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

A rolling budget is a dynamic financial planning tool that is updated regularly, typically on a quarterly basis, to reflect changes in the organization’s financial situation and operational goals. This type of budget allows organizations to adjust their financial forecasts and plans to align with current conditions, enabling more responsive and proactive financial management.

Rolling budgets are particularly useful for anticipating financial needs in the near term, as they extend the planning horizon continuously. For instance, when a quarter ends, the budget for a new quarter is added, and evaluations are made based on actual performance versus the planned figures. This practice helps organizations stay agile and manage resources more effectively in the face of changes in revenue or expenses throughout the fiscal year.

In contrast, the capital budget focuses on long-term investments and major projects rather than short-term operations. The operating budget tends to cover an entire fiscal year and sets out the organization’s projected revenues and expenses for that duration. The annual budget also typically encompasses the full year, without the flexibility of updating that is characteristic of a rolling budget. Therefore, the nature and functionality of the rolling budget in facilitating short-term planning and frequent updates make it the correct choice in this context.