AGA CGFM Certified Government Financial Manager Exam Practice Test

Answer : C

What Is Efficient Inventory Management?

Efficient inventory management ensures that an organization has the right amount of inventory at the right time to meet operational needs without overstocking or understocking.

Proper inventory management minimizes disruptions to operations, including work stoppages due to lack of necessary materials or supplies.

Why Is Fewer Instances of Work Stoppage the Correct Answer?

Efficient inventory management ensures that required inventory is available when needed, reducing the risk of work delays or stoppages caused by inventory shortages.

Why Other Options Are Incorrect:

A . A low inventory turnover ratio: A low turnover ratio often indicates overstocking or slow-moving inventory, which is not a sign of efficiency.

B . High write-offs of obsolete inventory: Efficient management reduces obsolete inventory, leading to fewer write-offs, not more.

D . High total asset turnover: While efficient inventory management may contribute to overall asset efficiency, it does not directly result in a high total asset turnover ratio.

Reference and Documents:

GAO Guide on Inventory Management: Emphasizes the role of inventory management in avoiding operational disruptions.

Best Practices for Inventory Management (AGA): Highlights reduced work stoppages as a key benefit of effective inventory control.

Answer : C

Antideficiency Act Overview:

The Antideficiency Act (31 U.S.C. 1341, 1342, 1517) prohibits federal agencies from:

Obligating or expending funds in excess of their appropriations.

Entering into contracts without sufficient appropriated funds.

Violating the Act is a serious matter, and agencies are required to report such violations to Congress and the President.

Explanation of Answer Choices:

A . Federal Managers' Financial Integrity Act: Incorrect. This Act requires agencies to assess internal controls, not monitor appropriations.

B . Federal Financial Management Improvement Act: Incorrect. This Act focuses on improving financial systems, not budgetary compliance.

C . Antideficiency Act: Correct. This Act directly prohibits expenditures beyond appropriations.

D . Sarbanes-Oxley Act: Incorrect. This Act applies to corporate financial reporting, not federal appropriations.

Antideficiency Act (31 U.S.C. 1341, 1342, 1517).

GAO, Principles of Federal Appropriations Law.

Answer : C

Definition of Output Measures:

Output measures track the results of providing goods or services, such as the number of items produced or services delivered.

These measures focus on quantity rather than quality or outcomes.

Explanation of Answer Choices:

A . Activity measures: Incorrect. Activity measures refer to inputs or processes, not results.

B . Outcome measures: Incorrect. Outcome measures assess the impact or effectiveness of a program, not the quantity of goods/services provided.

C . Output measures: Correct. Output measures focus on results (e.g., number of services delivered).

D . Workload measures: Incorrect. Workload measures assess the volume of work performed but do not necessarily report on the results.

GASB, Performance Measurement Concepts.

GAO, Performance Auditing Standards and Guidance.

Answer : D

Minimum Components of a Government Financial System:

A general ledger is the foundation of any financial system, providing a complete record of all financial transactions.

The definition of general ledger accounts ensures proper classification, tracking, and reporting of financial activities.

Explanation of Answer Choices:

A . Automated transaction processing: Incorrect. While automation is beneficial, it is not a 'minimum' requirement. Manual systems can still exist.

B . Debt-reduction analysis: Incorrect. This is a financial management activity, not a core component of the financial system.

C . Performance management reporting: Incorrect. Performance reporting is separate from the foundational financial system.

D . General ledger account definition: Correct. This is a fundamental element of any government financial system.

GAO, Standards for Internal Control in the Federal Government (Green Book).

GASB, Codification of Governmental Accounting and Financial Reporting Standards.

Answer : B

Performance Audit Objectives:

Performance audits evaluate whether government entities are operating efficiently, effectively, and in compliance with applicable laws.

A critical aspect is assessing whether the entity has implemented corrective actions in response to prior audit findings and recommendations, as this demonstrates accountability and progress.

Explanation of Answer Choices:

A . Updated its vision and strategic mission statements: Incorrect. While strategic planning is important, it is not the primary focus of performance audit objectives.

B . Corrective actions to address prior findings and recommendations: Correct. Addressing prior findings is a key objective to ensure identified issues have been resolved.

C . Updated its financial reports' MD&A: Incorrect. MD&A (Management's Discussion and Analysis) is related to financial reporting, not performance audits.

D . Internal controls in place: Incorrect. While internal controls are reviewed, the focus here is on corrective actions to past findings.

GAO, Government Auditing Standards (Yellow Book).

GAO, Performance Auditing Guidance.

Answer : D

What Does OMB Circular A-50 Require?

OMB Circular A-50 establishes policies for resolving and following up on audit findings and recommendations. It assigns personal responsibility to an audit follow-up official within the agency for ensuring that disagreements with audit findings are resolved and that corrective actions are implemented.

Why Is the Audit Follow-Up Official Responsible?

The follow-up official ensures the agency responds appropriately to audit findings, tracks corrective actions, and resolves disagreements in a timely manner. This ensures accountability and compliance with audit recommendations.

Why Other Options Are Incorrect:

A . Comptroller General: The Comptroller General leads the GAO and oversees audits but is not responsible for resolving disagreements within agencies.

B . OMB Deputy Director for Management: Provides guidance on audit policies but does not hold personal responsibility for resolving disagreements.

C . Inspector General: Performs audits and investigations but does not resolve disagreements over audit findings.

Reference and Documents:

OMB Circular A-50: Specifies that the audit follow-up official holds responsibility for resolving disagreements.

GAO Yellow Book: Discusses the roles and responsibilities of various officials in audit processes.

Answer : A

What Is a Lockbox?

A lockbox is a service provided by banks to streamline the collection of payments. Customers send payments directly to a bank-managed P.O. box, where the bank processes and deposits them on behalf of the organization.

Why Does a Lockbox Eliminate Internal Office Processing Delays?

Payments are sent directly to the bank, bypassing the organization's internal mail and deposit processes. This eliminates delays caused by handling checks internally and ensures quicker access to funds.

Why Other Options Are Incorrect:

B . Mail and check-clearing time: Lockboxes reduce internal processing delays but do not affect the mail delivery time or bank check-clearing processes.

C . Delays in the availability of funds after transaction initiation: Fund availability depends on banking processes, not the lockbox.

D . Writing of checks against insufficient funds: Lockboxes do not prevent the issuance of bad checks.

Reference and Documents:

Treasury Financial Manual: Describes lockboxes as tools to reduce internal delays in payment processing.

GAO Financial Management Best Practices: Highlights the benefits of lockboxes in expediting deposits.