CGFM STUDY GUIDE 2026 EXAM QUESTIONS AND
SOLUTIONS GRADED A+
✔✔I 10.The role of the International Public Sector Accounting Standards Board is to -
✔✔Correct Answer: set standards for the general purpose financial statements of
international public sector entities.
✔✔I 11.A state needs to determine its indirect cost rate for fringe benefits as a function
of direct salaries costs of $3 million. Based on the information shown on the left, the
indirect cost is - ✔✔Correct Answer: 10.8%
✔✔I 12.Non-exchange revenue includes inflows of resources arising from - ✔✔Correct
Answer: taxes, fines and penalties from the private sector.
✔✔I 13.A group of activities within a function are known as - ✔✔Correct Answer: a
program.
✔✔I 14.In financing capital projects, special assessments are used to ensure that -
✔✔Correct Answer: the individuals benefiting from the project are the ones who pay for
it.
✔✔I 15.The organizations that establish the standards used by their constituents for
external reporting purposes include FASB, FASAB, GASB and - ✔✔Correct Answer:
International Public Sector Accounting Standards Board.
✔✔I 16.Which of the following terms describes costs an agency incurs on behalf of
another agency? - ✔✔Correct Answer: inter-entity
✔✔I 17.State and local governments need cost information to receive reimbursements
for allowable costs for federal grants, while federal agencies are required to have cost
accounting concepts in the preparation of what type of statements? - ✔✔Correct
Answer: financial statements
✔✔I 18.State and local governments use encumbrances as the major budgetary control
tool to ensure availability of funds prior to entering agreements, while the federal
government instills budgetary control using - ✔✔Correct Answer: commitments and
obligations.
✔✔I 19.The equipment department of a municipality rents out equipment to other
departments and wants to set a fee that will recover expenses. The department
estimates 10,000 rentals per year, with the annual operating costs shown on the left.
The department has $5,000 in annual interest payments and $15,000 in annual debt
service payments for the loan they took out to purchase the equipment. The annual
,depreciation on the equipment is $7,500. Based on this information, the user fee should
be set at - ✔✔Correct Answer: $91.25 per rental.
✔✔I 20.Apportionments and allotments are used by agencies to ensure - ✔✔Correct
Answer: that outlays do not exceed appropriations.
✔✔I 21.Departments and agencies submit their apportionment requests for future
expenditures during which budget phase? - ✔✔Correct Answer: execution
✔✔I 22.Which element of the budget structure is represented by license and permit
revenue? - ✔✔Correct Answer: category or source
✔✔I 23.Agencies generally submit their budget requests during the - ✔✔Correct
Answer: budget preparation phase.
✔✔I 24.In United States governments, what is the cornerstone of financial reporting? -
✔✔Correct Answer: accountability
✔✔I 25.Unlike governments, businesses establish priorities for the services and
products they provide, based on the concept that - ✔✔Correct Answer: shareholders
provide financing and expect the business goals and objectives to be profit-driven.
✔✔I 26.Which is the preferred costing methodology? - ✔✔Correct Answer: directly
tracing costs wherever feasible and economically practical
✔✔I 27.Two agencies using the same accounting principles is an example of -
✔✔Correct Answer: comparability.
✔✔I 28.The function element of the budget refers to - ✔✔Correct Answer: one of the
major government service classifications.
✔✔I 29.One purpose of the hierarchy of generally accepted accounting principles for
state, local, and federal accounting and financial reporting is to - ✔✔Correct Answer:
provide guidance to preparers and attesters regarding accounting issues.
✔✔I 30.All of the following factors should be considered when choosing the method
used to forecast revenues EXCEPT the - ✔✔Correct Answer: complexity of the
forecasting process.
✔✔31.Federal government-wide financial reporting allows the reader to - ✔✔Correct
Answer: assess the government's financial condition and long-term sustainability.
, ✔✔I 32.What action is allowable during the expired phase of federal budget execution?
- ✔✔Correct Answer: make upward adjustments to obligations
✔✔I 33.The concept that taxpayers of the current period should pay for the services
they receive rather than passing on the costs to the taxpayers of subsequent periods is
called - ✔✔Correct Answer: interperiod equity.
✔✔I 34.An agency is recommending a new program to the legislature. Included with the
information is a budgetary estimate, which forecasts expenditures for the upcoming
fiscal year, as well as the next five years. The budget was determined by comparing the
goals to other entities providing similar services. This method of forecasting
expenditures is called - ✔✔Correct Answer: performance based-budgeting.
✔✔I 35.Limitations on the amount, purpose or period of availability of budget authority
are established by the - ✔✔Correct Answer: legislative branch in appropriation acts and
legislation.
✔✔I 36.A continuing resolution is defined as - ✔✔Correct Answer: a law allowing
federal organizational units to continue operating for a limited period of time, while the
budget process continues.
✔✔I 37.Which type of budgeting links strategic goals with related long-term and annual
performance goals, and with the costs of specific activities that contribute to the
achievement of those goals? - ✔✔Correct Answer: performance budgeting
✔✔I 38.As a way to improve the effectiveness and efficiency of programs, some states
and local governments use what type of budgeting? - ✔✔Correct Answer: performance
✔✔I 39.A claim in the amount of $500,000 has been filed against a state agency for a
wrongful termination occurring in the previous fiscal year. The initial hearing is set for
January 15th. The attorney general's office has determined the probability of payment is
remote. In the state's comprehensive annual financial report due December 31st, the
claim should be - ✔✔Correct Answer: omitted from the current year CAFR.
✔✔I 40.General obligation bonds differ from revenue bonds in that general obligation
bonds - ✔✔Correct Answer: are backed by the full faith and credit of the government.
✔✔I 41.Which of the following documents, related to accounting standards, outlines the
results of research efforts of staff, defines accounting and reporting issues for a
particular project, and solicits opinions from constituents? - ✔✔Correct Answer:
discussion memorandum
SOLUTIONS GRADED A+
✔✔I 10.The role of the International Public Sector Accounting Standards Board is to -
✔✔Correct Answer: set standards for the general purpose financial statements of
international public sector entities.
✔✔I 11.A state needs to determine its indirect cost rate for fringe benefits as a function
of direct salaries costs of $3 million. Based on the information shown on the left, the
indirect cost is - ✔✔Correct Answer: 10.8%
✔✔I 12.Non-exchange revenue includes inflows of resources arising from - ✔✔Correct
Answer: taxes, fines and penalties from the private sector.
✔✔I 13.A group of activities within a function are known as - ✔✔Correct Answer: a
program.
✔✔I 14.In financing capital projects, special assessments are used to ensure that -
✔✔Correct Answer: the individuals benefiting from the project are the ones who pay for
it.
✔✔I 15.The organizations that establish the standards used by their constituents for
external reporting purposes include FASB, FASAB, GASB and - ✔✔Correct Answer:
International Public Sector Accounting Standards Board.
✔✔I 16.Which of the following terms describes costs an agency incurs on behalf of
another agency? - ✔✔Correct Answer: inter-entity
✔✔I 17.State and local governments need cost information to receive reimbursements
for allowable costs for federal grants, while federal agencies are required to have cost
accounting concepts in the preparation of what type of statements? - ✔✔Correct
Answer: financial statements
✔✔I 18.State and local governments use encumbrances as the major budgetary control
tool to ensure availability of funds prior to entering agreements, while the federal
government instills budgetary control using - ✔✔Correct Answer: commitments and
obligations.
✔✔I 19.The equipment department of a municipality rents out equipment to other
departments and wants to set a fee that will recover expenses. The department
estimates 10,000 rentals per year, with the annual operating costs shown on the left.
The department has $5,000 in annual interest payments and $15,000 in annual debt
service payments for the loan they took out to purchase the equipment. The annual
,depreciation on the equipment is $7,500. Based on this information, the user fee should
be set at - ✔✔Correct Answer: $91.25 per rental.
✔✔I 20.Apportionments and allotments are used by agencies to ensure - ✔✔Correct
Answer: that outlays do not exceed appropriations.
✔✔I 21.Departments and agencies submit their apportionment requests for future
expenditures during which budget phase? - ✔✔Correct Answer: execution
✔✔I 22.Which element of the budget structure is represented by license and permit
revenue? - ✔✔Correct Answer: category or source
✔✔I 23.Agencies generally submit their budget requests during the - ✔✔Correct
Answer: budget preparation phase.
✔✔I 24.In United States governments, what is the cornerstone of financial reporting? -
✔✔Correct Answer: accountability
✔✔I 25.Unlike governments, businesses establish priorities for the services and
products they provide, based on the concept that - ✔✔Correct Answer: shareholders
provide financing and expect the business goals and objectives to be profit-driven.
✔✔I 26.Which is the preferred costing methodology? - ✔✔Correct Answer: directly
tracing costs wherever feasible and economically practical
✔✔I 27.Two agencies using the same accounting principles is an example of -
✔✔Correct Answer: comparability.
✔✔I 28.The function element of the budget refers to - ✔✔Correct Answer: one of the
major government service classifications.
✔✔I 29.One purpose of the hierarchy of generally accepted accounting principles for
state, local, and federal accounting and financial reporting is to - ✔✔Correct Answer:
provide guidance to preparers and attesters regarding accounting issues.
✔✔I 30.All of the following factors should be considered when choosing the method
used to forecast revenues EXCEPT the - ✔✔Correct Answer: complexity of the
forecasting process.
✔✔31.Federal government-wide financial reporting allows the reader to - ✔✔Correct
Answer: assess the government's financial condition and long-term sustainability.
, ✔✔I 32.What action is allowable during the expired phase of federal budget execution?
- ✔✔Correct Answer: make upward adjustments to obligations
✔✔I 33.The concept that taxpayers of the current period should pay for the services
they receive rather than passing on the costs to the taxpayers of subsequent periods is
called - ✔✔Correct Answer: interperiod equity.
✔✔I 34.An agency is recommending a new program to the legislature. Included with the
information is a budgetary estimate, which forecasts expenditures for the upcoming
fiscal year, as well as the next five years. The budget was determined by comparing the
goals to other entities providing similar services. This method of forecasting
expenditures is called - ✔✔Correct Answer: performance based-budgeting.
✔✔I 35.Limitations on the amount, purpose or period of availability of budget authority
are established by the - ✔✔Correct Answer: legislative branch in appropriation acts and
legislation.
✔✔I 36.A continuing resolution is defined as - ✔✔Correct Answer: a law allowing
federal organizational units to continue operating for a limited period of time, while the
budget process continues.
✔✔I 37.Which type of budgeting links strategic goals with related long-term and annual
performance goals, and with the costs of specific activities that contribute to the
achievement of those goals? - ✔✔Correct Answer: performance budgeting
✔✔I 38.As a way to improve the effectiveness and efficiency of programs, some states
and local governments use what type of budgeting? - ✔✔Correct Answer: performance
✔✔I 39.A claim in the amount of $500,000 has been filed against a state agency for a
wrongful termination occurring in the previous fiscal year. The initial hearing is set for
January 15th. The attorney general's office has determined the probability of payment is
remote. In the state's comprehensive annual financial report due December 31st, the
claim should be - ✔✔Correct Answer: omitted from the current year CAFR.
✔✔I 40.General obligation bonds differ from revenue bonds in that general obligation
bonds - ✔✔Correct Answer: are backed by the full faith and credit of the government.
✔✔I 41.Which of the following documents, related to accounting standards, outlines the
results of research efforts of staff, defines accounting and reporting issues for a
particular project, and solicits opinions from constituents? - ✔✔Correct Answer:
discussion memorandum
