AGA CGFM Final Competency Certification Study Guide
Exam Questions with Certified for Accuracy Answers
2024/2025
Ratio Analysis - correct answer Active use of numbers to point out problems and
indicate performance, questions to ask, etc. They serve as starting points for
further inquiry.
Ex. Numbers revealing that receivables are increasing could trigger an increase
in debt collection efforts. Other rations could indicate fiscal stress, adequacy of
reserves, liquidity, workloads, response times, and accuracy rates.
Pure Ratios - correct answer relating one number to another to create a
meaningful indicator of performance (ex., total expenditures to budget).
Comparative Analysis - correct answer Comparing entities numbers and ratios
to another agency or benchmarks. Credit rating agencies also publish median
ratios by industry and what they consider to be reasonable ranges and ratios
Time Series Analysis - correct answer comparing the agency against itself over
time, ex. Calculating the percentage change from year to year
Common Size Statements - correct answer converts all data elements in a
statement to percentages of 100, Examines expenditures of a function as
compared to total expenditures (ex., percentage of total budget spent on public
safety year over year, and if it is growing disproportionately to other programs)
Per Capita Information - correct answer Debt per capita
Cautionary Note on Ratio Analysis - correct answer Not an ends unto
themselves but serve as a starting point for further investigation.
,Liquidity Ratios - correct answer Determines entities ability to meet creditors
demands:
1) Current Ratio
2) Quick Ration
Current Ratio = current assets/current liabilities - correct answer current assets
= cash and those assets that will become cash within one year (including
inventories)
Current liabilities = those that are due and payable within one year
Should be a ratio of 2:1
Quick Ratio = Cash and equivalents, and receivables/current liabilities - correct
answer Removes the uncertainty over inventories
Ideal ration should be 1:1
Asset efficiency and Turn-Over ratios - correct answer Efficiency in using assets
and converting them to cash.
1) Receivables Ratios
2) Inventory Ratios
Receivables Ratios - correct answer ex., percentage of tax collections/taxes
levied. Rating agencies expect 98-99% range.
Days outstanding = Avg receivables/Annual revenues x 365
,Avg receivables = (Beg of year receivables + end of year receivables)/2
Inventory Ratios - correct answer helps determine risk of loss from spoilage,
pilfering, obsolescence, etc.
Inventory turnover = Revenues from sales of inventory/Avg inventory during the
period
Avg inventory = 365/Inventory Turnover
Operating Costs and Budgetary Cushions - correct answer Extent to which
entities revenues are sufficient to cover costs, or build balances for working
capital, rainy day funds, emergency needs, or debt service coverage.
Budgetary cushion is considered to be one of the most important financial ratios
for state and local governments
Need to watch out for balancing the budget with one time inflows
Debt Burden - correct answer Burden of 15-20% and above considered "high"
by rating agencies. Measured by:
* outstanding LTD/population
* outstanding LTD/assessed property values
Ability to repay Debt - correct answer Excess revenues over operating
expenditures/
Principal payment + interest expense
, Government Mgmt Reform Act of 1994 (GMRA) - correct answer Expanded
CFO Act to require 24 agencies to prepare an audited annual consolidated
financial statement for the executive branch of the federal government
Federal Financial Mgmt Improvement Act of 1996 (FFMIA) - correct answer
requirement to follow federal accounting standards, a standardized financial
mgmt system, and standard general ledger (sgl) at the transaction level
Accountability of Tax Dollars Act of 2002 - correct answer Annual audit
requirement expanded to include ALL federal agencies
* OMB Circular A-123 - Mgmts Responsibility for Internal Control - correct
answer Mgmt responsible for:
1) develop/implement cost effective I/c's
2) assess the adequacy of I/C's in programs/ operations
3) assess/correct ICOFR
4) identify needed improvements
5) take corresponding corrective action
6) report annually on I/C through mgm Statement of Assurance (SOA)
Appendix A - strengthened process for ICOFR
Appendix B - mgmt of gov't charge card programs
Appendix C - measurement and remediation of improper payments
Appendix D (2013) - FFMIA guidance for agencies subject to CFO Act
OMB Circular A-130 Mgmt of Federal Information Resources - correct answer
establishes minimum set of controls in federal automated information security
programs
Exam Questions with Certified for Accuracy Answers
2024/2025
Ratio Analysis - correct answer Active use of numbers to point out problems and
indicate performance, questions to ask, etc. They serve as starting points for
further inquiry.
Ex. Numbers revealing that receivables are increasing could trigger an increase
in debt collection efforts. Other rations could indicate fiscal stress, adequacy of
reserves, liquidity, workloads, response times, and accuracy rates.
Pure Ratios - correct answer relating one number to another to create a
meaningful indicator of performance (ex., total expenditures to budget).
Comparative Analysis - correct answer Comparing entities numbers and ratios
to another agency or benchmarks. Credit rating agencies also publish median
ratios by industry and what they consider to be reasonable ranges and ratios
Time Series Analysis - correct answer comparing the agency against itself over
time, ex. Calculating the percentage change from year to year
Common Size Statements - correct answer converts all data elements in a
statement to percentages of 100, Examines expenditures of a function as
compared to total expenditures (ex., percentage of total budget spent on public
safety year over year, and if it is growing disproportionately to other programs)
Per Capita Information - correct answer Debt per capita
Cautionary Note on Ratio Analysis - correct answer Not an ends unto
themselves but serve as a starting point for further investigation.
,Liquidity Ratios - correct answer Determines entities ability to meet creditors
demands:
1) Current Ratio
2) Quick Ration
Current Ratio = current assets/current liabilities - correct answer current assets
= cash and those assets that will become cash within one year (including
inventories)
Current liabilities = those that are due and payable within one year
Should be a ratio of 2:1
Quick Ratio = Cash and equivalents, and receivables/current liabilities - correct
answer Removes the uncertainty over inventories
Ideal ration should be 1:1
Asset efficiency and Turn-Over ratios - correct answer Efficiency in using assets
and converting them to cash.
1) Receivables Ratios
2) Inventory Ratios
Receivables Ratios - correct answer ex., percentage of tax collections/taxes
levied. Rating agencies expect 98-99% range.
Days outstanding = Avg receivables/Annual revenues x 365
,Avg receivables = (Beg of year receivables + end of year receivables)/2
Inventory Ratios - correct answer helps determine risk of loss from spoilage,
pilfering, obsolescence, etc.
Inventory turnover = Revenues from sales of inventory/Avg inventory during the
period
Avg inventory = 365/Inventory Turnover
Operating Costs and Budgetary Cushions - correct answer Extent to which
entities revenues are sufficient to cover costs, or build balances for working
capital, rainy day funds, emergency needs, or debt service coverage.
Budgetary cushion is considered to be one of the most important financial ratios
for state and local governments
Need to watch out for balancing the budget with one time inflows
Debt Burden - correct answer Burden of 15-20% and above considered "high"
by rating agencies. Measured by:
* outstanding LTD/population
* outstanding LTD/assessed property values
Ability to repay Debt - correct answer Excess revenues over operating
expenditures/
Principal payment + interest expense
, Government Mgmt Reform Act of 1994 (GMRA) - correct answer Expanded
CFO Act to require 24 agencies to prepare an audited annual consolidated
financial statement for the executive branch of the federal government
Federal Financial Mgmt Improvement Act of 1996 (FFMIA) - correct answer
requirement to follow federal accounting standards, a standardized financial
mgmt system, and standard general ledger (sgl) at the transaction level
Accountability of Tax Dollars Act of 2002 - correct answer Annual audit
requirement expanded to include ALL federal agencies
* OMB Circular A-123 - Mgmts Responsibility for Internal Control - correct
answer Mgmt responsible for:
1) develop/implement cost effective I/c's
2) assess the adequacy of I/C's in programs/ operations
3) assess/correct ICOFR
4) identify needed improvements
5) take corresponding corrective action
6) report annually on I/C through mgm Statement of Assurance (SOA)
Appendix A - strengthened process for ICOFR
Appendix B - mgmt of gov't charge card programs
Appendix C - measurement and remediation of improper payments
Appendix D (2013) - FFMIA guidance for agencies subject to CFO Act
OMB Circular A-130 Mgmt of Federal Information Resources - correct answer
establishes minimum set of controls in federal automated information security
programs
