
Accounting, Budgeting, Debt Administration, Financial
Reporting, Detailed Rationales, Public Finance
Certification Success
Question 1: According to California Government Code Section 53646, which of
the following is a primary responsibility of a municipal treasurer regarding the
investment policy?
A. Approving all investment transactions after execution
B. Annually submitting a detailed investment policy to the legislative body for review
and approval
C. Delegating all oversight duties to an external financial advisory firm
D. Reporting investment activities on a semi-annual basis only
CORRECT ANSWER: B. Annually submitting a detailed investment policy to
the legislative body for review and approval
Rationale: California Government Code Section 53646 mandates that the treasurer
annually submit a statement of investment policy to the legislative body. This policy
outlines the local agency’s investment goals, guidelines, and constraints, ensuring
legislative oversight. Options A, C, and D are incorrect because the treasurer does not
solely approve transactions post-execution, cannot fully delegate oversight, and must
report more frequently than semi-annually.
Question 2: In the context of the California Municipal Treasurer’s role, what is
the primary purpose of the "prudent investor rule" as applied to public funds?
A. To maximize returns regardless of risk to ensure budget surpluses
B. To prioritize investments with the highest credit ratings exclusively
C. To act with care, skill, and caution when investing public funds, focusing on safety
and liquidity
D. To match the investment strategy of the largest private pension funds
CORRECT ANSWER: C. To act with care, skill, and caution when investing
public funds, focusing on safety and liquidity
Rationale: The prudent investor rule, codified in California Government Code Section
53600.3, requires treasurers to act prudently, prioritizing safety of principal and liquidity
over yield. Option A ignores risk, B is overly restrictive, and D is irrelevant to public fund
statutes.
,Question 3: Which of the following securities is explicitly prohibited for
investment by California local agencies under Government Code Section
53601?
A. U.S. Treasury bonds
B. Negotiable certificates of deposit
C. Reverse repurchase agreements
D. Commercial paper rated A-1/P-1
CORRECT ANSWER: C. Reverse repurchase agreements
Rationale: California Government Code Section 53601 explicitly prohibits reverse
repurchase agreements for local agencies due to their leverage and counterparty risk.
U.S. Treasuries, negotiable CDs, and high-grade commercial paper are permitted under
specific conditions.
Question 4: When a California municipal treasurer calculates the agency’s
"pooled money" yield, which methodology is generally required for
compliance with Government Code Section 53646?
A. Internal rate of return (IRR)
B. Weighted-average maturity (WAM)
C. Dollar-weighted average yield based on book value
D. Time-weighted rate of return based on market value
CORRECT ANSWER: C. Dollar-weighted average yield based on book value
Rationale: The Code requires that the investment report include the average yield of the
pooled funds, typically calculated using a dollar-weighted average based on amortized
book value, which reflects actual accrued earnings. IRR and time-weighting are more
common in private portfolios, while WAM is a maturity measure, not a yield.
Question 5: Under California law, what is the maximum legal maturity for a
local agency investment in a negotiable certificate of deposit (CD) placed with
a California bank?
A. 1 year
B. 2 years
C. 3 years
D. 5 years
CORRECT ANSWER: D. 5 years
Rationale: Per Government Code Section 53601.8, negotiable CDs issued by a California
bank are permitted up to five years, provided the bank is solvent and the CD is
collateralized. Shorter terms are allowed but not the legal maximum.
,Question 6: Which of the following best describes the "de minimis" exception
in the context of California municipal bond arbitrage rebate regulations?
A. An exemption from arbitrage rebate calculations for bonds with an original issue
amount under $5 million
B. A rule allowing issuers to skip annual continuing disclosure filings
C. A waiver of the requirement to invest bond proceeds at market yields
D. An exemption from the state’s prevailing wage requirements for small projects
CORRECT ANSWER: A. An exemption from arbitrage rebate calculations for
bonds with an original issue amount under $5 million
Rationale: Under federal tax regulations and adopted by California for state tax
purposes, the de minimis exception exempts issuers from arbitrage rebate calculations if
the bond proceeds do not exceed $5 million. Options B, C, and D are unrelated to
arbitrage rebate.
Question 7: In the California debt management context, what is the primary
function of a "continuing disclosure certificate" required under SEC Rule 15c2-
12?
A. To disclose the issuer’s financial condition annually and upon material events to the
marketplace
B. To certify that all bond proceeds have been spent within 30 days of issuance
C. To provide a legal opinion that the bonds are tax-exempt
D. To register the bonds with the California Debt and Investment Advisory Commission
(CDIAC)
CORRECT ANSWER: A. To disclose the issuer’s financial condition annually
and upon material events to the marketplace
Rationale: Rule 15c2-12 requires municipal issuers to agree to provide annual financial
information and notice of certain material events to the Municipal Securities
Rulemaking Board’s EMMA system. Options B, C, and D describe other distinct bond
processes.
Question 8: Which committee within the California Municipal Treasurers
Association (CMTA) is primarily responsible for advising on legislative and
regulatory matters affecting public treasurers?
A. Education and Training Committee
B. Legislative and Regulatory Committee
C. Membership and Communications Committee
D. Finance and Budget Committee
, CORRECT ANSWER: B. Legislative and Regulatory Committee
Rationale: The CMTA’s Legislative and Regulatory Committee monitors bills,
regulations, and proposals impacting treasury operations and advocates on behalf of
members. Other committees focus on education, membership, and finance.
Question 9: A California treasurer is considering an investment in commercial
paper. What is the maximum allowable maturity for commercial paper under
Government Code Section 53601?
A. 180 days
B. 270 days
C. 360 days
D. 397 days
CORRECT ANSWER: B. 270 days
Rationale: Section 53601 permits commercial paper with a maximum maturity of 270
days, provided the issuer meets required credit ratings (e.g., A-1/P-1). Longer maturities
are not eligible under the statute.
Question 10: For the purpose of the California Public Records Act (CPRA),
which of the following records created by a municipal treasurer is generally
considered exempt from public disclosure?
A. Completed investment transaction logs
B. Final audited financial statements
C. Preliminary drafts and internal memoranda prepared during investment strategy
development
D. Records of all bank fees and service charges
CORRECT ANSWER: C. Preliminary drafts and internal memoranda prepared
during investment strategy development
Rationale: Under the CPRA, preliminary drafts, notes, or internal memoranda that are
not retained in the ordinary course and contain deliberative process are exempt. Final
logs, statements, and fee records are typically subject to disclosure.
Question 11: What is the primary risk addressed by "collateralization" of
public deposits in California?
A. Credit risk of the depository institution
B. Liquidity risk of the investment portfolio
C. Interest rate risk on long-term bonds
D. Operational risk of the treasury department
Comprehensive Study Guide, Practice Exam, Exam
Questions & Answers, Exam Prep Test Bank, Municipal
Finance, Treasury Management, Public Funds
Investment, Cash Flow Management, Government
Accounting, Budgeting, Debt Administration, Financial
Reporting, Detailed Rationales, Public Finance
Certification Success
Question 1: According to California Government Code Section 53646, which of
the following is a primary responsibility of a municipal treasurer regarding the
investment policy?
A. Approving all investment transactions after execution
B. Annually submitting a detailed investment policy to the legislative body for review
and approval
C. Delegating all oversight duties to an external financial advisory firm
D. Reporting investment activities on a semi-annual basis only
CORRECT ANSWER: B. Annually submitting a detailed investment policy to
the legislative body for review and approval
Rationale: California Government Code Section 53646 mandates that the treasurer
annually submit a statement of investment policy to the legislative body. This policy
outlines the local agency’s investment goals, guidelines, and constraints, ensuring
legislative oversight. Options A, C, and D are incorrect because the treasurer does not
solely approve transactions post-execution, cannot fully delegate oversight, and must
report more frequently than semi-annually.
Question 2: In the context of the California Municipal Treasurer’s role, what is
the primary purpose of the "prudent investor rule" as applied to public funds?
A. To maximize returns regardless of risk to ensure budget surpluses
B. To prioritize investments with the highest credit ratings exclusively
C. To act with care, skill, and caution when investing public funds, focusing on safety
and liquidity
D. To match the investment strategy of the largest private pension funds
CORRECT ANSWER: C. To act with care, skill, and caution when investing
public funds, focusing on safety and liquidity
Rationale: The prudent investor rule, codified in California Government Code Section
53600.3, requires treasurers to act prudently, prioritizing safety of principal and liquidity
over yield. Option A ignores risk, B is overly restrictive, and D is irrelevant to public fund
statutes.
,Question 3: Which of the following securities is explicitly prohibited for
investment by California local agencies under Government Code Section
53601?
A. U.S. Treasury bonds
B. Negotiable certificates of deposit
C. Reverse repurchase agreements
D. Commercial paper rated A-1/P-1
CORRECT ANSWER: C. Reverse repurchase agreements
Rationale: California Government Code Section 53601 explicitly prohibits reverse
repurchase agreements for local agencies due to their leverage and counterparty risk.
U.S. Treasuries, negotiable CDs, and high-grade commercial paper are permitted under
specific conditions.
Question 4: When a California municipal treasurer calculates the agency’s
"pooled money" yield, which methodology is generally required for
compliance with Government Code Section 53646?
A. Internal rate of return (IRR)
B. Weighted-average maturity (WAM)
C. Dollar-weighted average yield based on book value
D. Time-weighted rate of return based on market value
CORRECT ANSWER: C. Dollar-weighted average yield based on book value
Rationale: The Code requires that the investment report include the average yield of the
pooled funds, typically calculated using a dollar-weighted average based on amortized
book value, which reflects actual accrued earnings. IRR and time-weighting are more
common in private portfolios, while WAM is a maturity measure, not a yield.
Question 5: Under California law, what is the maximum legal maturity for a
local agency investment in a negotiable certificate of deposit (CD) placed with
a California bank?
A. 1 year
B. 2 years
C. 3 years
D. 5 years
CORRECT ANSWER: D. 5 years
Rationale: Per Government Code Section 53601.8, negotiable CDs issued by a California
bank are permitted up to five years, provided the bank is solvent and the CD is
collateralized. Shorter terms are allowed but not the legal maximum.
,Question 6: Which of the following best describes the "de minimis" exception
in the context of California municipal bond arbitrage rebate regulations?
A. An exemption from arbitrage rebate calculations for bonds with an original issue
amount under $5 million
B. A rule allowing issuers to skip annual continuing disclosure filings
C. A waiver of the requirement to invest bond proceeds at market yields
D. An exemption from the state’s prevailing wage requirements for small projects
CORRECT ANSWER: A. An exemption from arbitrage rebate calculations for
bonds with an original issue amount under $5 million
Rationale: Under federal tax regulations and adopted by California for state tax
purposes, the de minimis exception exempts issuers from arbitrage rebate calculations if
the bond proceeds do not exceed $5 million. Options B, C, and D are unrelated to
arbitrage rebate.
Question 7: In the California debt management context, what is the primary
function of a "continuing disclosure certificate" required under SEC Rule 15c2-
12?
A. To disclose the issuer’s financial condition annually and upon material events to the
marketplace
B. To certify that all bond proceeds have been spent within 30 days of issuance
C. To provide a legal opinion that the bonds are tax-exempt
D. To register the bonds with the California Debt and Investment Advisory Commission
(CDIAC)
CORRECT ANSWER: A. To disclose the issuer’s financial condition annually
and upon material events to the marketplace
Rationale: Rule 15c2-12 requires municipal issuers to agree to provide annual financial
information and notice of certain material events to the Municipal Securities
Rulemaking Board’s EMMA system. Options B, C, and D describe other distinct bond
processes.
Question 8: Which committee within the California Municipal Treasurers
Association (CMTA) is primarily responsible for advising on legislative and
regulatory matters affecting public treasurers?
A. Education and Training Committee
B. Legislative and Regulatory Committee
C. Membership and Communications Committee
D. Finance and Budget Committee
, CORRECT ANSWER: B. Legislative and Regulatory Committee
Rationale: The CMTA’s Legislative and Regulatory Committee monitors bills,
regulations, and proposals impacting treasury operations and advocates on behalf of
members. Other committees focus on education, membership, and finance.
Question 9: A California treasurer is considering an investment in commercial
paper. What is the maximum allowable maturity for commercial paper under
Government Code Section 53601?
A. 180 days
B. 270 days
C. 360 days
D. 397 days
CORRECT ANSWER: B. 270 days
Rationale: Section 53601 permits commercial paper with a maximum maturity of 270
days, provided the issuer meets required credit ratings (e.g., A-1/P-1). Longer maturities
are not eligible under the statute.
Question 10: For the purpose of the California Public Records Act (CPRA),
which of the following records created by a municipal treasurer is generally
considered exempt from public disclosure?
A. Completed investment transaction logs
B. Final audited financial statements
C. Preliminary drafts and internal memoranda prepared during investment strategy
development
D. Records of all bank fees and service charges
CORRECT ANSWER: C. Preliminary drafts and internal memoranda prepared
during investment strategy development
Rationale: Under the CPRA, preliminary drafts, notes, or internal memoranda that are
not retained in the ordinary course and contain deliberative process are exempt. Final
logs, statements, and fee records are typically subject to disclosure.
Question 11: What is the primary risk addressed by "collateralization" of
public deposits in California?
A. Credit risk of the depository institution
B. Liquidity risk of the investment portfolio
C. Interest rate risk on long-term bonds
D. Operational risk of the treasury department
