AGA CGFM: Government Environment Practice test exam
Questions with complete solutions verified by experts
2024/2025
Budgeting - correct answer Central control device in the gov't management
cycle.
Operating Budgets - correct answer Covers a limited period of usually one to
two years. Specifies planned revenues and expenditures throughout the budget
period.
Cash-flow Budget - correct answer Purpose is to help plan the timing of cash
receipts and expenditures so funds will actually be available when it's time to
make a payment.
Capital Budget - correct answer Covers big ticket items that will support
governmental operations for several years, and that may also be acquired over a
period of several years.
Operations - correct answer All activities needed to achieve program
objectives. During this phase, actual gov't services are delivered.
Internal Controls - correct answer To ensure assets are safeguarded and used
for the intended purpose. Minimizes the risk of loss, fraud and mismanagement.
Critical during the Operations phase of the gov't management cycle. Also
referred to as management controls.
Reporting - correct answer Primary purpose is to communicate
accomplishments and resources expended. It is essential to accountability.
,GASB - correct answer Governmental Accounting Standards Board. Defines
GAAP for state and local gov'ts; tribal gov'ts; and U.S. Territories, trusts, and
commonwealths.
FASAB - correct answer Federal Accounting Standards Advisory Board.
Defines GAAP for entities of the national gov't.
FASB - correct answer Financial Accounting Standards Board. Defines GAAP
for private sector entities.
Performance Reports - correct answer Reports that link financial resources to
the service outputs and outcomes achieved with those resources.
MD&A - correct answer Management Discussion & Analysis. Provides basic
information on the structure of government and budgetary process. Highlights
significant trends in the financial status of government.
Tax Equity - correct answer Principle that taxes should treat taxpayers fairly.
Horizontal Equity - correct answer Different taxpayers with the same income
level should pay the same amount of tax.
Vertical Equity - correct answer Taxpayers with different income levels should
pay different amounts of tax.
Tax Expenditures - correct answer Revenue losses that result from special
exemptions, exclusions, or deductions on federal tax law. Also called Tax Breaks
and/or Loopholes.
,Dedicated Tax - correct answer Levied for a specific purpose and the
proceeds are deposited into an account restricted to that purpose. Also referred
to as earmarked or restricted taxes.
Income Taxes - correct answer Taxes on income, both earned (salaries,
wages, tips, commissions) and unearned (interest, dividends). Income taxes can
be levied on both individuals (personal income taxes) and businesses (business
and corporate income taxes). Major source of revenue for the national gov't and
most states.
Wealth Tax - correct answer A tax on an individual's wealth.
Intangibles Tax - correct answer Form of wealth tax. Applied to intangible
assets such as stocks and bonds, savings accounts, and trademarks.
Inheritance Tax - correct answer Form of wealth tax. Levied on the person
receiving the money. States may levy.
Estate Tax - correct answer Form of wealth tax. Levied on the estate of the
deceased person before assets are distributed to heirs. States may levy. Fed
gov't levies.
Consumption Tax - correct answer A tax paid on individual or household
consumptions of goods (and sometimes services).
Sales Tax - correct answer Form of consumption tax. A tax on a sale of
merchandise or services.
Use Tax - correct answer Tax charged on goods purchased from out-of-state
and used within the state. Substitute sales tax.
, Value-Added Tax - correct answer A tax on increased value of a product at
each stage of production and distribution rather than just at the point of sale.
Project Grants - correct answer Also called discretionary grants. Provide
funding (i.e. Scholarships, fellowships, etc.) For specific purposes for limited
periods of time.
Formula Grants - correct answer Grants-in-aid in which a formula is used to
determine the amount of federal funds a state or local government will receive.
Categorical Grants - correct answer Can be used only for a narrowly defined
purpose, such as subsidized housing for senior citizens.
Block Grants - correct answer A form of fiscal federalism where federal aid is
given to the states or local gov'ts with few strings attached.
Shared Revenues - correct answer Form of intergovernmental funding. Funds
passed from state to local gov'ts that are provided with few constraints so that
local entities have maximum flexibility.
License Fee - correct answer Form of revenue. Fees are charged to cover the
cost of regulating the activity.
User Fees - correct answer Form of revenue. Charge imposed on the specific
beneficiary of a good or service. Provides flexibility to cover unexpected costs.
Donations - correct answer Form of revenue. Voluntary contributions that
confer no rights or benefits on the giver.
Questions with complete solutions verified by experts
2024/2025
Budgeting - correct answer Central control device in the gov't management
cycle.
Operating Budgets - correct answer Covers a limited period of usually one to
two years. Specifies planned revenues and expenditures throughout the budget
period.
Cash-flow Budget - correct answer Purpose is to help plan the timing of cash
receipts and expenditures so funds will actually be available when it's time to
make a payment.
Capital Budget - correct answer Covers big ticket items that will support
governmental operations for several years, and that may also be acquired over a
period of several years.
Operations - correct answer All activities needed to achieve program
objectives. During this phase, actual gov't services are delivered.
Internal Controls - correct answer To ensure assets are safeguarded and used
for the intended purpose. Minimizes the risk of loss, fraud and mismanagement.
Critical during the Operations phase of the gov't management cycle. Also
referred to as management controls.
Reporting - correct answer Primary purpose is to communicate
accomplishments and resources expended. It is essential to accountability.
,GASB - correct answer Governmental Accounting Standards Board. Defines
GAAP for state and local gov'ts; tribal gov'ts; and U.S. Territories, trusts, and
commonwealths.
FASAB - correct answer Federal Accounting Standards Advisory Board.
Defines GAAP for entities of the national gov't.
FASB - correct answer Financial Accounting Standards Board. Defines GAAP
for private sector entities.
Performance Reports - correct answer Reports that link financial resources to
the service outputs and outcomes achieved with those resources.
MD&A - correct answer Management Discussion & Analysis. Provides basic
information on the structure of government and budgetary process. Highlights
significant trends in the financial status of government.
Tax Equity - correct answer Principle that taxes should treat taxpayers fairly.
Horizontal Equity - correct answer Different taxpayers with the same income
level should pay the same amount of tax.
Vertical Equity - correct answer Taxpayers with different income levels should
pay different amounts of tax.
Tax Expenditures - correct answer Revenue losses that result from special
exemptions, exclusions, or deductions on federal tax law. Also called Tax Breaks
and/or Loopholes.
,Dedicated Tax - correct answer Levied for a specific purpose and the
proceeds are deposited into an account restricted to that purpose. Also referred
to as earmarked or restricted taxes.
Income Taxes - correct answer Taxes on income, both earned (salaries,
wages, tips, commissions) and unearned (interest, dividends). Income taxes can
be levied on both individuals (personal income taxes) and businesses (business
and corporate income taxes). Major source of revenue for the national gov't and
most states.
Wealth Tax - correct answer A tax on an individual's wealth.
Intangibles Tax - correct answer Form of wealth tax. Applied to intangible
assets such as stocks and bonds, savings accounts, and trademarks.
Inheritance Tax - correct answer Form of wealth tax. Levied on the person
receiving the money. States may levy.
Estate Tax - correct answer Form of wealth tax. Levied on the estate of the
deceased person before assets are distributed to heirs. States may levy. Fed
gov't levies.
Consumption Tax - correct answer A tax paid on individual or household
consumptions of goods (and sometimes services).
Sales Tax - correct answer Form of consumption tax. A tax on a sale of
merchandise or services.
Use Tax - correct answer Tax charged on goods purchased from out-of-state
and used within the state. Substitute sales tax.
, Value-Added Tax - correct answer A tax on increased value of a product at
each stage of production and distribution rather than just at the point of sale.
Project Grants - correct answer Also called discretionary grants. Provide
funding (i.e. Scholarships, fellowships, etc.) For specific purposes for limited
periods of time.
Formula Grants - correct answer Grants-in-aid in which a formula is used to
determine the amount of federal funds a state or local government will receive.
Categorical Grants - correct answer Can be used only for a narrowly defined
purpose, such as subsidized housing for senior citizens.
Block Grants - correct answer A form of fiscal federalism where federal aid is
given to the states or local gov'ts with few strings attached.
Shared Revenues - correct answer Form of intergovernmental funding. Funds
passed from state to local gov'ts that are provided with few constraints so that
local entities have maximum flexibility.
License Fee - correct answer Form of revenue. Fees are charged to cover the
cost of regulating the activity.
User Fees - correct answer Form of revenue. Charge imposed on the specific
beneficiary of a good or service. Provides flexibility to cover unexpected costs.
Donations - correct answer Form of revenue. Voluntary contributions that
confer no rights or benefits on the giver.
