AGA CGFM Competency test preparation questions with
approved Answers 2024/2025
Citizen action that enables voters to remove elected officials from office - correct
answer Recall
Type of government entity that performs multiple functions - correct answer
General purpose
Type of government entity that performs just one or two functions - correct
answer Special purpose
What are the two types of special purpose local governments - correct answer
School district
Special district
What are the 3 types of general purpose local governments? - correct answer
County
Municipality (cities/towns)
Township (historical)
Type of government entity that blends characteristics of government and not-for-
profit organizations - correct answer Quasi-Governmental (government
corporations)
Who issues the yellow book - correct answer Government Accountability
Office (GAO)
Another term for Generally Accepted Government Auditing Standards (GAGAS) -
correct answer Yellow Book
,3 types of external audits - correct answer Financial
Attestation Engagements
Performance Audits
Type of external audit that provides reasonable assurance on whether financial
statements are presented fairly in conformity with GAAP - correct answer
Financial Audit
What is an attestation engagement? - correct answer Examine, review, or
perform agreed-upon procedures on a limited subject matter & report on the
results, can be financial or non-financial
Principle that taxes should treat taxpayers fairly - correct answer Tax equity
Different taxpayers with the same income level should pay the same amount of
tax - correct answer horitzontal equity
Taxpayers with different income levels should pay different amounts of tax -
correct answer vertical equity
US Federal Income Taxes are progress or regressive? - correct answer
Progressive - those with higher incomes pay a higher proportion of their taxable
income due to a higher tax rate
Sales tax is progressive/regressive? - correct answer Regressive - single sales
tax rate applies to everyone
"Benefit Received" in tax policy decisions - correct answer Deciding to
establish new tax or raise existing taxes
,Also, deciding whether a specific group should bear a specific tax burden
Collection efficiency in tax policy - correct answer Cost of collecting the tax
Should be minimal compared to the revenue generated
How governments accomplish social goals with taxes (4) - correct answer
Exemptions
Deductions
Credits
Deferrals
Exceptions to tax laws and regulations are called ____________ - correct
answer Tax Expenditures (homeowners deduct interest, encourages home
ownership)
Tax levied for a specific purpose & proceeds are deposited into an account
restricted to that purpose - correct answer Dedicated Tax (earmarked or
restricted)
Income Taxes are Progressive/Regressive - correct answer Progressive
Are payroll taxes classified as income taxes? (social security, medicare) -
correct answer No, they are proportional to income & regressive
Term when state & local governments adjust taxes for state and local factors -
correct answer Piggyback
, What is the most direct impact of having a bond issue insured by a 3rd party
organization?
A- government can issue a larger amount of LT Debt
B- government can issue debt at a lower interest rate
C- government can extend the maturity period of the debt issue beyond 30 years
D- debt issuance guarantees that they interest payments will be tax-free for the
investor - correct answer B - issue at a lower interest rate
Ultimately government officials are accountable to ______________ - correct
answer Citizens
3 advantages of income tax - correct answer - less costly to administer
- compliance levels are high
- respond to general economic conditions
T/F - donations are always voluntary - correct answer False - valuables are left
by travelers
Which branch is accountable for authorizing & funding programs & subsequent
over site? - correct answer Legislative
Major method by which legislators examine and assess the accountability of
executive branch activities - correct answer Oversight Hearings
Term referring to the media because they are provide unofficial checks &
balances on the 3 branches of government - correct answer The fourth estate
Which is broader - solvency or sustainability - correct answer Sustainability
approved Answers 2024/2025
Citizen action that enables voters to remove elected officials from office - correct
answer Recall
Type of government entity that performs multiple functions - correct answer
General purpose
Type of government entity that performs just one or two functions - correct
answer Special purpose
What are the two types of special purpose local governments - correct answer
School district
Special district
What are the 3 types of general purpose local governments? - correct answer
County
Municipality (cities/towns)
Township (historical)
Type of government entity that blends characteristics of government and not-for-
profit organizations - correct answer Quasi-Governmental (government
corporations)
Who issues the yellow book - correct answer Government Accountability
Office (GAO)
Another term for Generally Accepted Government Auditing Standards (GAGAS) -
correct answer Yellow Book
,3 types of external audits - correct answer Financial
Attestation Engagements
Performance Audits
Type of external audit that provides reasonable assurance on whether financial
statements are presented fairly in conformity with GAAP - correct answer
Financial Audit
What is an attestation engagement? - correct answer Examine, review, or
perform agreed-upon procedures on a limited subject matter & report on the
results, can be financial or non-financial
Principle that taxes should treat taxpayers fairly - correct answer Tax equity
Different taxpayers with the same income level should pay the same amount of
tax - correct answer horitzontal equity
Taxpayers with different income levels should pay different amounts of tax -
correct answer vertical equity
US Federal Income Taxes are progress or regressive? - correct answer
Progressive - those with higher incomes pay a higher proportion of their taxable
income due to a higher tax rate
Sales tax is progressive/regressive? - correct answer Regressive - single sales
tax rate applies to everyone
"Benefit Received" in tax policy decisions - correct answer Deciding to
establish new tax or raise existing taxes
,Also, deciding whether a specific group should bear a specific tax burden
Collection efficiency in tax policy - correct answer Cost of collecting the tax
Should be minimal compared to the revenue generated
How governments accomplish social goals with taxes (4) - correct answer
Exemptions
Deductions
Credits
Deferrals
Exceptions to tax laws and regulations are called ____________ - correct
answer Tax Expenditures (homeowners deduct interest, encourages home
ownership)
Tax levied for a specific purpose & proceeds are deposited into an account
restricted to that purpose - correct answer Dedicated Tax (earmarked or
restricted)
Income Taxes are Progressive/Regressive - correct answer Progressive
Are payroll taxes classified as income taxes? (social security, medicare) -
correct answer No, they are proportional to income & regressive
Term when state & local governments adjust taxes for state and local factors -
correct answer Piggyback
, What is the most direct impact of having a bond issue insured by a 3rd party
organization?
A- government can issue a larger amount of LT Debt
B- government can issue debt at a lower interest rate
C- government can extend the maturity period of the debt issue beyond 30 years
D- debt issuance guarantees that they interest payments will be tax-free for the
investor - correct answer B - issue at a lower interest rate
Ultimately government officials are accountable to ______________ - correct
answer Citizens
3 advantages of income tax - correct answer - less costly to administer
- compliance levels are high
- respond to general economic conditions
T/F - donations are always voluntary - correct answer False - valuables are left
by travelers
Which branch is accountable for authorizing & funding programs & subsequent
over site? - correct answer Legislative
Major method by which legislators examine and assess the accountability of
executive branch activities - correct answer Oversight Hearings
Term referring to the media because they are provide unofficial checks &
balances on the 3 branches of government - correct answer The fourth estate
Which is broader - solvency or sustainability - correct answer Sustainability
