Pass the AGA Government Financial Manager CGFM Questions and answers with CertsForce

What Does GPRA Require?TheGovernment Performance and Results Act (GPRA)mandates that federal agencies prepare:

Astrategic planoutlining long-term goals.

Anannual performance plandetailing the objectives and performance measures for the upcoming year.

Anannual performance reportevaluating the agency’s success in meeting the goals outlined in the annual performance plan.

Why Is the Annual Performance Report Important?

The annual performance report provides accountability and transparency by comparing actual results to planned goals. It allows Congress and the public to assess how effectively the agency is achieving its mission.

Why Other Options Are Incorrect:

A. A five-year performance plan:GPRA requires a strategic plan (updated every four years), not a separate five-year performance plan.

C. SEA Report:This refers to Service Efforts and Accomplishments reporting, which is not mandated by GPRA.

D. The prior year’s audited financial report:While financial reports are important, they are separate from the performance reporting requirements of GPRA.

References and Documents:

Government Performance and Results Act (1993):Requires agencies to submit strategic plans, annual performance plans, and annual performance reports.

GAO Reports on GPRA Compliance:Emphasizes the role of annual performance reports in promoting accountability.

Why Is This the Best Measure for Performance?

Comparing thecost per acre maintainedto that of another jurisdiction provides a meaningful benchmark for performance evaluation. It allows the director to assess how efficiently the department is operating relative to similar organizations.

This comparison ensures that the department is managing resources effectively and identifies potential areas for improvement.

Why Other Options Are Incorrect:

A. Use a single measure of citizen satisfaction:While citizen satisfaction is important, it is subjective and does not provide insight into operational efficiency.

B. Evaluate funds spent on grounds maintenance:Total spending does not measure efficiency or productivity; it merely reflects the amount allocated.

C. Analyze staffing levels:Staffing levels do not directly measure performance; they are only one factor in determining efficiency.

References and Documents:

Governmental Performance Reporting (AGA):Recommends using comparative benchmarks for evaluating efficiency in service delivery.

Performance Management Framework by GAO:Highlights cost-effectiveness metrics such as cost per acre maintained.

What Is Efficient Inventory Management?

Efficient inventory management ensures that an organization has the right amount of inventory at the right time to meet operational needs without overstocking or understocking.

Proper inventory management minimizes disruptions to operations, including work stoppages due to lack of necessary materials or supplies.

Why Is Fewer Instances of Work Stoppage the Correct Answer?

Efficient inventory management ensures that required inventory is available when needed, reducing the risk of work delays or stoppages caused by inventory shortages.

Why Other Options Are Incorrect:

A. A low inventory turnover ratio:A low turnover ratio often indicates overstocking or slow-moving inventory, which is not a sign of efficiency.

B. High write-offs of obsolete inventory:Efficient management reduces obsolete inventory, leading to fewer write-offs, not more.

D. High total asset turnover:While efficient inventory management may contribute to overall asset efficiency, it does not directly result in a high total asset turnover ratio.

References and Documents:

GAO Guide on Inventory Management:Emphasizes the role of inventory management in avoiding operational disruptions.

Best Practices for Inventory Management (AGA):Highlights reduced work stoppages as a key benefit of effective inventory control.

Role of Management in Internal Control Evaluation:

Responsibility for Risk Identification:Management has the primary responsibility for designing, implementing, and maintaining an effective system of internal controls. As part of this process, management identifies the risks related to fraud, waste, and abuse that could impact financial reporting or operational efficiency.

Mitigating Risks:Once risks are identified, management is responsible for mitigating them by developing appropriate policies, procedures, and controls.

Role of the Auditor in Internal Control Evaluation:

Assessing Control Effectiveness:Auditors are not responsible for designing or implementing controls; rather, their role is to evaluate whether the controls put in place by management are effective. They do this through testing, observation, and other audit procedures.

Fraud Risk Assessment:As part of their duties under Generally Accepted Government Auditing Standards (GAGAS), auditors must assess the risk of material misstatement due to fraud and evaluate how management’s controls address those risks.

Why Other Options Are Incorrect:

B.Auditors do not identify risks—this is management's job. Auditors evaluate and assess the controls already in place.

C.Determining risk tolerance is a governance and management responsibility, not the joint responsibility of auditors and management.

D.Management mitigates risks, but auditors don’t monitor compliance with controls—they test and evaluate the controls as part of their audit procedures.

References and Documents:

GAGAS (Yellow Book) by GAO:Emphasizes management’s responsibility for risk identification and the auditor’s responsibility for assessing control effectiveness.

COSO Internal Control Framework (2013):Highlights management’s responsibility for risk assessment and control design, while auditors provide independent assurance.

Investment Management Basics:The first step in investment management is establishing theobjectivesof the investment program. This requires consensus among key stakeholders, such as managers, on what the investment goals are (e.g., risk tolerance, return expectations, liquidity needs).

Without clear objectives, subsequent steps like developing policies or selecting investments cannot be effectively carried out.

Why Consensus Is Important:

Investment objectives must align with the organization’s mission, risk tolerance, and financial goals.

Consensus ensures that all managers are on the same page before developing specific strategies or policies.

Why Other Options Are Incorrect:

A. Ensure employees understand their investment options:Employee understanding is not the first step; it comes later when the investment strategy is implemented.

C. Develop an investment policy manual:This happens after the objectives have been established.

D. Establish criteria for divesting:Divestment criteria are part of the investment policy and are determined later.

References and Documents:

GAO Financial Management Guide:Highlights setting objectives as the first step in investment management.

COSO Framework for Investment Risk Management:Stresses the importance of aligning objectives before policy development.

Federal Credit Reform Act of 1990:This Act established a new accounting framework for federal credit programs, such as direct loans and loan guarantees. It requires using thenet present value (NPV)method to measure the costs of loans and guarantees by discounting future cash flows (e.g., loan repayments, defaults) to their present value.

Explanation of Financial Analytical Technique:

Net Present Value (NPV): Accounts for the time value of money by discounting future cash flows to the present. It provides an accurate measure of the economic cost to the government.

Other options:

A. Future value: Focuses on future cash flows, not their present cost.

C. Current value: Not a recognized technique for analyzing long-term cash flows.

D. Regression analysis: A statistical method, unrelated to calculating loan program costs.

References:

Federal Credit Reform Act of 1990, Section 502.

Congressional Budget Office (CBO),Federal Credit Program Cost Analysis.

Office of Management and Budget (OMB),Circular A-11: Credit Reform Accounting.

Understanding the Scenario:The table compares the costs of four printing jobs performed by an "Internal Print Shop" versus three external vendors (Ace Printing, ABC Printing, and Printing, Inc.). Eachvendor's pricing varies by print job type. The task is to evaluate whether outsourcing (hiring external vendors) is a reasonable alternative to keeping the work in-house.

Key Considerations in Outsourcing:According to governmental accounting principles and budgeting practices outlined by theAssociation of Government Accountants (AGA), the decision to outsource should consider:

Cost-effectiveness: Does outsourcing reduce costs without compromising quality or service delivery?

Operational efficiency: Can outsourcing free up internal resources for other priorities?

Comparative pricing: How do external vendor rates compare to internal costs for identical services?

Analysis of the Print Jobs:Let’s break down the cost comparison for each print job:

Zone Map:Internal cost = $4.23.Cheapest vendor = Printing, Inc., at $4.00.Outsourcing is cheaper for this job.

Agenda Packet:Internal cost = $23.18.Cheapest vendor = Printing, Inc., at $22.00.Outsourcing is cheaper for this job.

Budget Cover:Internal cost = $840.00.Cheapest vendor = ABC Printing, at $624.30.Outsourcing is significantly cheaper for this job.

Employee Benefit Brochure:Internal cost = $6.14.Cheapest vendor = ABC Printing, at $4.90.Outsourcing is cheaper for this job.

Conclusion Based on Analysis:

Across all four print jobs, the lowest-cost external vendor always beats the Internal Print Shop's costs.

From abudgetary perspective, outsourcing is feasible as it offers cost savings across all jobs.

Why Not A, C, or D?:

Option A(Keep printing in-house): Incorrect, as in-house costs are consistently higher than the cheapest external vendor.

Option C(Outsourcing is necessary): Incorrect, as feasibility doesn’t mean necessity; internal printing is still an option if other factors (like quality or control) outweigh costs.

Option D(Award contract to ABC Printing): Incorrect, since the best vendor depends on the job (e.g., Printing, Inc. is cheaper for Zone Map and Agenda Packet).

References:

Association of Government Accountants (AGA),Government Financial Manager Certification Study Guide: Budgeting, Cost Accounting, and Auditing Principles.

Government Finance Officers Association (GFOA),Best Practices in Outsourcing and Procurement.

Federal Accounting Standards Advisory Board (FASAB),Cost Accounting Standards for Governmental Operations.

Governmental Attestation Engagements:

These engagements involve providing assurance on specific elements of financial or non-financial information, such as compliance with laws, contracts, or bond covenants.

Reviewing revenue coverage requirements for outstanding bonds fits the scope of attestation engagements, which focus on confirming adherence to specific requirements.

Explanation of Answer Choices:

A. Monitor a subgrantee for compliance to the grant restrictions: Monitoring is a management responsibility, not typically part of an attestation engagement.

B. Establish a policy concerning fraud prevention: Establishing policies is a management duty, not a task for auditors.

C. Monitor purchasing card charges for compliance with travel policies: Monitoring is operational, not attestation-related.

D. Review the revenue coverage requirements on outstanding bonds: Correct. This falls within the scope of attestation engagements.

References:

GAO,Government Auditing Standards (Yellow Book).

AICPA,Attestation Standards for Government Engagements.

Definition of Internal Control Weakness:Internal control weaknesses occur when controls fail to prevent or detect errors, fraud, or conflicts of interest. Allowing project managers to oversee companies in which they have a material interest introduces aconflict of interest, undermining internal controls.

Explanation of Answer Choices:

A. The contract department staff awards contracts and maintains a database for vendor information: While not ideal, this does not automatically signal a critical control weakness.

B. Management policy allows project managers to oversee controls of companies in which they have a material interest: Correct. This represents a serious conflict of interest and lack of independence.

C. The budget department staff is responsible for preparing the budget and for reporting on budget cost variances: This may indicate concentration of duties but is less severe than a direct conflict of interest.

D. The accounting department has one clerk prepare vendor payments and another clerk reconcile bank accounts: This demonstrates good segregation of duties, not a weakness.

References:

COSO,Internal Control - Integrated Framework.

GAO,Standards for Internal Control in the Federal Government (Green Book).