Certified Government Financial Manager (CGFM) 2026 – 400 Free Practice Questions to Pass the Exam

The requirement for financing current year services with current year revenues is rooted in the principles of fiscal responsibility and sound budget management that underpin balanced budget laws. These laws are designed to ensure that a government's expenses do not exceed its revenues in a given fiscal year, promoting financial stability and sustainability.

When current year services are financed with current year revenues, it ensures that the government is operating within its means and not accumulating debt to pay for services that are being consumed in the present. This approach helps maintain the integrity of the budget process and fosters trust among citizens and stakeholders, as it demonstrates a commitment to fiscal discipline.

In contrast, financing through future budget revenues, borrowed funds, or grants and donations introduces complexities and risks. Future revenues are uncertain and dependent on economic conditions and ultimately may not materialize. Borrowing can lead to increased debt levels, which can strain future budgets, and relying too heavily on grants and donations can create variability in funding sources that complicates budget planning and execution. Therefore, the principle of matching current year expenditures with current year revenues is a fundamental tenet of balanced budget laws.