GAC Governmental Financial Reporting & Analysis 3 — Questions and Answers
Question 1: A government issues $10 million in general obligation bonds. In which fund would the debt service payments typically be accounted for?
- General Fund
- Capital Projects Fund
- Debt Service Fund (Correct answer)
- Enterprise Fund
Correct answer: Debt Service Fund
Debt Service Funds accumulate resources and account for payment of principal and interest on long-term general obligation debt.
Question 2: Under GASB 68, pension expense reported in government-wide statements reflects which of the following?
- Cash contributions made during the year
- Changes in net pension liability plus deferred inflows and outflows (Correct answer)
- Benefits paid to retirees during the year
- Actuarially determined contribution amounts
Correct answer: Changes in net pension liability plus deferred inflows and outflows
GASB 68 pension expense includes service cost, interest, and amortization of deferred inflows/outflows related to the net pension liability.
Question 3: Which of the following is classified as a special revenue fund?
- A fund receiving dedicated state gas tax revenues for road maintenance (Correct answer)
- A fund accumulating resources to pay bond principal
- A fund accounting for water utility operations
- A fund managing assets held in trust for employees
Correct answer: A fund receiving dedicated state gas tax revenues for road maintenance
Special revenue funds account for legally restricted or committed revenue sources earmarked for specific purposes other than debt service or capital projects.
Question 4: What is the primary purpose of the Statistical Section in a CAFR?
- To present audited financial data
- To provide historical trend data and contextual information beyond the financial statements (Correct answer)
- To disclose significant accounting policies
- To list all capital assets and depreciation schedules
Correct answer: To provide historical trend data and contextual information beyond the financial statements
The Statistical Section provides multi-year trend data, demographic information, and economic data to help users assess the government's economic condition.
Question 5: A government reports a $500,000 interfund transfer from the General Fund to a Capital Projects Fund. How should this be presented?
- As revenue in the Capital Projects Fund and expenditure in the General Fund
- As an other financing source in Capital Projects Fund and other financing use in General Fund (Correct answer)
- As a liability in the General Fund and asset in Capital Projects Fund
- Eliminated in consolidation across all funds
Correct answer: As an other financing source in Capital Projects Fund and other financing use in General Fund
Interfund transfers are reported as other financing sources (uses) rather than revenues or expenditures in governmental fund statements.
Question 6: Which GASB concept statement establishes the hierarchy of users for whom governmental financial reporting is primarily intended?
- Citizens, legislative oversight bodies, and investors/creditors (Correct answer)
- Only taxpayers and legislative bodies
- Federal oversight agencies and bond rating firms
- Internal management and external auditors
Correct answer: Citizens, legislative oversight bodies, and investors/creditors
GASB's user hierarchy for external governmental financial reporting includes citizens, legislative and oversight bodies, and investors and creditors.
Question 7: When a government's expenditures exceed its appropriations, this is referred to as what type of violation?
- Encumbrance overrun
- Budgetary appropriation violation (Correct answer)
- Fund balance deficiency
- Unappropriated deficit
Correct answer: Budgetary appropriation violation
Spending in excess of appropriated amounts constitutes a budgetary appropriation violation and may be illegal under state or local law.
GAC Governmental Financial Reporting & Analysis 3
A government issues $10 million in general obligation bonds.
In which fund would the debt service payments typically be accounted for?