CGFM EXAM 2026/2027 -CERTIFIED GOVERNMENT FINANCIAL
MANAGER | COMPLETE QUESTIONS AND ANSWERS (VERIFIED
ANSWERS) | EXAM PREP | LATEST EXAM GUIDE 2026&2027
1. Which characteristic most clearly distinguishes governmental financial management
from private-sector financial management?
A. Government entities never prepare financial statements
B. Government financial decisions are primarily directed toward shareholder returns
C. Government financial management emphasizes accountability for public resources and
achievement of public objectives
D. Government entities are not subject to budgeting requirements
Answer: C
Governmental financial management emphasizes stewardship, accountability, compliance,
and service delivery rather than maximizing shareholder profit.
2. A government agency receives a federal grant restricted to improving emergency
communications. The agency wants to use part of the grant for routine office furniture.
What is the BEST initial action?
A. Determine whether the grant agreement permits the proposed expenditure
B. Spend the funds because furniture supports agency operations
C. Transfer the money to the general fund
D. Use the funds and document the decision afterward
Answer: A
Restricted resources must be used in accordance with applicable grant terms and restrictions
before management authorizes the expenditure.
3. Which governmental accounting principle requires resources to be accounted for
according to the purposes for which they are legally restricted or committed?
A. Materiality
B. Fund accounting
C. Conservatism
D. Matching
Answer: B
Fund accounting separates resources according to legal, regulatory, or administrative
restrictions and the purposes for which those resources may be used.
4. A city establishes a fund to account for resources legally restricted to constructing a new
public library. Which classification is MOST appropriate?
,A. Enterprise fund
B. Permanent fund
C. Special revenue fund
D. Capital projects fund
Answer: D
A capital projects fund is generally used to account for financial resources restricted,
committed, or assigned to capital acquisition or construction.
5. Which organization is primarily responsible for establishing accounting and financial
reporting standards for U.S. state and local governments?
A. FASB
B. GASB
C. SEC
D. PCAOB
Answer: B
The Governmental Accounting Standards Board establishes accounting and financial
reporting standards for state and local governments.
6. A governmental manager wants to evaluate whether a program achieved its intended
outcomes using the resources provided. Which concept is MOST relevant?
A. Performance measurement
B. Encumbrance accounting
C. Fund balance classification
D. Bond amortization
Answer: A
Performance measurement evaluates how effectively and efficiently governmental programs
use resources to achieve intended results.
7. Which level of government generally has the broadest constitutional authority to exercise
powers not prohibited by the Constitution?
A. Federal government
B. State government
C. County government
D. Municipal government
Answer: B
States generally possess broad residual powers under the federal constitutional framework,
subject to constitutional and statutory limitations.
,8. A government official is offered an expensive gift by a contractor immediately before a
procurement decision. What is the MOST appropriate response?
A. Accept it if no contract has yet been signed
B. Accept it if the official does not personally benefit from the contract
C. Decline or report the gift in accordance with applicable ethics requirements
D. Accept it and disclose it after the procurement is complete
Answer: C
Potential gifts from vendors can create actual or perceived conflicts of interest and should be
handled according to applicable ethics policies and laws.
9. Which principle is most directly associated with ensuring that government officials can
be held responsible for the use of public resources?
A. Public accountability
B. Revenue recognition
C. Depreciation
D. Capitalization
Answer: A
Public accountability requires governmental officials to demonstrate responsible stewardship
of resources entrusted to them.
10. A county establishes an internal control requiring two authorized employees to approve
electronic fund transfers above a specified threshold. This control primarily addresses
which risk?
A. Depreciation risk
B. Unauthorized disbursement risk
C. Revenue recognition risk
D. Budget forecasting risk
Answer: B
Dual authorization reduces the likelihood that one individual can independently initiate and
complete a significant unauthorized transfer.
11. Which financial statement provides information about governmental activities using an
economic-resources measurement focus?
A. Government-wide statement of net position
B. Budgetary comparison schedule
C. Statement of revenues, expenditures, and changes in fund balances
D. Encumbrance report
Answer: A
, Government-wide financial statements use the economic resources measurement focus and
accrual basis of accounting.
12. A city government has a legally adopted annual budget. Which action BEST
demonstrates budgetary compliance?
A. Recording all purchases as liabilities
B. Comparing actual results with legally authorized budget amounts
C. Eliminating all year-end encumbrances
D. Reporting only cash expenditures
Answer: B
Budgetary compliance is demonstrated by monitoring actual financial activity against legally
authorized budgetary limits.
13. Which governmental fund is normally used to account for the government's primary
operating activities?
A. General fund
B. Debt service fund
C. Permanent fund
D. Internal service fund
Answer: A
The general fund accounts for and reports all financial resources that are not required to be
reported in another governmental fund.
14. A city collects property taxes that are legally restricted for debt repayment. Which fund
would normally account for those resources?
A. General fund
B. Debt service fund
C. Enterprise fund
D. Internal service fund
Answer: B
Debt service funds are used to account for resources restricted, committed, or assigned to the
payment of principal and interest on governmental long-term debt.
15. Which basis of accounting is generally used in governmental fund financial statements?
A. Full accrual
B. Modified accrual
C. Cash basis exclusively
D. Tax basis
Answer: B
MANAGER | COMPLETE QUESTIONS AND ANSWERS (VERIFIED
ANSWERS) | EXAM PREP | LATEST EXAM GUIDE 2026&2027
1. Which characteristic most clearly distinguishes governmental financial management
from private-sector financial management?
A. Government entities never prepare financial statements
B. Government financial decisions are primarily directed toward shareholder returns
C. Government financial management emphasizes accountability for public resources and
achievement of public objectives
D. Government entities are not subject to budgeting requirements
Answer: C
Governmental financial management emphasizes stewardship, accountability, compliance,
and service delivery rather than maximizing shareholder profit.
2. A government agency receives a federal grant restricted to improving emergency
communications. The agency wants to use part of the grant for routine office furniture.
What is the BEST initial action?
A. Determine whether the grant agreement permits the proposed expenditure
B. Spend the funds because furniture supports agency operations
C. Transfer the money to the general fund
D. Use the funds and document the decision afterward
Answer: A
Restricted resources must be used in accordance with applicable grant terms and restrictions
before management authorizes the expenditure.
3. Which governmental accounting principle requires resources to be accounted for
according to the purposes for which they are legally restricted or committed?
A. Materiality
B. Fund accounting
C. Conservatism
D. Matching
Answer: B
Fund accounting separates resources according to legal, regulatory, or administrative
restrictions and the purposes for which those resources may be used.
4. A city establishes a fund to account for resources legally restricted to constructing a new
public library. Which classification is MOST appropriate?
,A. Enterprise fund
B. Permanent fund
C. Special revenue fund
D. Capital projects fund
Answer: D
A capital projects fund is generally used to account for financial resources restricted,
committed, or assigned to capital acquisition or construction.
5. Which organization is primarily responsible for establishing accounting and financial
reporting standards for U.S. state and local governments?
A. FASB
B. GASB
C. SEC
D. PCAOB
Answer: B
The Governmental Accounting Standards Board establishes accounting and financial
reporting standards for state and local governments.
6. A governmental manager wants to evaluate whether a program achieved its intended
outcomes using the resources provided. Which concept is MOST relevant?
A. Performance measurement
B. Encumbrance accounting
C. Fund balance classification
D. Bond amortization
Answer: A
Performance measurement evaluates how effectively and efficiently governmental programs
use resources to achieve intended results.
7. Which level of government generally has the broadest constitutional authority to exercise
powers not prohibited by the Constitution?
A. Federal government
B. State government
C. County government
D. Municipal government
Answer: B
States generally possess broad residual powers under the federal constitutional framework,
subject to constitutional and statutory limitations.
,8. A government official is offered an expensive gift by a contractor immediately before a
procurement decision. What is the MOST appropriate response?
A. Accept it if no contract has yet been signed
B. Accept it if the official does not personally benefit from the contract
C. Decline or report the gift in accordance with applicable ethics requirements
D. Accept it and disclose it after the procurement is complete
Answer: C
Potential gifts from vendors can create actual or perceived conflicts of interest and should be
handled according to applicable ethics policies and laws.
9. Which principle is most directly associated with ensuring that government officials can
be held responsible for the use of public resources?
A. Public accountability
B. Revenue recognition
C. Depreciation
D. Capitalization
Answer: A
Public accountability requires governmental officials to demonstrate responsible stewardship
of resources entrusted to them.
10. A county establishes an internal control requiring two authorized employees to approve
electronic fund transfers above a specified threshold. This control primarily addresses
which risk?
A. Depreciation risk
B. Unauthorized disbursement risk
C. Revenue recognition risk
D. Budget forecasting risk
Answer: B
Dual authorization reduces the likelihood that one individual can independently initiate and
complete a significant unauthorized transfer.
11. Which financial statement provides information about governmental activities using an
economic-resources measurement focus?
A. Government-wide statement of net position
B. Budgetary comparison schedule
C. Statement of revenues, expenditures, and changes in fund balances
D. Encumbrance report
Answer: A
, Government-wide financial statements use the economic resources measurement focus and
accrual basis of accounting.
12. A city government has a legally adopted annual budget. Which action BEST
demonstrates budgetary compliance?
A. Recording all purchases as liabilities
B. Comparing actual results with legally authorized budget amounts
C. Eliminating all year-end encumbrances
D. Reporting only cash expenditures
Answer: B
Budgetary compliance is demonstrated by monitoring actual financial activity against legally
authorized budgetary limits.
13. Which governmental fund is normally used to account for the government's primary
operating activities?
A. General fund
B. Debt service fund
C. Permanent fund
D. Internal service fund
Answer: A
The general fund accounts for and reports all financial resources that are not required to be
reported in another governmental fund.
14. A city collects property taxes that are legally restricted for debt repayment. Which fund
would normally account for those resources?
A. General fund
B. Debt service fund
C. Enterprise fund
D. Internal service fund
Answer: B
Debt service funds are used to account for resources restricted, committed, or assigned to the
payment of principal and interest on governmental long-term debt.
15. Which basis of accounting is generally used in governmental fund financial statements?
A. Full accrual
B. Modified accrual
C. Cash basis exclusively
D. Tax basis
Answer: B
