CGAP Government Financial Management 2 — Questions and Answers
Question 1: What is the primary purpose of a government's Comprehensive Annual Financial Report (CAFR), now called Annual Comprehensive Financial Report (ACFR)?
- To present the approved operating budget
- To provide a complete audited picture of a government's financial position and results (Correct answer)
- To summarize federal grant expenditures only
- To report on program performance outcomes
Correct answer: To provide a complete audited picture of a government's financial position and results
The ACFR provides a complete, audited financial overview of a state or local government, including financial statements, notes, and statistical data.
Question 2: Under GASB standards, which measurement focus and basis of accounting applies to governmental funds?
- Economic resources / accrual
- Current financial resources / modified accrual (Correct answer)
- Cash / cash basis
- Economic resources / modified accrual
Correct answer: Current financial resources / modified accrual
Governmental funds use the current financial resources measurement focus and modified accrual basis of accounting under GASB standards.
Question 3: Which type of government fund accounts for activities financed by user fees and intended to be self-supporting?
- General Fund
- Special Revenue Fund
- Enterprise Fund (Correct answer)
- Capital Projects Fund
Correct answer: Enterprise Fund
Enterprise funds (a type of proprietary fund) account for government business-type activities that are financed primarily through user charges.
Question 4: What does a government's 'fund balance' in the General Fund primarily represent?
- Total net assets of the government
- Difference between current financial resources and current liabilities (Correct answer)
- Cash on hand at year-end
- Amount available for capital projects
Correct answer: Difference between current financial resources and current liabilities
Fund balance is the difference between governmental fund assets/deferred outflows and liabilities/deferred inflows, reflecting available current financial resources.
Question 5: Which federal act requires agencies to produce audited financial statements and links performance to budget?
- Chief Financial Officers Act of 1990 (Correct answer)
- Government Performance and Results Act
- Federal Managers' Financial Integrity Act
- Inspectors General Act
Correct answer: Chief Financial Officers Act of 1990
The Chief Financial Officers Act of 1990 requires 24 major federal agencies to produce annual audited financial statements and establishes CFO positions.
Question 6: What is 'interperiod equity' in government financial reporting?
- Equal treatment of all fund types in financial statements
- The concept that current-year revenues should finance current-year services (Correct answer)
- Consistent application of accounting policies across periods
- Fair distribution of tax burdens among citizens
Correct answer: The concept that current-year revenues should finance current-year services
Interperiod equity means that today's taxpayers pay for today's services rather than deferring costs to future generations.
CGAP Government Financial Management 2
What is the primary purpose of a government's Comprehensive Annual Financial Report (CAFR), now called Annual Comprehensive Financial Report (ACFR)?