Certified Government Financial Manager (CGFM) Practice Exam

Mandatory spending laws govern expenditures that are required by existing law, such as entitlement programs where recipients meet certain eligibility criteria. Medicare, Social Security, and Medicaid are examples of entitlement programs characterized by this approach, meaning their funding levels are determined by the number of beneficiaries rather than appropriations fixed by lawmakers each year.

Defense spending, on the other hand, falls under discretionary spending, which is set through annual appropriations by Congress. This means that funding for defense programs can be adjusted yearly based on legislative decisions and priorities, unlike mandatory spending programs, which automatically receive funding based on established rules.

Recognizing the distinction between discretionary and mandatory spending is crucial in understanding budgetary classifications. This knowledge is essential for anyone preparing for the CGFM exam, as it highlights the different mechanisms through which federal funds are allocated and spent.