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

Deposit funds are a type of fiduciary fund used by federal agencies to account for monies held temporarily for others and where the government does not have ownership. These funds are not available for general government use and are excluded from budgetary resources.

Examples include:

Unidentified remittances

Bid deposits or earnest money

Collections awaiting resolution of ownership

These do not represent revenue to the federal government and are instead liabilities until disbursed.

Relevant References:

Treasury Financial Manual (TFM), Volume I, Part 2, Chapter 1500 – Deposit Fund Accounts

GAO Red Book – Federal Appropriations Law

FASAB SFFAS No. 1 – Accounting for Selected Assets and Liabilities

Answer: C. funds held temporarily until ownership is determined

Comprehensive Detailed Explanation:

A contingent liability is a potential obligation that may arise depending on the outcome of a future event. A building containing asbestos represents a situation where a liability may be incurred if the asbestos must be removed due to safety regulations, public health concerns, or legal requirements.

Unlike realized losses (e.g., from asset sales or impairments), contingent liabilities depend on future events and uncertainty.

Relevant References:

FASAB SFFAS No. 5 – Accounting for Liabilities of the Federal Government

GASB Statement No. 62 – Codification of Accounting and Financial Reporting Guidance

GAO Red Book – Contingent Liabilities Examples

Answer: B. building with asbestos

According to GASB Statement No. 96 (Subscription-Based Information Technology Arrangements or SBITAs), a subscription agreement is considered “short-term” if the maximum possible term (including renewal options) is 12 months or less.

Short-term SBITAs are not reported as subscription liabilities and are accounted for as outflows (expenses or expenditures) when incurred.

Relevant References:

GASB Statement No. 96 – SBITAs (Issued May 2020)

GASB Implementation Guide No. 2021-1 – Q&A on SBITAs

GFOA Advisory – Cloud Computing and Subscription Agreements

Answer: B. 12 months

A committed fund balance is established when the highest level of decision-making authority (e.g., county board or city council) formally sets aside resources for a specific purpose through resolution or ordinance before the end of the fiscal year.

Since the county board — the highest authority — has set aside $7 million specifically to address a projected budget deficit, the classification should be committed fund balance.

Assigned fund balance (Option B) is typically used when intent is expressed by a lower level of authority (e.g., finance director).

Relevant References:

GASB Statement No. 54 – Fund Balance Reporting

GASB Codification Section 1800.176 – Fund Balance Classifications

GFOA Guidance on Fund Balance Policies

Answer: D. Committed Fund Balance

Fund Balance with Treasury (FBWT) increases when an agency receives a Treasury warrant. A warrant is the official document issued by the U.S. Treasury that provides budgetary authority to the agency and establishes funds available for obligation and disbursement.

Other options:

Rescission of appropriation → decreases FBWT

Recovery of prior-year obligations → may restore budgetary authority, but not necessarily FBWT

Custodial revenue → collected on behalf of others; not retained by the collecting agency

Relevant References:

Treasury Financial Manual (TFM), Volume I, Part 2, Chapter 5100

FASAB SFFAS No. 1 – Fund Balance with Treasury

USSGL Guidance on Fund Balance Transactions

Answer: A. receipt of a Treasury warrant

Separate fund financial statements are required for:

Governmental Funds (e.g., general fund, special revenue)

Proprietary Funds (e.g., enterprise, internal service funds)

Fiduciary Funds (reported separately but not combined with government-wide statements)

Long-term debt and capital assets are components within the financial statements—not fund types.

Relevant References:

GASB Statement No. 34 – Financial Reporting Model

GASB Codification Section 2200 – Financial Reporting

GFOA Fund Reporting Framework

Answer: B. governmental and proprietary funds

According to GASB Statement No. 51 – Accounting and Financial Reporting for Intangible Assets, costs associated with internally generated computer software can be capitalized only during the “application development stage.” Activities in this stage that are capitalizable include:

Coding

Software configuration

Testing (for functionality)

Non-capitalizable activities include:

Preliminary project planning (e.g., selecting between alternatives)

Data conversion not necessary for the software to operate

Training employees

Therefore, testing the software for functionality is an activity that should be capitalized.

Relevant References:

GASB Statement No. 51

GFOA Best Practices – Capitalization of Intangible Assets

Answer: C. testing the software for functionality and ease of use

A custodial fund is a type of fiduciary fund used by state and local governments to report assets held temporarily in a purely custodial capacity—for example, taxes collected by one government on behalf of another. These funds do not involve administrative or financial control over the assets; the government is merely acting as an intermediary.

As per GASB Statement No. 84, custodial funds replace agency funds and are used to report fiduciary activities that are not held in a trust agreement and where the government does not have discretion over how the resources are spent.

Relevant Standards and References:

GASB Statement No. 84, Fiduciary Activities

GASB Codification Section 1300: Fiduciary Funds

GFOA Best Practices – Accounting and Financial Reporting for Fiduciary Activities

Therefore, Option A is correct.

 What Are the Four General Government Auditing Standards?

These standards, as defined in theGAO Yellow Book (Government Auditing Standards):

Qualifications:Auditors must have the necessary professional skills and competence to perform their work.

Independence:Auditors must remain free from personal, external, and organizational impairments to maintain objectivity.

Due Professional Care:Auditors must exercise care and diligence, adhering to professional standards and ethical requirements.

Quality Control:Auditors must establish and maintain a system of quality control to ensure audit work meets professional standards.

 Why Is Option D Correct?

These four elements are explicitly outlined in the GAO Yellow Book as the core principles of government auditing standards.

 Why Other Options Are Incorrect:

A. Compliance, timeliness, qualifications, and due professional care:Timeliness and compliance are not part of the four general standards; they are components of audit objectives.

B. Supervision, planning, management controls, and evidence:These are aspects of audit performance, not general standards.

C. Planning, internal controls, independence, and irregularities:Planning and internal controls are part of the audit process, not general standards.

 References and Documents:

GAO Yellow Book (Generally Accepted Government Auditing Standards - GAGAS):Lists qualifications, independence, due professional care, and quality control as the four general standards.

AICPA Audit Standards:Aligns with GAGAS in emphasizing these four principles.

In the statewide financial statements, which represent the government-wide financial reporting model, depreciation is reported using the full accrual basis of accounting. This means long-term assets and liabilities are recognized, and depreciation is recorded systematically over the useful lives of capital assets.

The modified accrual basis (used in governmental funds) does not report depreciation because capital assets are not reported in those funds.

Relevant References:

GASB Statement No. 34 – Depreciation Reporting

GASB Concept Statement No. 1 – Measurement Focus and Basis of Accounting

GFOA – Capital Asset and Depreciation Policies

Answer: D. accrual basis