CGFM EXAM STUDY GUIDE CORE QUESTIONS WITH
SOLUTIONS A+ 2025/2026
✔✔Before financial reports are completed, all information pertaining to financial
condition and results of operation should be available. - ✔✔False. In order to issue
reports in a timely manner, it may be necessary to make estimates. If the reports are not
released in a timely manner, they cannot be useful for making decisions.
✔✔Financial Accounting Standards Board (FASB) - ✔✔establishes standards for the
private sector including not-for-profit entities.
✔✔Governmental Accounting Standards Board (GASB) - ✔✔establishes standards for
governments, excluding federal governments.
✔✔Federal Accounting Standards Advisory Board - ✔✔established standards for the
federal government.
✔✔State and local governments never have to follow standards of the Financial
Standards Board (FASB - ✔✔True
✔✔During due process, a standards-setting board mayor may not take a position.
Which has a position not to be taken? - ✔✔Discussion memorandum and invitation to
comment
✔✔The following is not a cost of accounting? - ✔✔Making an investment of government
funds
✔✔Types of costs - ✔✔Costs can be direct or indirect.
✔✔Direct costs are - ✔✔those that can be directly attributed to a cost objective.
✔✔Indirect costs are - ✔✔jointly or commonly used by two or more cost objectives and
cannot practically or economically be attributed to an objective.
✔✔Costs should be assigned on a direct basis at all times. - ✔✔False. Although the
direct basis is preferred, in many instances, it is neither practical nor economical to
assign costs on a direct basis.
✔✔Which is the preferred sequence for assigning costs? - ✔✔direct tracing, cause-and-
effect, and allocation
✔✔OMB Circular A-87 was established to allow state and local governments to
determine indirect costs that could be recovered under federal awards. - ✔✔True. The
federal government recognized that state and local governments incurred indirect costs,
, such as general, administrative and support, on behalf of federal awards. The indirect
cost rate determination process is the established mechanism that nonfederal entities
must use to claim their fair share of indirect costs under federal awards.
✔✔Factors which determine if cost is reasonable under the December 2014 OMB
Uniform Guidance: - ✔✔A cost is reasonable if it does not exceed that which should be
incurred by a prudent person under the circumstances prevailing at the time the
decision was made to incur the cost. The question of reasonableness is particularly
important when governmental units are predominantly federally funded.
✔✔Fringe benefits include - ✔✔contribution to retirement system, healthcare
contribution to retirement system health care contribution for employees, and life
insurance contribution.
✔✔Two criteria are needed to determine an indirect cost - ✔✔Indirect costs are those
incurred for a common purpose benefiting more than one cost objective or not readily
assignable to an objective without considerable effort.
✔✔The amount charged for a user fee can be different based on the cost recovery
objective. - ✔✔True. Depending on the cost recovery objective, different costs would be
included in calculating the user fee. If the government wanted to recover expenditures
(outlays), then capital purchases would be included, even though they benefit future
periods. If the government wants to recovers expenses, an allocation for depreciation
would be included. If a government wants to recover expenses plus debt service,
payments for principal retirement would be included.
✔✔Breakeven equation - ✔✔Fixed costs divided by Price per unit - (Labor cost per unit
plus material cost per unit)
✔✔Cover recovery objectives - ✔✔The user fee will recover only direct costs. The user
fee will recover all expenditures, including capital assets. The user fee will recover
expenses (costs during the accrual basis of accounting, including depreciation).
✔✔Cost recovery objectives - ✔✔The user fee will recover expenses (including
depreciation) plus an allowance for replacing equipment currently used. The user fee
will recover expenses, plus the amount required to pay principal on outstanding bonds,
in lieu of depreciation.
✔✔A major disadvantage of a user fee is that only those who use the service are
charged. - ✔✔False. This is the major advantage of user fees-only those who use the
service have to pay for it.
✔✔A government's budget should incorporate only a short-term perspective because
the budget is only for a one-year period. - ✔✔False. Although the budget is only for a
SOLUTIONS A+ 2025/2026
✔✔Before financial reports are completed, all information pertaining to financial
condition and results of operation should be available. - ✔✔False. In order to issue
reports in a timely manner, it may be necessary to make estimates. If the reports are not
released in a timely manner, they cannot be useful for making decisions.
✔✔Financial Accounting Standards Board (FASB) - ✔✔establishes standards for the
private sector including not-for-profit entities.
✔✔Governmental Accounting Standards Board (GASB) - ✔✔establishes standards for
governments, excluding federal governments.
✔✔Federal Accounting Standards Advisory Board - ✔✔established standards for the
federal government.
✔✔State and local governments never have to follow standards of the Financial
Standards Board (FASB - ✔✔True
✔✔During due process, a standards-setting board mayor may not take a position.
Which has a position not to be taken? - ✔✔Discussion memorandum and invitation to
comment
✔✔The following is not a cost of accounting? - ✔✔Making an investment of government
funds
✔✔Types of costs - ✔✔Costs can be direct or indirect.
✔✔Direct costs are - ✔✔those that can be directly attributed to a cost objective.
✔✔Indirect costs are - ✔✔jointly or commonly used by two or more cost objectives and
cannot practically or economically be attributed to an objective.
✔✔Costs should be assigned on a direct basis at all times. - ✔✔False. Although the
direct basis is preferred, in many instances, it is neither practical nor economical to
assign costs on a direct basis.
✔✔Which is the preferred sequence for assigning costs? - ✔✔direct tracing, cause-and-
effect, and allocation
✔✔OMB Circular A-87 was established to allow state and local governments to
determine indirect costs that could be recovered under federal awards. - ✔✔True. The
federal government recognized that state and local governments incurred indirect costs,
, such as general, administrative and support, on behalf of federal awards. The indirect
cost rate determination process is the established mechanism that nonfederal entities
must use to claim their fair share of indirect costs under federal awards.
✔✔Factors which determine if cost is reasonable under the December 2014 OMB
Uniform Guidance: - ✔✔A cost is reasonable if it does not exceed that which should be
incurred by a prudent person under the circumstances prevailing at the time the
decision was made to incur the cost. The question of reasonableness is particularly
important when governmental units are predominantly federally funded.
✔✔Fringe benefits include - ✔✔contribution to retirement system, healthcare
contribution to retirement system health care contribution for employees, and life
insurance contribution.
✔✔Two criteria are needed to determine an indirect cost - ✔✔Indirect costs are those
incurred for a common purpose benefiting more than one cost objective or not readily
assignable to an objective without considerable effort.
✔✔The amount charged for a user fee can be different based on the cost recovery
objective. - ✔✔True. Depending on the cost recovery objective, different costs would be
included in calculating the user fee. If the government wanted to recover expenditures
(outlays), then capital purchases would be included, even though they benefit future
periods. If the government wants to recovers expenses, an allocation for depreciation
would be included. If a government wants to recover expenses plus debt service,
payments for principal retirement would be included.
✔✔Breakeven equation - ✔✔Fixed costs divided by Price per unit - (Labor cost per unit
plus material cost per unit)
✔✔Cover recovery objectives - ✔✔The user fee will recover only direct costs. The user
fee will recover all expenditures, including capital assets. The user fee will recover
expenses (costs during the accrual basis of accounting, including depreciation).
✔✔Cost recovery objectives - ✔✔The user fee will recover expenses (including
depreciation) plus an allowance for replacing equipment currently used. The user fee
will recover expenses, plus the amount required to pay principal on outstanding bonds,
in lieu of depreciation.
✔✔A major disadvantage of a user fee is that only those who use the service are
charged. - ✔✔False. This is the major advantage of user fees-only those who use the
service have to pay for it.
✔✔A government's budget should incorporate only a short-term perspective because
the budget is only for a one-year period. - ✔✔False. Although the budget is only for a
