GAC Cheat Sheet 2026

The 30 highest-yield GAC facts, distilled from real exam questions. Print it, save it as a PDF, or study it here — free, no sign-up.

1. A school district issues bonds and uses the proceeds to invest in higher-yielding securities before spending on construction. This practice is called: → Arbitrage
2. An advisor is helping a city improve its cash management practices. Which strategy best reduces idle cash balances while maintaining liquidity? → Implementing a pooled investment portfolio with laddered maturities
3. Which provision allows governmental entities to exclude interest income on state and local bonds from federal gross income? → IRC Section 103
4. A city's internal auditor discovers that a department head approved expenditures that exceeded their delegated authority. This is BEST classified as a: → Control deficiency related to authorization controls
5. When forecasting pension expenditures for a government, which factor has the greatest long-term financial modeling impact? → Assumed investment return rate on pension assets
6. What is the hierarchy of controls in GAC risk management? → Elimination, substitution, engineering, administrative, then PPE
7. Which type of government investment is MOST subject to prepayment risk? → Mortgage-backed securities
8. Which document formally establishes the legal relationship, terms, and conditions between a federal awarding agency and a grant recipient? → Federal Award Agreement
9. Which element is NOT required to be included in a GAGAS performance audit report? → A detailed listing of all audit procedures performed
10. In governmental accounting, which of the following describes an 'inter-fund loan'? → A temporary advance of resources from one fund to another that is expected to be repaid
11. Which risk is MOST associated with the control environment component of COSO in a governmental entity? → Lack of ethical tone from elected officials and senior management
12. Under GASB Statement No. 34, which financial statements are required for governmental funds? → Balance sheet and statement of revenues, expenditures, and changes in fund balances
13. A government receives a federal grant with a requirement that unspent funds be returned. This grant would be classified as: → Non-exchange revenue with eligibility requirements
14. An auditor finds that a city improperly recorded a capital lease as an operating expense. Which financial statement assertion is violated? → Classification
15. Which financial modeling approach starts from a clean slate each budget cycle, requiring all expenditures to be justified from zero? → Zero-based budgeting
16. A government's investment policy requires all securities to be rated at least 'A' by a nationally recognized rating agency. This policy primarily addresses: → Credit risk
17. How does segregation of duties improve internal controls in government? → By reducing the risk of errors and fraud.
18. A government's pension plan reports a fiduciary net position equal to 110% of total pension liability. This is best described as: → An overfunded pension plan
19. Which type of federal award requires the recipient to contribute a specified percentage of non-federal resources? → Matching grant
20. Which condition must be met for a government to include a legally separate entity as a blended component unit? → The entity exclusively serves the primary government or its component units
21. What are consequences of non-compliance in GAC practice? → Fines, license revocation, legal liability, and reputation damage
22. Under GASB standards, which of the following is NOT considered a custodial credit risk for governmental investments? → Securities registered in the government's name held by a third-party custodian
23. In a governmental financial model, 'encumbrances' are best described as: → Commitments of fund balance for purchase orders not yet received
24. What is active listening in GAC practice? → Fully concentrating on the speaker and providing thoughtful feedback
25. Under GASB standards, which of the following is an example of a 'derived tax revenue'? → Sales taxes collected by retailers on behalf of the government
26. Under GASB Statement No. 34, which financial statement presents the government-wide net position at year-end? → Statement of Net Position
27. In governmental accounting, what is the purpose of a permanent fund? → To account for resources legally restricted so that only earnings may be expended
28. Which fund type uses the economic resources measurement focus and accrual basis of accounting? → Enterprise Fund
29. Which federal agency serves as the standard-setting body for Generally Accepted Government Auditing Standards (GAGAS)? → Government Accountability Office (GAO)
30. What does ROI measure in GAC financial analysis? → Gain or loss relative to the investment amount