AGA CGFM Certified Government Financial Manager Exam Practice Test

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Total 115 questions
Question 1

A city parks department is selecting a contractor to renovate a community playground. Which of the following contractors should be selected?



Answer : B

Understanding the Procurement Process for Contractors:

When selecting contractors for government projects, the goal is to ensure the selection of a responsible and responsive bidder who meets all requirements outlined in the Request for Proposal (RFP) or bidding documents.

Key considerations include the contractor's ability to meet deadlines, quality of work, and compliance with laws and regulations.

Analyzing the Answer Options:

A . The contractor with the lowest bid who has a history of delayed projects:

While cost savings are important, a contractor with a history of delays poses a significant risk to project timelines and community satisfaction. This bidder is not considered 'responsible' based on their track record.

B . The contractor with the second-lowest bid, who has no prior violations and meets all bid specifications:

Although this is not the lowest bid, it is the best choice because the contractor meets all requirements and has a clean history. Selecting a reliable bidder ensures the project is completed on time and within acceptable quality standards. This is the most responsible and justified decision.

C . The contractor with the highest bid, who includes luxury, non-requested upgrades to the design:

Selecting a contractor who proposes unnecessary and expensive upgrades is not cost-effective. Government procurement prioritizes fulfilling project specifications within the approved budget, making this choice impractical.

D . The contractor whose bid was submitted past the deadline but offers a discount for early payment:

Late bids violate procurement rules, which emphasize fairness and transparency. Accepting this bid could lead to legal challenges or allegations of favoritism. Discounts do not justify breaching procurement guidelines.

Why Option B is Correct:

The second-lowest bid is the most responsible choice because the contractor:

Meets all bid requirements.

Has a strong history of compliance with regulations.

Avoids risks associated with unreliable or excessively expensive options.

This selection aligns with government procurement standards that prioritize balancing cost, quality, and reliability.

Reference and Documentation from the Government Financial Manager (GFM) by AGA:

Procurement Best Practices: The AGA emphasizes the importance of selecting bidders who demonstrate responsibility, reliability, and compliance with the bidding process.

Ethical Procurement Standards: The Yellow Book (Government Auditing Standards) highlights the importance of fairness, transparency, and accountability in contractor selection.

Source: AGA Certified Government Financial Manager (CGFM) study guides, Section IV: Internal Controls, Procurement, and Ethics.


Question 2

In state and local financial audits, material weaknesses must be reported to the



Answer : B

What Are Material Weaknesses?

A material weakness in internal control is a deficiency or combination of deficiencies that creates a reasonable possibility of a material misstatement in the financial statements that would not be prevented or detected in a timely manner.

In the context of state and local financial audits, material weaknesses must be reported to those charged with governance, as they are responsible for oversight and corrective actions.

Why Is the Governing Body the Correct Answer?

The governing body (e.g., city council, county board, or state commission) is directly responsible for overseeing the entity's financial operations and ensuring accountability. Reporting material weaknesses to them ensures that corrective actions can be implemented to strengthen internal controls.

Auditors communicate such findings through an audit report or a management letter addressed to the governing body.

Why Other Options Are Incorrect:

A . Legislature: The legislature may have oversight of state budgets and appropriations but is not the direct governing body for financial audits.

C . Taxpayers: While transparency is important, material weaknesses are not directly reported to taxpayers. They may be disclosed in public audit reports, but taxpayers are not the primary audience.

D . Local media: Material weaknesses are not formally reported to the media; their disclosure depends on the entity's public reporting processes.

Reference and Documents:

GAO Yellow Book (GAGAS): Requires auditors to report material weaknesses to those charged with governance.

GASB (Governmental Accounting Standards Board): Emphasizes the importance of communicating significant audit findings to governing bodies.

AICPA Audit Standards (AU-C 265): Requires auditors to communicate material weaknesses to management and those charged with governance.


Question 3

The four general government auditing standards are



Answer : D

What Are the Four General Government Auditing Standards?

These standards, as defined in the GAO Yellow Book (Government Auditing Standards):

Qualifications: Auditors must have the necessary professional skills and competence to perform their work.

Independence: Auditors must remain free from personal, external, and organizational impairments to maintain objectivity.

Due Professional Care: Auditors must exercise care and diligence, adhering to professional standards and ethical requirements.

Quality Control: Auditors must establish and maintain a system of quality control to ensure audit work meets professional standards.

Why Is Option D Correct?

These four elements are explicitly outlined in the GAO Yellow Book as the core principles of government auditing standards.

Why Other Options Are Incorrect:

A . Compliance, timeliness, qualifications, and due professional care: Timeliness and compliance are not part of the four general standards; they are components of audit objectives.

B . Supervision, planning, management controls, and evidence: These are aspects of audit performance, not general standards.

C . Planning, internal controls, independence, and irregularities: Planning and internal controls are part of the audit process, not general standards.

Reference and Documents:

GAO Yellow Book (Generally Accepted Government Auditing Standards - GAGAS): Lists qualifications, independence, due professional care, and quality control as the four general standards.

AICPA Audit Standards: Aligns with GAGAS in emphasizing these four principles.


Question 4

Management's need for real-time access to data is facilitated when



Answer : D

Why Does Management Need Real-Time Data Access?

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

Complex data sets presented 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.

Reference 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.


Question 5

Which of the following disbursement techniques can be used to ensure timely payments?



Answer : C

What Are Disbursement Techniques?

Disbursement techniques refer to the methods used by organizations to pay vendors or settle financial obligations. The timeliness of payments depends on the technique used.

Why Are Drafts the Best Option for Timely Payments?

A draft is a payment instrument issued by an organization's bank, drawn against its account, and typically includes specific payment timing instructions.

Drafts allow the payer to specify the timing of payments, ensuring they are made on time.

Why Other Options Are Incorrect:

A . Warrants: Warrants authorize payments but do not ensure timeliness as they require additional processing before funds are disbursed.

B . Checks: Checks rely on postal delivery and clearing times, which may delay payments.

D . Bank cards: While convenient, bank cards are typically used for immediate payments, not for ensuring future timely disbursements.

Reference and Documents:

Treasury Financial Manual: Highlights drafts as a disbursement tool for controlling the timing of payments.

GAO Cash Management Guide: Discusses the benefits of drafts in ensuring timely payments.


Question 6

The National Performance Management Advisory Commission established a comprehensive framework that

incorporates performance measurement into the



Answer : D

National Performance Management Advisory Commission Framework:

The National Performance Management Advisory Commission developed a comprehensive framework to integrate performance measurement into government operations.

One of its primary goals was to incorporate performance metrics into the budget process to align resource allocation with program outcomes.

This ensures that budgeting decisions are informed by program performance, improving efficiency and accountability.

Why the Budget Process?

By linking performance to budgeting, governments can prioritize funding for programs that demonstrate effectiveness and reduce funding for underperforming initiatives.

Why Other Options Are Incorrect:

A . Internal control plan: Internal controls focus on risk management, not incorporating performance measurement.

B . Financial statements: Performance metrics are not reported in financial statements, which focus on financial position and results.

C . Audit procedures: Audits verify financial accuracy and compliance but do not incorporate performance measurement.

Reference and Documents:

National Performance Management Advisory Commission Report (2010): Recommends integrating performance measurement into the budget process.

GAO Guide on Performance Budgeting: Explains how performance metrics inform budget decisions.


Question 7

Pay.gov is an example of



Answer : C

What Is Pay.gov?

Pay.gov is an electronic lockbox system managed by the U.S. Department of the Treasury. It allows federal agencies to collect payments electronically, improving efficiency and reducing the time and cost associated with manual payment processing.

It supports online payments for taxes, fees, and other government-related obligations.

Why Is It an Electronic Lockbox?

Pay.gov consolidates and processes payments on behalf of federal agencies, similar to how a lockbox service processes payments for private businesses.

Why Other Options Are Incorrect:

A . Zero-balance account: This refers to a type of bank account that maintains a balance of zero by automatically transferring funds as needed, unrelated to Pay.gov's purpose.

B . Concentration system: Refers to pooling funds from multiple accounts into one central account, not payment processing.

D . Data warehouse system: A data warehouse stores and organizes large amounts of data for analysis, unrelated to payment collection.

Reference and Documents:


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Total 115 questions