AGA GAFRB Dumps

Comprehensive Detailed Explanation:

Budget authority is the legal authorization provided by Congress that allows federal agencies to enter into obligations that will result in outlays, either immediately or in the future. It is a prerequisite for agencies to spend federal funds.

Commitment authority is not an official federal term; transfer authority allows movement of funds between accounts and is more restrictive; expenditure authority is an informal term and not defined in U.S. Code.

Relevant References:

U.S. Code Title 31 – § 1341 and § 1102

GAO Red Book – Budget Concepts

OMB Circular A-11, Section 20 – Budget Authority Definition

Answer: B. a budget authority

Comprehensive Detailed Explanation:

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

Relevant References:

FASAB SFFAC No. 1 – Objectives of Federal Financial Reporting

FASAB Handbook of Accounting Standards and Other Pronouncements

GASB Statement No. 34 provides the criteria for determining major funds, primarily based on quantitative thresholds (e.g., 10% of total assets, liabilities, revenues, or expenditures/expenses).

However, GASB also allows management to designate any governmental or enterprise fund as a major fund if, in its judgment, it is particularly important to users of the financial statements—even if it doesn’t meet the quantitative criteria.

Other options are incorrect:

The general fund is always presented as a major fund regardless of criteria.

Internal service funds are never reported as major funds in the fund financial statements.

Relevant References:

GASB Statement No. 34 – Paragraph 76

GASB Codification Section 2200 – Fund Reporting Requirements

GFOA ACFR Preparation Guide

Answer: C. Management can elect to present any governmental or enterprise fund as a major fund

The first and most appropriate action for the state Medicaid director is to inform the governor. This ensures that executive leadership is aware of the fiscal shortfall early and can weigh in on how to proceed. The governor plays a central role in budget planning and proposing supplemental appropriations.

While informing legislators or freezing spending may be necessary later, those steps should occur after executive leadership has been notified and involved in decision-making.

Relevant References:

GFOA Best Practices – Budget Monitoring and Adjustment

State Budget Procedures Manuals (varies by state, but consistent in escalation path)

National Association of State Budget Officers (NASBO) Guidance

Answer: A. Inform the governor of the situation and options for addressing the shortfall

The $900,000 paid to the construction manager and $100,000 paid to the architect are capitalized as part of the building's total cost, totaling $1,000,000.

Using straight-line depreciation over 50 years with the half-year convention:

Annual depreciation = $1,000,000 ÷ 50 = $20,000

Since the half-year convention is used in the year the asset is placed in service, only 50% of the full-year depreciation is recorded.

Depreciation for the current year = $20,000 × 0.5 = $10,000

However, note: since both amounts ($900,000 + $100,000) were paid during construction and the school was completed and placed into service this year, the full capitalized amount applies.

GASB and GAAP allow the half-year rule unless the asset was placed into service at the beginning of the year. In this case, since placed during the year, the half-year rule applies.

Correct depreciation for the first year = $10,000

So, the correct answer is:

Answer: B. $10,000

Correction Note: While option C ($20,000) may seem valid for full-year depreciation, the use of the "half-year depreciation method" dictates that only half of the full-year amount is expensed in the first year.

Relevant References:

GASB Statement No. 34 – Capital Assets and Depreciation

GFOA Best Practices on Capital Asset Accounting and Reporting

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

Comprehensive Detailed Explanation:

Object classes categorize federal government obligations by the type of goods or services purchased, such as personnel compensation, equipment, travel, etc. These are standardized in OMB Circular A-11, Section 83.

This classification supports budgeting, analysis, and reporting.

Relevant References:

OMB Circular A-11, Section 83 – Object Classification

USSGL (U.S. Standard General Ledger) Glossary

GAO Glossary of Budget Terms

Answer: B. object classes

State and local governments adopt legally binding budgets and are required to monitor compliance with those budgets. Budget-to-actual comparisons help ensure that public funds are spent only as authorized by the legislative body. This supports the core accountability principle of public sector financial reporting.

While budgets can also support planning and cash flow, the primary purpose of tracking budgeted vs. actual expenditures is legal compliance.

Relevant References:

GASB Statement No. 34 – Budgetary Comparison Schedules

GFOA – Budget Monitoring and Compliance

GAO Red Book – Legal Requirements for Public Spending

Answer: D. spending conforms to legal requirements.

The Federal Financial Management Improvement Act (FFMIA) of 1996 established the requirement for federal agencies to implement and maintain financial systems that comply with federal accounting standards. It formally recognized the Federal Accounting Standards Advisory Board (FASAB) as the source of GAAP for federal agencies.

FASAB’s standards are authoritative for federal entities, much like GASB for state and local governments and FASB for private-sector entities.

Relevant References:

Federal Financial Management Improvement Act of 1996 (Public Law 104–208, Title VIII)

FASAB Handbook – Introduction & Authority

GAO Federal Accounting Standards Overview

Answer: D. FASAB

The "pass back" is a step in the federal budget process during which the Office of Management and Budget (OMB) communicates to federal agencies what parts of their budget requests it has approved or rejected. It precedes the preparation of the President’s Budget and gives agencies a chance to appeal decisions before final submission.

Other options:

Allotment: An internal division of an appropriation.

Rescission: A cancellation of budget authority.

Apportionment: OMB’s formal distribution of funds over time, typically quarterly.

Relevant References:

OMB Circular A-11 – Preparation, Submission, and Execution of the Budget

GAO Glossary of Budgetary Terms

Congressional Budget Office (CBO) – Federal Budget Process

Answer: A. pass back

Comprehensive Detailed Explanation:

Interperiod (or intergenerational) equity is the concept that current-year revenues should be sufficient to pay for current-year services, so that future taxpayers are not burdened with today's costs.

GASB incorporates interperiod equity as a core principle when developing financial reporting standards, especially to evaluate whether financial reporting helps users assess if the government is living within its means.

Relevant References:

GASB Concepts Statement No. 1 – Objectives of Financial Reporting

GASB Statement No. 34 – Emphasizes accountability and long-term sustainability

GFOA Budgeting Best Practices

Answer: C. issuing financial reporting guidelines

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

First, we calculate total eligible project costs:

Eligible categories (architectural, construction, project management):

Architectural (actual): $90,000

Construction (actual): $10,000,000

Project management (city employee at 50% time for 6 months):

 $10,000/month × 6 months × 50% = $30,000

Total eligible cost = $90,000 + $10,000,000 + $30,000 = $10,120,000

State reimburses 40% of eligible cost:

0.40 × $10,120,000 = $4,048,000

Relevant References:

OMB Uniform Guidance (2 CFR § 200) – Cost Principles

GFOA Best Practices – Grant Compliance

State grant agreements outlining cost-sharing requirements

Answer: A. $4,048,000

A component unit is a legally separate entity for which the elected officials of the primary government are financially accountable. This accountability may arise if the primary government:

Appoints a majority of the governing board, and

Is able to impose its will or has the potential to receive financial benefits or bear financial burdens.

Component units are reported in the financial statements of the primary government, either as blended or discretely presented entities.

Relevant Standards and References:

GASB Statement No. 14, The Financial Reporting Entity

GASB Statement No. 61, The Financial Reporting Entity: Omnibus

GASB Codification Section 2100: Defining the Financial Reporting Entity

Therefore, Option B is correct.

Governmental fund financial statements (such as the General Fund, Special Revenue Funds, Capital Projects Funds) use the current financial resources measurement focus and the modified accrual basis of accounting. This focus reports inflows and outflows of current financial resources and excludes long-term assets and liabilities.

This differs from the government-wide financial statements, which use the economic resources measurement focus and full accrual basis.

Relevant References:

GASB Statement No. 34 – Basic Financial Statements

GASB Codification Section 1600 – Fund Accounting

GFOA Fund Accounting Guidance

Answer: C. current financial resources

In federal accounting, upon receipt of utility bills (and before payment), a government agency records an obligation. Since the service has already been received and payment is imminent, the budgetary accounting entry reduces available allotments and records the obligation.

The entry would look like:

Debit: Allotment Available for Commitment/Obligation

Credit: Undelivered Orders – Unpaid (or potentially Delivered Orders – Unpaid, depending on agency policy)

In the case of immediate payment, the next step would move from obligation to expenditure, but the initial obligation entry affects the budgetary accounts as described above.

Relevant References:

FASAB SFFAS No. 7 – Budgetary Accounting

Treasury Financial Manual (TFM) – Budgetary Transactions

OMB Circular A-11

Answer: A. Debit Allotment Available for Commitment/Obligation / Credit Undelivered Orders Unpaid

The Government Management Reform Act (GMRA) of 1994 amended the Chief Financial Officers (CFO) Act of 1990 to require each executive agency to prepare and submit audited financial statements covering all accounts and associated activities.

This extended the audit requirement beyond the pilot CFO agencies and laid the groundwork for the Financial Report of the U.S. Government.

Relevant References:

Government Management Reform Act of 1994 (Public Law 103-356)

CFO Act of 1990

OMB Circular A-136 – Financial Reporting Requirements

Answer: B. audited financial statements of the executive departments

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A Treasury warrant is the formal notification from the U.S. Department of the Treasury that funds have been made available to a federal agency. Agencies cannot legally obligate or expend appropriated funds until a warrant has been issued.

Apportionments and allotments come afterward in the budget execution process.

Relevant References:

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

OMB Circular A-11 – Budget Execution

GAO Red Book – Appropriations Law

Answer: C. a warrant

Non-exchange revenues are those in which a government gives or receives value without directly receiving or giving equal value in return. Sales taxes are a classic example of a non-exchange revenue because the payer (consumer) does not receive a direct, measurable benefit from the government in exchange for the tax paid.

Other examples of non-exchange revenues include property taxes, grants, and fines. In contrast, licensing fees and investment earnings are exchange or exchange-like revenues, since they involve a mutual benefit or earnings return.

Relevant Standards and References:

GASB Statement No. 33, Accounting and Financial Reporting for Nonexchange Transactions

GASB Codification Section N50

GFOA Revenue Classification Guidelines

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

For state and local governments, GASB (Governmental Accounting Standards Board) is the authoritative standard-setting body. If a GASB principle exists, it must be followed, even if a FASB (Financial Accounting Standards Board) principle suggests a different approach.

FASB guidance may only be used in the absence of applicable GASB guidance — and even then, only when it does not conflict with governmental accounting objectives.

Relevant References:

GASB Statement No. 76 – The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments

GASB Concepts Statements

GAO and GFOA Reporting Manuals

Answer: A. the principle established by GASB

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

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

Research and development (R&D) costs are generally expensed when incurred. However, capitalization may occur only if the asset has an "alternative future use." This means it can be used in other projects or for other purposes beyond the specific R&D effort.

This principle aligns with both federal and private-sector accounting under FASAB and FASB standards.

Relevant References:

FASAB SFFAS No. 10 – Accounting for Internal Use Software

FASB ASC 730 – Research and Development

GAO Red Book – Capitalization Guidelines

Answer: D. have alternative future use

A basic financial statement that includes a budgetary comparison (typically the Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual) is used to demonstrate whether the government complied with its legally adopted budget.

This is a core element of accountability in governmental financial reporting and is required under GASB Statement No. 34.

Relevant References:

GASB Statement No. 34 – Budgetary Comparison Statements

GASB Codification Section 2400 – Budgetary Accounting and Reporting

GFOA Best Practices – Budget Monitoring and Reporting

Answer: B. demonstrate compliance with the legally adopted budget

When a private bank issues a student loan that is insured by the government in case of default, the federal government is acting as a guarantor—not issuing the loan directly, but promising repayment to the lender if the borrower defaults. This is a classic example of a federal loan guarantee program.

Loan guarantees are off-budget unless called, and the government only incurs a liability if the student defaults.

Relevant References:

FASAB SFFAS No. 2 – Accounting for Direct Loans and Loan Guarantees

Credit Reform Act of 1990

OMB Circular A-11, Section 185 – Federal Credit Programs

Answer: B. a loan guarantee

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 References:

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.

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

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 References:

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.

An Agency Financial Report (AFR), required by OMB Circular A-136, must include the following core components:

✔Management’s Discussion and Analysis (MD&A)

✔Financial Section (includes basic financial statements and accompanying notes)

✔Required Supplementary Information (RSI)

✔Auditor’s Opinion (if audited)

However, the Standard General Ledger (SGL) trial balance is not included in the AFR itself. While agencies must use the SGL for financial reporting consistency and submit trial balances to Treasury (e.g., via GTAS), the trial balance is not published in the AFR.

Relevant References:

OMB Circular A-136

Treasury Financial Manual (TFM)

FASAB SFFAS No. 53 – Financial Reporting

Answer: C. a standard general ledger trial balance

The governmental fund category is used to account for the core services of a government that are primarily supported by taxes and other non-exchange revenues. These services include public safety, education, health, transportation, and social services. It includes the general fund, special revenue funds, capital projects funds, debt service funds, and permanent funds.

While option D (general fund) is technically a fund within the governmental category, the broader and more accurate classification is "governmental."

Relevant References:

GASB Statement No. 34 – Basic Financial Statements for State and Local Governments

GASB Codification Section 1300 – Fund Types

GFOA Fund Structure Guidance

Answer: B. governmental

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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

Enterprise funds are a type of proprietary fund used by governments to account for operations that are financed and operated in a manner similar to private business enterprises. These include activities like water, sewer, and electricity utilities, where user fees or charges for services are the primary revenue source.

In this case, a water utility charging users is best accounted for using an enterprise fund.

Relevant References:

GASB Codification Section 1300 – Fund Types

GASB Statement No. 34 – Fund Classification

GFOA Best Practices – Utility and Enterprise Fund Accounting

Answer: D. enterprise fund

The agency uses accrual accounting, meaning bad debt expense should be recognized based on the revenue earned, not the cash collected. The historical bad debt rate is 5%.

Fee revenue recorded = $1.1 million

Bad debt expense = 5% × $1,100,000 = $55,000

This matches the standard accounting treatment under FASAB SFFAS No. 1, where the expense is estimated and recognized in the same period as the related revenue.

Relevant References:

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

GAAP treatment for allowance for doubtful accounts

Treasury Financial Manual – Accounts Receivable Accounting

Answer: C. $55,000

Federal agencies submit their budget requests to the Office of Management and Budget (OMB), which reviews, analyzes, and makes recommendations to the President. After OMB review, the final version of the President’s Budget is submitted to Congress.

Other roles:

Treasury: Manages federal finances, not budget formulation.

GAO: Audits and provides oversight to Congress.

Congress: Receives and authorizes the budget but does not initially review agency requests.

Relevant References:

OMB Circular A-11 – Preparation and Submission of Budget Estimates

GAO Budget Glossary

U.S. Code Title 31 – Role of OMB

Answer: B. OMB