Certified Government Financial Manager (CGFM) — Questions and Answers

Question 1: What does 'economy' mean as a performance concept in government auditing?

Cutting the budget by a fixed percentage
Acquiring resources at the lowest possible cost consistent with required quality (Correct answer)
Reducing the size of the federal government
The overall state of the national economy

Correct answer: Acquiring resources at the lowest possible cost consistent with required quality

Economy means acquiring the right resources — in the right quality and quantity — at the right time and place, for the least cost, to achieve program objectives.

Question 2: What is 'program evaluation' in the context of governmental performance management?

Reviewing a program's budget for accuracy
Evaluating employee performance for annual reviews
A systematic study assessing how well a government program is working and whether it achieves its intended outcomes (Correct answer)
An audit of program expenditures

Correct answer: A systematic study assessing how well a government program is working and whether it achieves its intended outcomes

Program evaluation is a rigorous, systematic study that assesses a program's design, implementation, and outcomes to determine whether it is working as intended and achieving its goals.

Question 3: What is a 'Prompt Payment Act' penalty designed to address?

Late payments by the federal government to vendors (Correct answer)
Delays in budget submission to Congress
Unauthorized commitments of funds
Fraud by government contractors

Correct answer: Late payments by the federal government to vendors

The Prompt Payment Act requires federal agencies to pay invoices within specified time limits (generally 30 days) and imposes automatic interest penalties for late payments to vendors.

Question 4: What is 'evidence-based policymaking' in government financial management?

Using rigorous data and research to design and evaluate government programs and spending decisions (Correct answer)
Using historical budget data only for future projections
Using only GAO audit findings to inform policy
Basing budget decisions solely on congressional testimony

Correct answer: Using rigorous data and research to design and evaluate government programs and spending decisions

Evidence-based policymaking uses data, research, and program evaluations to inform decisions about which programs work, how to improve them, and how to allocate resources most effectively.

Question 5: What is the purpose of note disclosures in a government's financial statements?

To provide detailed information about specific transactions and policies that cannot be found in the statements themselves (Correct answer)
To summarize the budget vs. actual results
To list all employees and salaries
To report on capital asset depreciation only

Correct answer: To provide detailed information about specific transactions and policies that cannot be found in the statements themselves

Note disclosures provide essential information about accounting policies, significant transactions, and other details necessary for understanding the financial statements.

Question 6: Under GASB, Permanent Funds are used to account for resources that are legally restricted so that:

Only earnings, not principal, may be used to support government programs (Correct answer)
Resources are held in trust for external parties
Both principal and earnings support capital projects
Principal may be spent only for debt service

Correct answer: Only earnings, not principal, may be used to support government programs

Permanent Funds account for resources where only the earnings (not the corpus/principal) may be spent, and must be used for the benefit of the government or its citizenry.

Question 7: What is the primary objective of a 'performance audit' in government?

Detecting fraud and improper payments
Expressing an opinion on financial statements
Verifying compliance with appropriations law
Providing an independent assessment of program economy, efficiency, and effectiveness (Correct answer)

Correct answer: Providing an independent assessment of program economy, efficiency, and effectiveness

A performance audit objectively examines whether government programs and activities are achieving their intended results economically, efficiently, and effectively.

Question 8: What does 'working capital' mean in the context of government financial management?

Congressional appropriations for operating expenses
Revolving fund balances available for operations
The difference between current assets and current liabilities, indicating short-term financial health (Correct answer)
Funds available for capital construction projects

Correct answer: The difference between current assets and current liabilities, indicating short-term financial health

Working capital is the difference between current assets and current liabilities, indicating whether an entity has sufficient short-term resources to meet its near-term obligations.

Question 9: A city issues general obligation bonds to finance a new public library. Under GASB standards, the debt service payments should be reported in:

The Debt Service Fund (Correct answer)
The Enterprise Fund
The Capital Projects Fund
The General Fund

Correct answer: The Debt Service Fund

Debt Service Funds account for the accumulation of resources and payment of principal and interest on long-term general obligation debt.

Question 10: What does GPRA (Government Performance and Results Act) require of federal agencies?

Monthly financial reporting to OMB
Quarterly audits by the Inspector General
Annual balanced budgets
Setting strategic goals, measuring performance, and reporting results to Congress and the public (Correct answer)

Correct answer: Setting strategic goals, measuring performance, and reporting results to Congress and the public

GPRA (1993) and the GPRA Modernization Act (2010) require agencies to set strategic goals, measure performance with metrics, and report actual results annually.

Question 11: What is 'float' in the context of government cash management?

Cash held in agency petty cash accounts
Funds invested in Treasury securities
The amount of money in transit between payer and payee (Correct answer)
The difference between the budget and actual spending

Correct answer: The amount of money in transit between payer and payee

Float is the amount of money in transit — disbursement float occurs when a check is issued but not yet cleared; collection float is when a payment is received but not yet available.

Question 12: What is 'strategic financial management' in government?

Reducing government spending by 10% annually
Focusing financial management solely on compliance
Managing investments in the stock market
Aligning financial resources, controls, and systems with the organization's strategic goals and mission (Correct answer)

Correct answer: Aligning financial resources, controls, and systems with the organization's strategic goals and mission

Strategic financial management links financial planning and execution to the organization's mission and strategic goals, ensuring resources support programmatic objectives.

Question 13: The concept of 'interperiod equity' in governmental accounting refers to what?

Fair allocation of costs between governmental and business-type activities
Whether current-year revenues are sufficient to pay for current-year services (Correct answer)
Equal treatment of all taxpayers across jurisdictions
Consistent application of accounting policies between fiscal years

Correct answer: Whether current-year revenues are sufficient to pay for current-year services

Interperiod equity is a key objective in governmental accounting, assessing whether current-year citizens are paying for current-year services or shifting the burden to future taxpayers.

Question 14: What is an 'improper payment' as defined by the Improper Payments Information Act?

A payment exceeding $1 million
A payment that should not have been made, was made in an incorrect amount, or was made to an ineligible recipient (Correct answer)
Any payment made to a contractor
A payment not supported by a contract

Correct answer: A payment that should not have been made, was made in an incorrect amount, or was made to an ineligible recipient

An improper payment is any payment that should not have been made, was made in the wrong amount, or was made to an ineligible recipient, including duplicate payments.

Question 15: Which of the following is a proprietary fund type?

General Fund
Enterprise Fund (Correct answer)
Special Revenue Fund
Capital Projects Fund

Correct answer: Enterprise Fund

Enterprise Funds are proprietary funds used to account for activities financed by user charges, similar to private business operations.

Question 16: Which basis of accounting is required for governmental fund financial statements under GASB?

Modified accrual basis (Correct answer)
Budgetary basis
Cash basis
Full accrual basis

Correct answer: Modified accrual basis

GASB requires governmental funds (General, Special Revenue, Debt Service, Capital Projects, and Permanent funds) to use the modified accrual basis of accounting.

Question 17: Which type of government audit focuses on whether a program is achieving its intended results?

Performance audit (Correct answer)
Financial statement audit
Attestation engagement
Compliance audit

Correct answer: Performance audit

Performance audits examine program effectiveness, efficiency, and economy — assessing whether programs achieve their intended results.

Question 18: In government financial management, what is 'debt management'?

Collecting delinquent taxes from citizens
Managing the federal government's outstanding debt obligations including issuance, interest payments, and retirement of securities (Correct answer)
Overseeing agency credit card programs
Approving agency loans to contractors

Correct answer: Managing the federal government's outstanding debt obligations including issuance, interest payments, and retirement of securities

Federal debt management involves issuing Treasury securities, making interest payments, retiring maturing debt, and managing the overall composition and maturity structure of the public debt.

Question 19: What is 'cost accounting' and why is it important in government financial management?

Tracking and analyzing the full costs of government programs and activities to support decision-making and performance measurement (Correct answer)
Tracking only the cost of supplies purchased
Calculating depreciation of government buildings only
Recording only direct labor costs

Correct answer: Tracking and analyzing the full costs of government programs and activities to support decision-making and performance measurement

Cost accounting identifies, measures, and reports the full costs (direct and indirect) of government programs to support informed management decisions and accountability.

Question 20: Which of the following best describes the concept of 'stewardship' in governmental financial management?

The responsibility of public officials to manage and account for public resources on behalf of citizens (Correct answer)
Managing government investments in private companies
Preparing the annual budget request
Maintaining physical custody of government assets

Correct answer: The responsibility of public officials to manage and account for public resources on behalf of citizens

Stewardship in government means public officials are responsible for managing public resources entrusted to them by citizens and must account for how those resources are used.

Question 21: What does GASB's concept of 'interperiod equity' mean in the context of governmental accounting?

Balancing the budget across multiple years
Distributing funds equally among jurisdictions
Ensuring current-year revenues are sufficient to pay current-year costs (Correct answer)
Equal treatment of all government departments

Correct answer: Ensuring current-year revenues are sufficient to pay current-year costs

Interperiod equity means today's taxpayers are paying for today's services, not shifting the burden to future taxpayers.

Question 22: Which type of government accountability focuses on whether programs achieve their intended outcomes?

Compliance accountability
Process accountability
Financial accountability
Program accountability (Correct answer)

Correct answer: Program accountability

Program accountability focuses on whether government programs actually achieve the results they were designed to produce, beyond just spending money or following rules.

Question 23: An agency that spends more than its appropriation has most likely violated which law?

Prompt Payment Act
Chief Financial Officers Act
Impoundment Control Act
Antideficiency Act (Correct answer)

Correct answer: Antideficiency Act

The Antideficiency Act prohibits federal agencies from obligating or expending funds in excess of the amount appropriated by Congress.

Question 24: In government auditing, what does 'GAGAS' stand for?

Generally Accepted Government Auditing Standards (Correct answer)
Government Approved GAAP Auditing Standards
General Accountability and Government Audit Standards
Government Agency and Grant Auditing Standards

Correct answer: Generally Accepted Government Auditing Standards

GAGAS stands for Generally Accepted Government Auditing Standards, also known as the 'Yellow Book,' issued by GAO for audits of government entities and federally funded programs.

Question 25: Under GASB Statement No. 34, government-wide financial statements are presented using which basis of accounting?

Modified accrual
Cash basis
Full accrual (Correct answer)
Budgetary basis

Correct answer: Full accrual

Government-wide financial statements use the full accrual basis of accounting to present a comprehensive economic view of the government's financial position.

Question 26: What is the purpose of the Single Audit Act?

To require non-federal entities that expend significant federal awards to undergo a comprehensive audit (Correct answer)
To standardize financial statements for all government entities
To eliminate duplicate audits of federal agencies
To consolidate all federal audits into one annual audit by GAO

Correct answer: To require non-federal entities that expend significant federal awards to undergo a comprehensive audit

The Single Audit Act requires states, local governments, and non-profit organizations that expend $750,000 or more in federal awards annually to have a single, organization-wide audit.

Question 27: Which law requires federal agencies to annually assess and report on the effectiveness of their internal controls over financial reporting?

Inspector General Act of 1978
Chief Financial Officers Act of 1990
Government Performance and Results Act of 1993
Federal Managers' Financial Integrity Act of 1982 (Correct answer)

Correct answer: Federal Managers' Financial Integrity Act of 1982

The Federal Managers' Financial Integrity Act (FMFIA) of 1982 requires agency heads to annually evaluate and report on the adequacy of their internal control and financial systems.

Question 28: What are the three CGFM examination areas?

Governmental Environment; Governmental Accounting, Financial Reporting, and Budgeting; Governmental Financial Management and Control (Correct answer)
Federal Finance, State Finance, and Local Finance
Accounting, Management, and Leadership
Budgeting, Auditing, and Tax Policy

Correct answer: Governmental Environment; Governmental Accounting, Financial Reporting, and Budgeting; Governmental Financial Management and Control

The CGFM certification requires passing three exams: Exam 1 (Governmental Environment), Exam 2 (Governmental Accounting, Financial Reporting, and Budgeting), and Exam 3 (Governmental Financial Management and Control).

Question 29: What is 'government-wide' reporting designed to accomplish?

Consolidate only enterprise fund activities
Track budget variances by department
Show the overall financial position of the government including all long-term assets and liabilities (Correct answer)
Report only capital project expenditures

Correct answer: Show the overall financial position of the government including all long-term assets and liabilities

Government-wide reporting provides a comprehensive economic view, consolidating all governmental and business-type activities to show total assets, liabilities, and net position.

Question 30: What is a 'revolving fund' in the federal government?

A reserve fund for emergencies
A fund that automatically renews each fiscal year
A fund that pays interest on federal debt
A fund that sustains its operations by charging other agencies for goods or services and using the proceeds to cover its costs (Correct answer)

Correct answer: A fund that sustains its operations by charging other agencies for goods or services and using the proceeds to cover its costs

A revolving fund finances a continuing cycle of operations, recovering costs through charges to customers and using the receipts to finance continuing operations without annual appropriations.

Question 31: The concept of 'interperiod equity' in governmental accounting means:

Current-year revenues should be sufficient to pay for current-year services (Correct answer)
All funds must maintain equal balances at year-end
Capital assets should be depreciated equally over their useful lives
Tax burdens must be distributed equitably among taxpayers

Correct answer: Current-year revenues should be sufficient to pay for current-year services

Interperiod equity means that current taxpayers pay for the services they receive and do not shift costs to future taxpayers.

Question 32: Under federal accounting standards (FASAB), which of the following is a stewardship asset?

Federal buildings and office equipment
Land purchased for a military base
Heritage assets such as the National Mall (Correct answer)
National defense assets such as fighter jets

Correct answer: Heritage assets such as the National Mall

Heritage assets (like national monuments, historic sites, and museum collections) are stewardship assets reported in supplementary information rather than on the balance sheet.

Question 33: What year was the Federal Accounting Standards Advisory Board (FASAB) established?

1984
1999
1990 (Correct answer)
2002

Correct answer: 1990

FASAB was established in 1990 by a memorandum of understanding among the Treasury, OMB, and GAO to develop accounting standards for the federal government.

Question 34: In a government audit, what is an 'audit finding'?

A summary of audit procedures performed
The auditor's unmodified opinion on financial statements
A deficiency, noncompliance, or abuse identified during the audit that must be reported (Correct answer)
The agency's response to the audit

Correct answer: A deficiency, noncompliance, or abuse identified during the audit that must be reported

An audit finding is a significant deficiency, material weakness, noncompliance, questioned cost, or abuse identified during the audit that must be communicated to management.

Question 35: What is the role of the Government Accountability Office (GAO) in the federal budget process?

Apportioning funds to federal agencies
Preparing the President's annual budget
Providing Congress with independent auditing, investigative, and oversight services (Correct answer)
Setting tax policy for the federal government

Correct answer: Providing Congress with independent auditing, investigative, and oversight services

The GAO is Congress's independent watchdog, providing audits, investigations, and analyses to help Congress make informed decisions about federal programs and spending.

Question 36: Which federal law created strong protections against retaliation for federal employee whistleblowers?

Sarbanes-Oxley Act
Inspector General Act of 1978
Whistleblower Protection Act of 1989 (Correct answer)
Federal Employees Protection Act

Correct answer: Whistleblower Protection Act of 1989

The Whistleblower Protection Act of 1989 (and its 2012 enhancement) protects federal employees who disclose fraud, waste, abuse, or violations of law from retaliation by their agencies.

Certified Government Financial Manager (CGFM)

The CGFM certification, administered by the Association of Government Accountants (AGA), validates expertise in governmental financial management across three exams covering the governmental environment, accounting and budgeting, and financial management and control.

Questions

40 min

Time Limit

71%

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