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

When full costs cannot be directly traced to a product or service, indirect costs must be allocated using a rational and systematic basis. The preferred method is to use a cause-and-effect relationship between the resource consumed and the output generated. This aligns with cost accounting principles under FASAB SFFAS No. 4 and managerial accounting frameworks.

Other options, such as direct labor or opportunity cost approaches, may be helpful in specific settings but do not meet the standard requirement for full cost allocation.

Relevant References:

FASAB SFFAS No. 4 – Managerial Cost Accounting Standards

OMB Circular A-136 – Full Cost Accounting

GAO Cost Estimating and Assessment Guide

Answer: D. a cause-and-effect relationship between resource costs and outputs

Entity receivables refer to amounts due to a federal agency that it has legal claim over and is authorized to spend or retain. These include:

Claims to cash from other agencies or external entities (e.g., reimbursements, fees for services)

Amounts expected to be collected and available for the agency’s own operations

This contrasts with non-entity receivables, which are collected on behalf of other federal agencies or the general fund and are not available for the collecting agency’s use.

Relevant References:

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

Treasury Financial Manual (TFM), Vol. I, Part 2 – Definitions of Entity vs. Non-Entity Assets

OMB Circular A-136 – Reporting of Receivables

Answer: C. a federal entity claims from other federal or non-federal entities that the federal entity is authorized to spend

Although the building is listed on the National Register of Historic Places (a heritage asset), renovations that support current operations and serve general purposes (e.g., office upgrades) are considered capitalizable or expensed under general property, plant, and equipment (G-PP&E), not stewardship or heritage classifications.

Stewardship or heritage classifications apply to assets whose primary purpose is historical preservation, not ongoing operations.

Relevant References:

FASAB SFFAS No. 29 – Heritage Assets and Stewardship Land

FASAB SFFAS No. 6 – General PP&E Accounting

OMB Circular A-136 – Capital Asset Guidance

Answer: D. general property, plant and equipment expense

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

An appropriation is a statutory authority from Congress that allows federal agencies to incur obligations and make payments (outlays) for specific purposes. It is the most common and formal type of budget authority.

Other terms:

Budget authority: General term for permission to spend

Allotment: Internal allocation by an agency

Apportionment: Control mechanism used by OMB

Relevant References:

U.S. Code Title 31 – § 1301 et seq.

GAO Red Book – Appropriations Law

OMB Circular A-11 – Budget Authority Definitions

Answer: D. appropriation

FASAB SFFAS No. 10 (Accounting for Internal Use Software) provides guidance for capitalizing software development costs. The following costs are capitalized:

Software configuration and development: $750,000

Testing for functionality (ready for use): $225,000

These fall within the "software development stage."

The following are not capitalized:

Research costs (e.g., feasibility studies): $100,000 → Expense

Data conversion costs: $500,000 → Expense (unless part of application development, which it’s not here)

Capitalized total = $750,000 + $225,000 = $975,000

Relevant References:

FASAB SFFAS No. 10 – Accounting for Internal Use Software

OMB Circular A-136 – Capitalization Guidance

Treasury Financial Manual (TFM) – Capital Assets

Answer: B. $975,000

In the governmental fund (such as the debt service fund), modified accrual accounting is used. Under this basis:

Payment of principal and interest is recorded as expenditures, not reductions of liabilities or interest expense.

No long-term liabilities (e.g., bonds payable) are recorded in governmental funds.

So, the correct journal entry is:

 Debit: Expenditures – Principal

 Debit: Expenditures – Interest

 Credit: Cash

Relevant References:

GASB Codification Section 1300 – Fund Accounting and Modified Accrual Basis

GASB Statement No. 34 – Fund-Level Reporting

GFOA Accounting and Reporting for Debt Service Funds

Answer: A. expenditures – principal and expenditures – interest

State and local government budgets primarily serve to:

Set public policy priorities

Provide legislative control over taxing and spending

Serve as a financial planning tool

Debt policy is typically established outside the annual budget process and guided by a separate debt management policy that sets borrowing limits, credit rating objectives, and debt service goals.

Relevant References:

GFOA Best Practices – Role of the Budget

NASBO Budgeting Handbook

GASB Concept Statements – Financial Reporting Objectives

Answer: C. determine debt policy

This is the point when a proprietary entry and a budgetary entry must both be recorded:

Proprietary entry: To record the asset (e.g., equipment) and recognize the payable

Budgetary entry: To move from unpaid obligation (Undelivered Orders) to paid obligation (Delivered Orders)

Receiving goods/services triggers both the accrual of the expense and the update of the obligation’s status in the budgetary accounts.

Relevant References:

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

Treasury Financial Manual, Part 2, Ch. 4700 – Proprietary vs. Budgetary Accounting

GAO Red Book – Appropriations Law

Answer: B. A contracting officer's representative receives delivery of previously ordered printers.

The Governmental Accounting Standards Board (GASB) issues accounting standards after a structured due process that includes:

Publication of a Discussion Document (e.g., Preliminary Views)

Publication of an Exposure Draft

Solicitation and analysis of public comments (written/oral)

Deliberation by the full Board

A majority vote (not unanimous) of the GASB board members is required to approve and issue a final standard.

Relevant References:

GASB Rules of Procedure

GASB Due Process Manual

GASB Website – Standard-Setting Process

Answer: D. vote of the majority of board members, after discussing the written and oral comments offered by interested parties on an exposure draft of a statement of proposed standards