Which of the following is evidence of fiscal independence for the purpose of considering whether one legally separate organization is a component unit of another?
A) The potential component unit is precluded from issuing long-term debt.
B) The potential component unit raises its own taxes without the approval of the primary government.
C) The potential component unit names its board of directors without the approval of the primary government.
D) The potential component unit sets user charges with the approval of the primary government.

Question

Quizplus · Accepted Answer

Fiscal independence refers to the ability of an organization to generate and use its own revenue streams without reliance on the primary government. Option B indicates that the potential component unit raises its own taxes without the approval of the primary government, which is a strong indication of fiscal independence. Option A is incorrect because the inability to issue long-term debt does not necessarily reflect fiscal independence. Option C is incorrect because the primary government typically has some level of involvement in the appointment of a potential component unit's board of directors. Option D is incorrect because the approval of the primary government to set user charges indicates a certain level of dependence.

Which of the Following Is Evidence of Fiscal Independence for the Purpose