CGFM 2026 EXAM SCRIPT QUESTIONS AND SOLUTIONS
GRADED A+
✔✔Data Mining - ✔✔(Predictive) sorting through large data sets and using filters and
algorithms to pick out relationships
** See strengths and weaknesses
✔✔Predictive Analytics - ✔✔data collected through a variety of techniques to analyze
current and historical facts to make predictions about future events
✔✔Data Mining Strengths and Weaknesses - ✔✔* Strengths
Analyst is able to review complete data sets
Ability to link together multiple data sources
* Weaknesses
Must have quality data
Must have ability to understand program requirements and how this is represented in
the data
✔✔Starting a Data Analytic Program - ✔✔Collaborate with other agencies for data
collection and sharing
Determine ROI in Analytics Programs
Give leaders clear concise analysis they can use to support data driven programs
Enable employees at all levels to see and utilize data for their needs (not just the needs
of senior leaders
Managers to demand the use of data and provide employees with targeted on the job
training
✔✔Forensic Auditing - ✔✔examination of financial information that is likely to be used
for the investigation and prosecution of financial crimes
Need to have knowledge of basic legal principles, standards for discovery
✔✔Steps for Forensic Auditing - ✔✔a) data collection,
b) data preparation,
c) data analysis,
and d) reporting
✔✔Benford Digital Analysis - ✔✔based on observation that more transactions begin
with the number one than larger numbers. More transactions will start with number one
than number two ... and more with number two, than number three, etc...
Because there is an expected distribution of numbers, the testing an point out
potentially fraudulent transactions
,✔✔Competitive Source Analysis - ✔✔Used to determine if there is a benefit to
contracting government services to the private sector:
1) Conduct a management study
2) Prepare a performance work statement - defines the expected outputs/results
3) Project the in-house and contract costs
4) Select the best alternative - combination of performance and price
✔✔Ratio Analysis - ✔✔Active use of numbers to point out problems and indicate
performance, questions to ask, etc. They serve as starting points for further inquiry.
Ex. numbers revealing that receivables are increasing could trigger an increase in debt
collection efforts. Other rations could indicate fiscal stress, adequacy of reserves,
liquidity, workloads, response times, and accuracy rates.
✔✔Pure Ratios - ✔✔relating one number to another to create a meaningful indicator of
performance (ex., total expenditures to budget).
✔✔Comparative Analysis - ✔✔Comparing entities numbers and ratios to another
agency or benchmarks. Credit rating agencies also publish median ratios by industry
and what they consider to be reasonable ranges and ratios
✔✔Time Series Analysis - ✔✔comparing the agency against itself over time, ex.
Calculating the percentage change from year to year
✔✔Common Size Statements - ✔✔converts all data elements in a statement to
percentages of 100, Examines expenditures of a function as compared to total
expenditures (ex., percentage of total budget spent on public safety year over year, and
if it is growing disproportionately to other programs)
✔✔Per Capita Information - ✔✔Debt per capita
✔✔Cautionary Note on Ratio Analysis - ✔✔Not an ends unto themselves but serve as a
starting point for further investigation.
✔✔Liquidity Ratios - ✔✔Determines entities ability to meet creditors demands:
1) Current Ratio
2) Quick Ration
✔✔Current Ratio = current assets/current liabilities - ✔✔current assets = cash and
those assets that will become cash within one year (including inventories)
Current liabilities = those that are due and payable within one year
,Should be a ratio of 2:1
✔✔Quick Ratio = Cash and equivalents, and receivables/current liabilities -
✔✔Removes the uncertainty over inventories
Ideal ration should be 1:1
✔✔Asset efficiency and Turn-Over ratios - ✔✔Efficiency in using assets and converting
them to cash.
1) Receivables Ratios
2) Inventory Ratios
✔✔Receivables Ratios - ✔✔ex., percentage of tax collections/taxes levied. Rating
agencies expect 98-99% range.
Days outstanding = Avg receivables/Annual revenues x 365
Avg receivables = (Beg of year receivables + end of year receivables)/2
✔✔Inventory Ratios - ✔✔helps determine risk of loss from spoilage, pilfering,
obsolescence, etc.
Inventory turnover = Revenues from sales of inventory/Avg inventory during the period
Avg inventory = 365/Inventory Turnover
✔✔Operating Costs and Budgetary Cushions - ✔✔Extent to which entities revenues are
sufficient to cover costs, or build balances for working capital, rainy day funds,
emergency needs, or debt service coverage.
Budgetary cushion is considered to be one of the most important financial ratios for
state and local governments
Need to watch out for balancing the budget with one time inflows
✔✔Debt Burden - ✔✔Burden of 15-20% and above considered "high" by rating
agencies. Measured by:
* outstanding LTD/population
* outstanding LTD/assessed property values
✔✔Ability to repay Debt - ✔✔Excess revenues over operating expenditures/
Principal payment + interest expense
, ✔✔Government Mgmt Reform Act of 1994 (GMRA) - ✔✔Expanded CFO Act to require
24 agencies to prepare an audited annual consolidated financial statement for the
executive branch of the federal government
✔✔Federal Financial Mgmt Improvement Act of 1996 (FFMIA) - ✔✔requirement to
follow federal accounting standards, a standardized financial mgmt system, and
standard general ledger (sgl) at the transaction level
✔✔Accountability of Tax Dollars Act of 2002 - ✔✔Annual audit requirement expanded
to include ALL federal agencies
✔✔* OMB Circular A-123 - Mgmts Responsibility for Internal Control - ✔✔Mgmt
responsible for:
1) develop/implement cost effective I/C's
2) assess the adequacy of I/C's in programs/ operations
3) assess/correct ICOFR
4) identify needed improvements
5) take corresponding corrective action
6) report annually on I/C through mgm Statement of Assurance (SOA)
Appendix A - strengthened process for ICOFR
Appendix B - mgmt of gov't charge card programs
Appendix C - measurement and remediation of improper payments
Appendix D (2013) - FFMIA guidance for agencies subject to CFO Act
✔✔OMB Circular A-130 Mgmt of Federal Information Resources - ✔✔establishes
minimum set of controls in federal automated information security programs
✔✔GAO Standards for I/C in Fed Gov't - ✔✔See Appendix 2
✔✔Government Accountability w/Reasonable Assurance of ... - ✔✔1) achieving
program objectives/mission
2) using resources efficiently
3) complying with legal requirements
4) accurate and reliable financial reporting
5) safeguarding resources/assets
✔✔Five Internal Control Components/Standards - Development - ✔✔Developed by the
Committee of Sponsoring Organizations (COSO) in 1992, updated in 2013
Per COSO, Internal controls are intended to meet three major objectives:
1) Operations, 2) Reporting, 3) Compliance
✔✔Five Internal Control Components/Standards - TRIANGLE - ✔✔1) Control
Environment - Base -> most important
GRADED A+
✔✔Data Mining - ✔✔(Predictive) sorting through large data sets and using filters and
algorithms to pick out relationships
** See strengths and weaknesses
✔✔Predictive Analytics - ✔✔data collected through a variety of techniques to analyze
current and historical facts to make predictions about future events
✔✔Data Mining Strengths and Weaknesses - ✔✔* Strengths
Analyst is able to review complete data sets
Ability to link together multiple data sources
* Weaknesses
Must have quality data
Must have ability to understand program requirements and how this is represented in
the data
✔✔Starting a Data Analytic Program - ✔✔Collaborate with other agencies for data
collection and sharing
Determine ROI in Analytics Programs
Give leaders clear concise analysis they can use to support data driven programs
Enable employees at all levels to see and utilize data for their needs (not just the needs
of senior leaders
Managers to demand the use of data and provide employees with targeted on the job
training
✔✔Forensic Auditing - ✔✔examination of financial information that is likely to be used
for the investigation and prosecution of financial crimes
Need to have knowledge of basic legal principles, standards for discovery
✔✔Steps for Forensic Auditing - ✔✔a) data collection,
b) data preparation,
c) data analysis,
and d) reporting
✔✔Benford Digital Analysis - ✔✔based on observation that more transactions begin
with the number one than larger numbers. More transactions will start with number one
than number two ... and more with number two, than number three, etc...
Because there is an expected distribution of numbers, the testing an point out
potentially fraudulent transactions
,✔✔Competitive Source Analysis - ✔✔Used to determine if there is a benefit to
contracting government services to the private sector:
1) Conduct a management study
2) Prepare a performance work statement - defines the expected outputs/results
3) Project the in-house and contract costs
4) Select the best alternative - combination of performance and price
✔✔Ratio Analysis - ✔✔Active use of numbers to point out problems and indicate
performance, questions to ask, etc. They serve as starting points for further inquiry.
Ex. numbers revealing that receivables are increasing could trigger an increase in debt
collection efforts. Other rations could indicate fiscal stress, adequacy of reserves,
liquidity, workloads, response times, and accuracy rates.
✔✔Pure Ratios - ✔✔relating one number to another to create a meaningful indicator of
performance (ex., total expenditures to budget).
✔✔Comparative Analysis - ✔✔Comparing entities numbers and ratios to another
agency or benchmarks. Credit rating agencies also publish median ratios by industry
and what they consider to be reasonable ranges and ratios
✔✔Time Series Analysis - ✔✔comparing the agency against itself over time, ex.
Calculating the percentage change from year to year
✔✔Common Size Statements - ✔✔converts all data elements in a statement to
percentages of 100, Examines expenditures of a function as compared to total
expenditures (ex., percentage of total budget spent on public safety year over year, and
if it is growing disproportionately to other programs)
✔✔Per Capita Information - ✔✔Debt per capita
✔✔Cautionary Note on Ratio Analysis - ✔✔Not an ends unto themselves but serve as a
starting point for further investigation.
✔✔Liquidity Ratios - ✔✔Determines entities ability to meet creditors demands:
1) Current Ratio
2) Quick Ration
✔✔Current Ratio = current assets/current liabilities - ✔✔current assets = cash and
those assets that will become cash within one year (including inventories)
Current liabilities = those that are due and payable within one year
,Should be a ratio of 2:1
✔✔Quick Ratio = Cash and equivalents, and receivables/current liabilities -
✔✔Removes the uncertainty over inventories
Ideal ration should be 1:1
✔✔Asset efficiency and Turn-Over ratios - ✔✔Efficiency in using assets and converting
them to cash.
1) Receivables Ratios
2) Inventory Ratios
✔✔Receivables Ratios - ✔✔ex., percentage of tax collections/taxes levied. Rating
agencies expect 98-99% range.
Days outstanding = Avg receivables/Annual revenues x 365
Avg receivables = (Beg of year receivables + end of year receivables)/2
✔✔Inventory Ratios - ✔✔helps determine risk of loss from spoilage, pilfering,
obsolescence, etc.
Inventory turnover = Revenues from sales of inventory/Avg inventory during the period
Avg inventory = 365/Inventory Turnover
✔✔Operating Costs and Budgetary Cushions - ✔✔Extent to which entities revenues are
sufficient to cover costs, or build balances for working capital, rainy day funds,
emergency needs, or debt service coverage.
Budgetary cushion is considered to be one of the most important financial ratios for
state and local governments
Need to watch out for balancing the budget with one time inflows
✔✔Debt Burden - ✔✔Burden of 15-20% and above considered "high" by rating
agencies. Measured by:
* outstanding LTD/population
* outstanding LTD/assessed property values
✔✔Ability to repay Debt - ✔✔Excess revenues over operating expenditures/
Principal payment + interest expense
, ✔✔Government Mgmt Reform Act of 1994 (GMRA) - ✔✔Expanded CFO Act to require
24 agencies to prepare an audited annual consolidated financial statement for the
executive branch of the federal government
✔✔Federal Financial Mgmt Improvement Act of 1996 (FFMIA) - ✔✔requirement to
follow federal accounting standards, a standardized financial mgmt system, and
standard general ledger (sgl) at the transaction level
✔✔Accountability of Tax Dollars Act of 2002 - ✔✔Annual audit requirement expanded
to include ALL federal agencies
✔✔* OMB Circular A-123 - Mgmts Responsibility for Internal Control - ✔✔Mgmt
responsible for:
1) develop/implement cost effective I/C's
2) assess the adequacy of I/C's in programs/ operations
3) assess/correct ICOFR
4) identify needed improvements
5) take corresponding corrective action
6) report annually on I/C through mgm Statement of Assurance (SOA)
Appendix A - strengthened process for ICOFR
Appendix B - mgmt of gov't charge card programs
Appendix C - measurement and remediation of improper payments
Appendix D (2013) - FFMIA guidance for agencies subject to CFO Act
✔✔OMB Circular A-130 Mgmt of Federal Information Resources - ✔✔establishes
minimum set of controls in federal automated information security programs
✔✔GAO Standards for I/C in Fed Gov't - ✔✔See Appendix 2
✔✔Government Accountability w/Reasonable Assurance of ... - ✔✔1) achieving
program objectives/mission
2) using resources efficiently
3) complying with legal requirements
4) accurate and reliable financial reporting
5) safeguarding resources/assets
✔✔Five Internal Control Components/Standards - Development - ✔✔Developed by the
Committee of Sponsoring Organizations (COSO) in 1992, updated in 2013
Per COSO, Internal controls are intended to meet three major objectives:
1) Operations, 2) Reporting, 3) Compliance
✔✔Five Internal Control Components/Standards - TRIANGLE - ✔✔1) Control
Environment - Base -> most important
