CGFO Ethics, Compliance & Financial Governance 2 — Questions and Answers
Question 1: A government finance officer discovers that a department head has been approving invoices from a vendor owned by the department head's spouse. Which ethical principle is most clearly violated?
- Transparency
- Conflict of interest (Correct answer)
- Fiscal conservatism
- Separation of duties
Correct answer: Conflict of interest
A conflict of interest exists when a public official's personal financial interests intersect with their official decision-making responsibilities.
Question 2: Under the GFOA Code of Professional Ethics, which obligation requires members to disclose all facts known to them that, if not disclosed, might distort the reporting of financial conditions?
- Integrity (Correct answer)
- Professionalism
- Objectivity
- Confidentiality
Correct answer: Integrity
Integrity under the GFOA Code requires full disclosure of all material facts to prevent misleading financial reporting.
Question 3: Which federal law established the framework for internal controls in federal agencies and is considered a foundational governance standard for government finance?
- Sarbanes-Oxley Act
- Federal Managers Financial Integrity Act (FMFIA) (Correct answer)
- Dodd-Frank Act
- Government Performance and Results Act
Correct answer: Federal Managers Financial Integrity Act (FMFIA)
The FMFIA of 1982 requires federal agencies to establish internal accounting and administrative controls based on GAO standards.
Question 4: A city finance director is asked by the mayor to delay recording a significant liability until after the upcoming election. The appropriate response is to:
- Comply if the delay is less than 30 days
- Refuse and record the liability in the correct period (Correct answer)
- Seek a legal opinion before deciding
- Defer to the mayor as the elected official
Correct answer: Refuse and record the liability in the correct period
GAAP requires liabilities to be recorded in the period they are incurred; delaying recording to influence elections violates both accounting standards and ethical duties.
Question 5: The 'reasonable person' standard in government ethics is used to evaluate whether a public official's actions would be perceived as improper by:
- The official's supervisor
- A knowledgeable, objective observer (Correct answer)
- A majority of elected officials
- The state ethics commission
Correct answer: A knowledgeable, objective observer
The reasonable person standard asks how an informed, impartial member of the public would evaluate the official's conduct.
Question 6: Which COSO component focuses on ensuring that control activities are actually functioning as intended over time?
- Risk Assessment
- Control Environment
- Monitoring Activities (Correct answer)
- Information and Communication
Correct answer: Monitoring Activities
Monitoring Activities is the COSO component that evaluates whether controls are present and functioning through ongoing evaluations and separate assessments.
Question 7: A government finance officer receives a gift valued at $75 from a vendor whose contract is up for renewal. Most state ethics laws would require the officer to:
- Accept it since it is below $100
- Report it and decline or return it (Correct answer)
- Donate it to charity and report it
- Accept it but recuse from the contract vote
Correct answer: Report it and decline or return it
Most ethics statutes prohibit gifts from vendors doing business with the government regardless of value, requiring refusal or return and disclosure.
CGFO Ethics, Compliance & Financial Governance 2
A government finance officer discovers that a department head has been approving invoices from a vendor owned by the department head's spouse.
Which ethical principle is most clearly violated?