Certified Government Financial Manager (CGFM) 2025 – 400 Free Practice Questions to Pass the Exam

Line item budgeting is a budgetary approach that allocates funds to specific categories of spending, such as salaries, materials, and overhead. One significant downside of this method is that it restricts management's ability to shift spending in response to unforeseen circumstances.

In using line item budgeting, each expense is predetermined and allocated a fixed amount. This rigidity means that if an unexpected need arises—such as an emergency repair or an urgent program requirement—managers may face limitations in reallocating funds from one line item to another. The line item format makes it harder to flexibly respond to changing priorities since funds are strictly tied to pre-approved expenditures.

In contrast, other budgeting methods, such as program or performance-based budgeting, can allow for more flexibility, enabling managers to adapt expenditures in real time based on organizational needs. This adaptability is crucial in government financial management, where circumstances can shift rapidly based on policy changes, public needs, or economic conditions.