CGFM TEST 2 QUESTIONS AND
ANSWERS
Governments exist to provide services - Correct Answers -no profit motive, no single
measure of success
Primary funding source = - Correct Answers -taxes (involuntary payments, because
there is no ability to match services to those who provide the resource)
Budget process = - Correct Answers -primary control device in government
US Constitution provides two levels of government - Correct Answers -Federal and
State
State consitituions similar in that each defines the excutive and legislative braches,
establishes political offices, and defines how local governments can be formed.
Government Accountability - Correct Answers -based on the belief that the government
has a responsibility to report, the public has a right to know, andthe ultimate power
belongs to the people.
1) Legal Accountability - Correct Answers -public officials are accountable for the
extablishment of controls to ensure that transations are processed properly
2) Performance Accountability - Correct Answers -acting in an efficient, effective, or
economic manner.
3) Fiscal Accountability - Correct Answers -raising and allocation of resources to
accomplish objectives
4) Operational Accountability - Correct Answers -stewardship of public resources
Which branch is accountable to whom? - Correct Answers -Legislative --> to the public
Executive --> to legislative and public as well as other governments
Interperiod Equity - Correct Answers -current generation of citizens should not be able
to shift the burden of paying for current-year services to future taxpayers
,balanced budget law = current year services must be financed with current year
revenues (problem is financial data can be manipulated to achieve this). Fed Gov't not
subject to this.
Laws prohibiting borrowing - Correct Answers -* only to meet cash flow needs
* not for operating purposes
* should match the useful life of capital assets
Users of financial reports - Correct Answers -1) Legislators and oversight groups
2) Citizens and taxpayers
3) Investors and Creditors
4) Media
5) Financial and Program managers
6) Employees and employee organizations
Need for financial reports - Correct Answers -1) primary communication device for
assessing accountability
2) aid in decision making process (economic, social, and political)
* planning and administration
* results of operations
* financial condition of the organization
Point in time financial reports - Correct Answers -provides current information as of the
date of the reports (e.g. balance sheet)
Period financial reports - Correct Answers -reports the activity for an entire fiscal period
(month, year)
General Purpose External Financial Reports (GPEFR)/CAFR - Correct Answers -1)
audited financial statements (including notes)
"basic financial statements" - state/local
"principal financial statements" - federal
2) required supplementary information
3) other accompanying information (voluntary)
Special Purpose Financial Reports (may or may not be provided to external users) -
Correct Answers -* budget comparison reports
* cash position reports
* offering statements (when issuing debt)
* popular reports
*grantor reports
* service efforts and accomplishments
* economy and efficiency
Reporting Characteristics - Correct Answers -1) understandability
,2) reliability - info is verfiable and free from bias
3) relevance
4) timeliness - for decision making purposes
5) consistency - any change in method or principle should be noted
6) comparability
** most comprehensive financial reports provide non-financial information regarding the
performance of the entity.
** info is often based on judgements or estimates base on the application of rules or
conventions
American Recovery and Reinvestment Act (2009) - Correct Answers -** important
because it required online reporting of the use of government funds awarded for the
purpose of stimulating the economy - Recovery.gov
Federal Open Government Initiative - Correct Answers -government should be
transparent, participatory, and collaborative
* State Dept, Justice Dept, HHS, NASA, Treasury Dept, EPA, Defense, and SSA
Digital Accountability and Transparency Act (DATA Act - 2014) - Correct Answers -1)
expanded FFATA of 2006
2) established government wide data standards that is displayed on USAspending.gov
3) simplified reporting for federal funding recipients
4) agencies held accountable for the accuracy and completeness of data submitted to
USAspending.gov
5) apply approaches developed by the Recovery Accountability and Transparency
Board
open government challenges - Correct Answers -making information accessible while
securing personally identifiable information
Securities and Exchange Commission (SEC) 1934 - Correct Answers -vested with the
power to regulate securities markets, requires publicly traded companies to disclose
certain financial information
SEC gave authority to set accounting standards to the Financial Accounting Foundation
(FAF), who appoints members to the FASB to set reporting and accounting standards
for private and non-profits
National Committee of Municipal Accounting (1934) - Correct Answers -* set first
reporting standards for states and locals, and established the Municipal Finance
Officers Association (MFOA), which was active until 1941
National Council of Government Accounting (NCGA - 1948)
, .... later became GFOA - Correct Answers -issued the Governmental Accounting,
Auditing, and Financial Reporting (GAAFR/Blue Book) in 1968, however local policy
retained primacy
Audits of State and Local Government Units (ASLGU) - Correct Answers -issued in
1974 by AICPA in response to several government financial melt-downs
* recognized the principles in the GAAFR and made them the accepted principles for all
state and locals within the auditing committee, but there was no requirement for
compliance (due to their sovereign status)
Governmental Accounting Standards Board (GASB, 1984) - Correct Answers -
established in lieu of expanding FASBs authority
GASB standards still not required, but may be necessary for bonding and borrowing,
plus good public policy, so many enacted legislation requiring compliance
Federal Accounting Standards Advisory Board (FASAB, 1990) - Correct Answers -
established by the OMB, Sec of Treasury, and Comptroller general to address
additional financial reporting standards (most were related to budgetary reporting up
until this point)
GASB Mission - Correct Answers -1) set and improve standards of state/local
accounting and financial reporting
2) guide and educate the public in using these reports
GASB Rules of Procedure - Correct Answers -1) establish an advisory task force to
provide feedback on issues
2) publish documents for comment
3) broadly distribute an exposure draft for public comment
4) conduct public hearings on due process documents
5) issue a final standard
FASAB Mission - Correct Answers -improving federal financial reporting through issuing
financial standards, which are published in the Federal Register and reviewed by
Congress
FASAB rules of procedure - Correct Answers -1) identify accounting issues and set
agendas
2) prepare initial documents
ANSWERS
Governments exist to provide services - Correct Answers -no profit motive, no single
measure of success
Primary funding source = - Correct Answers -taxes (involuntary payments, because
there is no ability to match services to those who provide the resource)
Budget process = - Correct Answers -primary control device in government
US Constitution provides two levels of government - Correct Answers -Federal and
State
State consitituions similar in that each defines the excutive and legislative braches,
establishes political offices, and defines how local governments can be formed.
Government Accountability - Correct Answers -based on the belief that the government
has a responsibility to report, the public has a right to know, andthe ultimate power
belongs to the people.
1) Legal Accountability - Correct Answers -public officials are accountable for the
extablishment of controls to ensure that transations are processed properly
2) Performance Accountability - Correct Answers -acting in an efficient, effective, or
economic manner.
3) Fiscal Accountability - Correct Answers -raising and allocation of resources to
accomplish objectives
4) Operational Accountability - Correct Answers -stewardship of public resources
Which branch is accountable to whom? - Correct Answers -Legislative --> to the public
Executive --> to legislative and public as well as other governments
Interperiod Equity - Correct Answers -current generation of citizens should not be able
to shift the burden of paying for current-year services to future taxpayers
,balanced budget law = current year services must be financed with current year
revenues (problem is financial data can be manipulated to achieve this). Fed Gov't not
subject to this.
Laws prohibiting borrowing - Correct Answers -* only to meet cash flow needs
* not for operating purposes
* should match the useful life of capital assets
Users of financial reports - Correct Answers -1) Legislators and oversight groups
2) Citizens and taxpayers
3) Investors and Creditors
4) Media
5) Financial and Program managers
6) Employees and employee organizations
Need for financial reports - Correct Answers -1) primary communication device for
assessing accountability
2) aid in decision making process (economic, social, and political)
* planning and administration
* results of operations
* financial condition of the organization
Point in time financial reports - Correct Answers -provides current information as of the
date of the reports (e.g. balance sheet)
Period financial reports - Correct Answers -reports the activity for an entire fiscal period
(month, year)
General Purpose External Financial Reports (GPEFR)/CAFR - Correct Answers -1)
audited financial statements (including notes)
"basic financial statements" - state/local
"principal financial statements" - federal
2) required supplementary information
3) other accompanying information (voluntary)
Special Purpose Financial Reports (may or may not be provided to external users) -
Correct Answers -* budget comparison reports
* cash position reports
* offering statements (when issuing debt)
* popular reports
*grantor reports
* service efforts and accomplishments
* economy and efficiency
Reporting Characteristics - Correct Answers -1) understandability
,2) reliability - info is verfiable and free from bias
3) relevance
4) timeliness - for decision making purposes
5) consistency - any change in method or principle should be noted
6) comparability
** most comprehensive financial reports provide non-financial information regarding the
performance of the entity.
** info is often based on judgements or estimates base on the application of rules or
conventions
American Recovery and Reinvestment Act (2009) - Correct Answers -** important
because it required online reporting of the use of government funds awarded for the
purpose of stimulating the economy - Recovery.gov
Federal Open Government Initiative - Correct Answers -government should be
transparent, participatory, and collaborative
* State Dept, Justice Dept, HHS, NASA, Treasury Dept, EPA, Defense, and SSA
Digital Accountability and Transparency Act (DATA Act - 2014) - Correct Answers -1)
expanded FFATA of 2006
2) established government wide data standards that is displayed on USAspending.gov
3) simplified reporting for federal funding recipients
4) agencies held accountable for the accuracy and completeness of data submitted to
USAspending.gov
5) apply approaches developed by the Recovery Accountability and Transparency
Board
open government challenges - Correct Answers -making information accessible while
securing personally identifiable information
Securities and Exchange Commission (SEC) 1934 - Correct Answers -vested with the
power to regulate securities markets, requires publicly traded companies to disclose
certain financial information
SEC gave authority to set accounting standards to the Financial Accounting Foundation
(FAF), who appoints members to the FASB to set reporting and accounting standards
for private and non-profits
National Committee of Municipal Accounting (1934) - Correct Answers -* set first
reporting standards for states and locals, and established the Municipal Finance
Officers Association (MFOA), which was active until 1941
National Council of Government Accounting (NCGA - 1948)
, .... later became GFOA - Correct Answers -issued the Governmental Accounting,
Auditing, and Financial Reporting (GAAFR/Blue Book) in 1968, however local policy
retained primacy
Audits of State and Local Government Units (ASLGU) - Correct Answers -issued in
1974 by AICPA in response to several government financial melt-downs
* recognized the principles in the GAAFR and made them the accepted principles for all
state and locals within the auditing committee, but there was no requirement for
compliance (due to their sovereign status)
Governmental Accounting Standards Board (GASB, 1984) - Correct Answers -
established in lieu of expanding FASBs authority
GASB standards still not required, but may be necessary for bonding and borrowing,
plus good public policy, so many enacted legislation requiring compliance
Federal Accounting Standards Advisory Board (FASAB, 1990) - Correct Answers -
established by the OMB, Sec of Treasury, and Comptroller general to address
additional financial reporting standards (most were related to budgetary reporting up
until this point)
GASB Mission - Correct Answers -1) set and improve standards of state/local
accounting and financial reporting
2) guide and educate the public in using these reports
GASB Rules of Procedure - Correct Answers -1) establish an advisory task force to
provide feedback on issues
2) publish documents for comment
3) broadly distribute an exposure draft for public comment
4) conduct public hearings on due process documents
5) issue a final standard
FASAB Mission - Correct Answers -improving federal financial reporting through issuing
financial standards, which are published in the Federal Register and reviewed by
Congress
FASAB rules of procedure - Correct Answers -1) identify accounting issues and set
agendas
2) prepare initial documents
