GAC Financial Modeling & Forecasting 3

Question 1

Which GASB standard most directly governs the financial reporting framework that governmental financial models must align with?

Accepted Answer

GASB Statement No. 34

Answer

GASB Statement No. 34 established the modern financial reporting model for state and local governments, including government-wide and fund-level statements.

Question 2

In a governmental financial model, 'encumbrances' are best described as:

Accepted Answer

Commitments of fund balance for purchase orders not yet received

Answer

Encumbrances represent commitments (e.g., purchase orders) that reserve a portion of appropriations but have not yet resulted in actual expenditures.

Question 3

When forecasting pension expenditures for a government, which factor has the greatest long-term financial modeling impact?

Accepted Answer

Assumed investment return rate on pension assets

Answer

The assumed investment return rate (discount rate) determines the present value of pension liabilities and significantly drives required contribution levels.

Question 4

A government's five-year capital improvement plan (CIP) financial model should primarily link to which operating fund impact?

Accepted Answer

Future debt service requirements and maintenance costs

Answer

Capital projects generate future debt service obligations and ongoing maintenance costs that must be incorporated into operating fund forecasts.

Question 5

Which method is used to estimate the cost of a government service by tracing indirect costs to specific programs or activities?

Accepted Answer

Activity-based costing (ABC)

Answer

Activity-based costing allocates overhead and indirect costs to specific activities or programs based on actual resource consumption.

(GAC) Governmental Accounting Certification Practice Test

(GAC) Governmental Accounting Certification Practice Test

GAC Financial Modeling & Forecasting 3