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

The unobligated balance of an appropriation refers to the portion of the total appropriation authority that has not yet been committed (obligated) through contracts, purchase orders, or other legally binding agreements.

Formula:

Unobligated Balance = Total Appropriation – Total Obligations

This is a key control metric in federal and state financial management, used to determine how much funding remains legally available for future obligations.

Relevant Standards and References:

OMB Circular A-11, Section 20.3

GAO Principles of Federal Appropriations Law (Red Book)

FASAB SFFAS No. 7: Reporting on Budgetary Resources

Therefore, Option A is correct.

OMB Circular A-136 specifies the required components of the Agency Financial Report (AFR), which include:

A Message from the Head of the Agency

Management’s Discussion and Analysis (MD&A)

Financial Section (including statements and notes)

Other Information (e.g., improper payments, internal controls)

The Performance Section is not included in the AFR but is instead part of the alternative Performance and Accountability Report (PAR) or included separately in an Annual Performance Report (APR).

Relevant References:

OMB Circular A-136 – Financial Reporting Requirements (Section II)

GPRA Modernization Act of 2010

CFO Act of 1990

Answer: D. the performance section

Comprehensive Detailed Explanation:

Trust funds in the federal government are used to account for assets held in a fiduciary capacity for specific purposes. These funds typically involve revenue dedicated by law for particular programs and purposes, such as:

Social Security Trust Fund

Medicare Trust Fund

Unemployment Trust Fund

These involve collections from earmarked taxes or contributions and are used to provide specific benefits or services.

Relevant References:

FASAB SFFAS No. 27 – Identifying and Reporting Earmarked Funds

Treasury Financial Manual – Trust Fund Accounts

OMB Circular A-11, Section 20 – Federal Fund and Trust Fund Definitions

Answer: B. provisions of benefits, goods or services financed by specific revenue sources

To calculate the full cost of the vehicle fleet program, we must include:

✔Direct costs

✔Indirect costs (pro-rated)

Given:

Fleet personnel costs: $80,000 (direct)

Fuel: $10,000 (direct)

Fleet depreciation: $50,000 (direct)

Fleet garage rent: $40,000 (direct)

Subtotal direct costs: $180,000

Now calculate 20% of indirect personnel costs:

Procurement personnel: 20% of $200,000 = $40,000

Accounting personnel: 20% of $100,000 = $20,000

Subtotal indirect support: $60,000

Total full cost: $180,000 (direct) + $60,000 (indirect) = $240,000

Correction: This contradicts the initial selection of “C. $430,000.” Let’s recheck:

Ah! The earlier subtotal missed summing all elements:

Corrected breakdown:

Fleet personnel: $80,000

Fuel: $10,000

Fleet depreciation: $50,000

Fleet garage rent: $40,000

20% of procurement ($200,000): $40,000

20% of accounting ($100,000): $20,000

= Total: $80,000 + $10,000 + $50,000 + $40,000 + $40,000 + $20,000 = $240,000

✅Correct Answer: B. $240,000

Relevant References:

FASAB SFFAS 4 – Managerial Cost Accounting

OMB Circular A-136 – Full Cost Definition

GAO Cost Estimating Guide

Answer: B. $240,000

Footnotes (Notes to the Financial Statements) serve to clarify and provide additional detail about the financial statements. Key components include:

Summary of significant accounting policies (e.g., measurement focus, basis of accounting)

Details on capital assets, long-term liabilities, commitments, contingencies

Pension/OPEB disclosures

Not performance metrics or audit opinions (those are in MD&A and audit reports)

Relevant References:

GASB Codification Section 2300 – Notes to Financial Statements

GFOA Best Practices – Financial Reporting and Disclosure

Answer: C. a summary of significant accounting policies.

The government-wide financial statements required by GASB Statement No. 34 include:

Statement of Net Position (similar to a balance sheet)

Statement of Activities (similar to an income statement)

These financial statements provide a consolidated view of the government's financial position and activities using the economic resources measurement focus and accrual basis of accounting.

There is no requirement under GASB for a government-wide statement of cash flows.

Relevant Standards and References:

GASB Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments

GASB Codification Section 2200: Financial Reporting

GFOA Budgeting Best Practices

Therefore, Option C is correct.

According to GASB Statement No. 51 (Accounting and Financial Reporting for Intangible Assets), only costs incurred during the “application development stage” are capitalized for internally generated software. These include:

✔Development of the system – $500,000

✔Development of interfaces – $75,000

✔Data conversion necessary to make software operational – $50,000

✔Testing the software – $130,000

Excluded (should be expensed):

✘Evaluation of needs (preliminary) – $100,000

✘Selection of developer – $25,000

✘Staff training – $15,000

✘Ongoing maintenance – $20,000

Total Capitalizable Costs:

$500,000 + $75,000 + $50,000 + $130,000 = $755,000

Relevant References:

GASB Statement No. 51 – Paragraphs 6–12

GFOA Guidelines – Capitalization of Intangible Assets

Answer: C. $755,000

When a government issues purchase orders, it records encumbrances to reflect commitments against appropriations. This helps track budgetary commitments and avoid overspending.

The entry is recorded in the budgetary accounts (not proprietary accounts) as follows:

Debit Encumbrances: Recognizes the commitment

Credit Budgetary Fund Balance (or Reserve for Encumbrances): Reflects that part of the fund balance is committed

This is consistent with modified accrual accounting and standard governmental fund practice.

Relevant References:

GASB Codification Section 1300 – Budgetary Accounting

GFOA Best Practices – Encumbrance Accounting

GAO Principles of Appropriation Law – Encumbrance Controls

Answer: D. Debit Encumbrances $427,000; Credit Budgetary Fund Balance $427,000

 Why Does Management Need Real-Time Data Access?

Real-time access to data enables managers to make timely and informed decisions.

Complex data setspresented clearly and concisely (with minimal distractions) allow decision-makers to focus on the critical insights necessary for strategic and operational planning.

 Why Is Option D Correct?

On-demand access ensures managers can retrieve updated data whenever needed. Presenting the data in a focused and distraction-free format facilitates quick comprehension and decision-making.

 Why Other Options Are Incorrect:

A. Visual representation with indirect information:Including unrelated data can overwhelm users and detract from effective decision-making.

B. Dashboards updated quarterly:Quarterly updates do not meet the need for real-time access.

C. Prior year’s financial data:Decisions based solely on historical data are not responsive to real-time needs.

 References and Documents:

GAO Data Analytics and Visualization Framework:Stresses the importance of real-time, actionable, and distraction-free data for decision-making.

AICPA Dashboard Guidelines:Recommends presenting complex data sets in a clear and accessible format for management use.

Serial bonds mature in installments over the life of the bond (e.g., every year or every few years). This structure allows the cost of repaying the debt to align more closely with the periods in which the capital asset is used — achieving intergenerational equity by spreading the cost over the same span as the asset’s useful life.

Term bonds, zero-coupon bonds, and pay-as-you-go do not align costs with benefits across multiple years in the same way.

Relevant References:

GFOA Best Practices – Debt Management and Capital Planning

GASB Concepts Statement No. 1 – Interperiod Equity

MSRB Educational Materials on Bond Types

Answer: A. 30-year serial bonds