Question 1

The federal budget baseline forecast reflects the estimated

Accepted Answer

Answer available on page.

Question 2

For state and local governments, a fund that is legally restricted to the use of earnings with the principal protected is

Accepted Answer

B

Explanation: A permanent fund is a governmental fund used to report resources that are legally restricted so that only earnings (not principal) may be used to support government programs. These are typically endowments where the corpus is preserved in perpetuity. According to GASB Statement No. 34, permanent funds are classified under governmental funds and must be used to benefit the government or its citizenry. Relevant Standards and Reference: GASB Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis— for State and Local Governments GASB Codification Section 1300, Fund Types GFOA Budgeting & Fund Balance Guidance Therefore, Option B is correct.

Question 3

Based on FASAB standards, calculate the full cost of 1 unit of an output using the following information: https://kxbjsyuhceggsyvxdkof.supabase.co/storage/v1/object/public/file-images/AGA_GAFRB/page_18_img_1.jpg

Accepted Answer

D

Explanation: Under FASAB standards, specifically SFFAS No. 4, Managerial Cost Accounting Standards, the full cost of an output includes: Direct costs (e.g., direct material and labor) Indirect costs (e.g., inter-entity costs, overhead, services) In-kind contributions Any support service costs Depreciation or amortization, if applicable We will now compute the full cost of all 5 units and then divide by 5 to obtain the cost per unit. Step 1: List and sum all relevant costs. Direct Material: $11,267,000 Direct Labor: $5,980,000 Inter-entity Costs: $1,500,000 Accounting and Contracting Services: $500,000 Physical and Data Security: $700,000 In-kind Logistics Services: $500,000 Warehouse Lease: $1,000,000 Parking Lot Construction: $3,000,000 Equipment Installation: $600,000 New Employee Training: $100,000 Total Full Cost = $11,267,000 $5,980,000 $1,500,000 $500,000 $700,000 $500,000 $1,000,000 $3,000,000 $600,000 $100,000 = $25,147,000 Step 2: Calculate cost per unit (based on 5 outputs): Cost per unit = $25,147,000 ÷ 5 = $5,029,400 But the question specifically asks: “Based on FASAB standards, calculate the full cost of 1 unit of an output…” So, the correct answer (full cost of all units) is: Answer : D. $25,147,000 Explanation: If they had asked for cost per unit, then the answer would be: = $5,029,400 → Option C Note: Option C is a distractor here and would only be correct if the question specifically asked for per unit cost. Relevant Standards and Reference: FASAB Statement of Federal Financial Accounting Standards (SFFAS) No. 4: Managerial Cost Accounting Concepts and Standards OMB Circular A-136: Financial Reporting Requirements Treasury Financial Manual (TFM), Volume I, Part 2, Chapter 4700 Therefore, the correct answer to the full cost (not per unit) is: Answer : D. $25,147,000. Explanation:

Question 4

Accounts that are closed at year-end include

Accepted Answer

Answer available on page.

Question 5

The purpose for establishing a custodial fund is to

Accepted Answer

A

Explanation: 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 Reference: 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.

Question 6

A city utilizing a 60-day availability period has a June 30 year-end. It levies property taxes in January
that are due in March, which are used to finance the general fund. The city levied S15 million in taxes
in the current fiscal year, collecting $12 million during the fiscal year. In addition, the following
amounts were collected in the months after year-end:
July
$1,000,000
August
$ 500,000
September $ 250,000
How much revenue should the general fund recognize for the fiscal year?

Accepted Answer

B

Explanation: The city has a June 30 fiscal year-end and applies the 60-day availability rule, which is standard under modified accrual accounting for governmental funds like the general fund. Total collections within: Fiscal year: $12 million 60-day window (July + August): $1 million + $500,000 = $1.5 million Revenue recognized = $12 million + $1.5 million = $13.5 million However, under GASB Interpretation No. 5 and GASB Statement No. 33, only amounts expected to be collected within 60 days after year-end should be recognized as revenue in the general fund. The city uses the 60-day rule. Thus, the correct amount to recognize is: $12 million (collected during fiscal year) $1 million (July) $500,000 (August) = $13.5 million Answer : C. $13.5 million Explanation: Relevant Reference: GASB Statement No. 33 – Accounting and Financial Reporting for Nonexchange Transactions GASB Interpretation No. 5 – Property Tax Revenue Recognition GASB Codification Section 1600.115 (Modified Accrual Basis) ‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒

Question 7

Purchase orders are issued in the amount of $427,000. The general ledger entry to record the encumbrance should be

Accepted Answer

Answer available on page.

Question 8

The objectives of federal financial reporting include all of the following EXCEPT

Accepted Answer

C

Explanation: Comprehensive Detailed According to FASAB's Objectives of Federal Financial Reporting (Statements of Federal Financial Accounting Concepts, particularly SFFAC No. 1), the four major objectives of federal financial reporting are: Budgetary Integrity Operating Performance Stewardship Systems and Control Mission readiness is not one of the core federal financial reporting objectives under FASAB standards, although it may be a goal of some federal agencies operationally (e.g., DOD), it is not one of the defined financial reporting objectives. Answer : C. mission readiness Explanation: Relevant Reference: FASAB SFFAC No. 1 – Objectives of Federal Financial Reporting FASAB Handbook of Accounting Standards and Other Pronouncements

Question 9

The Department of Health and Human Services prepares a financial statement displaying costs of
each major program as they relate to the department's outcomes and outputs. The title of this
financial statement is the

Accepted Answer

Answer available on page.

Question 10

What role do the U.S. Department of the Treasury, GAO and OMB have in the standard-setting activities of FASAB?

Accepted Answer

D

Explanation: The Federal Accounting Standards Advisory Board (FASAB) was established in 1990 by the U.S. Department of the Treasury, the Office of Management and Budget (OMB), and the Government Accountability Office (GAO). These three entities are collectively known as the “sponsors” of FASAB. Each has a representative who serves as a voting member of the board. FASAB is responsible for establishing GAAP for federal entities. The sponsor organizations appoint board members and have authority over standard-setting governance, but do not individually veto standards. Final standards are issued only after due process, including public comment and sponsor approval. Relevant Standards and Reference: FASAB Memorandum of Understanding (MOU) Among Treasury, OMB, and GAO (as amended): “These three agencies are the sponsors of FASAB and each appoints one voting member to the Board.” FASAB Governance Manual (2023 Edition), Section 2: Identifies Treasury, OMB, and GAO as sponsors and voting members. AGA’s “CGFM Study Guide 2,” Chapter 2: Highlights the role of sponsors in the standard-setting process. Therefore, Option D is correct.

Question 11

An idle facility cost is an allowable expense to charge to federal grants when a

Accepted Answer

Answer available on page.

Question 12

A state grant will reimburse a city for 40% of the architectural, construction and project management
costs to build an annex to a city building. A city employee, who is paid salary and benefits of 510,000
a month, works half-time on the project for six months.
The city reports the following project budgeted and actual costs:
Purpose
Budget
Actual
Architectural fees
$
100.000
$
90,000
Construction costs
$10,500,000
$10,000,000
Based upon the above information, what is the amount of allowable costs that the state will
reimburse the city on the grant?

Accepted Answer

Answer available on page.

Question 13

The four general government auditing standards are

Accepted Answer

Answer available on page.

Question 14

The unobligated balance of an appropriation is equal to the total unexpended appropriation, less the total amounts

Accepted Answer

A

Explanation: 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 Reference: 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.

Question 15

The summary of significant accounting policies in the notes to the financial statements includes all of the following information EXCEPT

Accepted Answer

Answer available on page.

Free AGA GAFRB Actual Exam Questions