American Institute of Certified Planners (AICP) Practice Exam

What is one advantage of line item budgeting?

1. It requires evaluation of existing services

2. It is difficult to prepare and justify

3. It is easy for public officials to understand

4. It links directly to strategic plans

The correct answer is: It is easy for public officials to understand

One significant advantage of line item budgeting is its clarity and simplicity, which makes it easy for public officials and stakeholders to understand. This budgeting format organizes expenses by specific categories, such as salaries, equipment, and supplies, providing a straightforward view of where funds are allocated. This transparency allows decision-makers to quickly assess how money is being spent and facilitates easier communication about the budget with the public and other officials. The ease of understanding can lead to increased accountability, as it is clear what each line item represents and how it contributes to the overall budget. In contrast, some of the other options do not accurately reflect advantages of line item budgeting. For instance, the requirement to evaluate existing services is not unique to line item budgeting and may be more closely associated with performance or zero-based budgeting approaches. While simplicity is a hallmark of line item budgets, they can also present challenges in illustrating how expenses link to strategic goals and outcomes. Furthermore, line item budgeting is typically seen as easier to prepare rather than difficult, which is why it is widely employed in governmental and organizational budgeting practices.