Updated Dec-2025 Test Engine to Practice GAFRB Dumps & Practice Exam
Dumps Collection GAFRB Test Engine Dumps Training With 117 Questions
NEW QUESTION # 51
What organization establishes GAAP for federal agencies?
- A. FASB
- B. FASAB
- C. OMB
- D. GAO
Answer: B
Explanation:
The Federal Accounting Standards Advisory Board (FASAB) establishes Generally Accepted Accounting Principles (GAAP) for federal government entities. FASAB is recognized by the American Institute of Certified Public Accountants (AICPA) as the authoritative source of GAAP for federal agencies.
Other agencies:
OMB: Issues financial reporting guidance and formats (e.g., A-136), but does not set GAAP.
GAO: Audits financial statements and issues internal control guidance.
FASB: Sets GAAP for private sector and some not-for-profit organizations-not federal.
Relevant References:
FASAB Memorandum of Understanding (GAO, Treasury, OMB)
AICPA Rule 203 Designation of FASAB as the GAAP Authority
SFFAS No. 34 - The Hierarchy of GAAP
A). FASAB
NEW QUESTION # 52
State Medicaid caseloads have been exceeding projections for the past two months. Review of the data indicates the increase is likely to continue, leading to the need for significant supplemental appropriations before the end of the fiscal year. Based upon this information, what is the first action the state director of Medicaid should take?
- A. Confer with the chairmen or staff directors of the House and Senate appropriations committees concerning the need to call a legislative special session.
- B. Impose a hiring freeze and hold all spending approvals for contracts and purchases on the affected departments.
- C. Inform the legislative counsel bureau about the potential over-expenditure.
- D. Inform the governor of the situation and options for addressing the shortfall.
Answer: D
Explanation:
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 A). Inform the governor of the situation and options for addressing the shortfall
NEW QUESTION # 53
An example of a non-exchange revenue is
- A. licensing fees.
- B. bond proceeds.
- C. sales taxes.
- D. investment earnings.
Answer: C
Explanation:
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
NEW QUESTION # 54
The Office of Personnel Management provides employee pension benefits for an agency's employees and bills the agency for a portion of the costs. The portion of costs not billed to the agency is an
- A. inferred cost to be recognized by the Office of Personnel Management.
- B. imputed cost to be recognized by the agency.
- C. imputed cost to be recognized by the Office of Personnel Management.
- D. inferred cost to be recognized by the agency.
Answer: B
Explanation:
When a federal agency participates in a pension plan administered by another government entity (such as the Office of Personnel Management, OPM), and OPM bills the agency for a portion of the cost while covering the remainder itself, the portion not billed is considered an "imputed cost" to the agency. This imputed cost represents the agency's share of employee pension benefits that are financed on its behalf by another entity.
Accounting guidance requires that the employing agency recognize both the amount billed and the amount covered by OPM as a pension expense, recordingthe imputed cost as an expense and as an imputed financing source in its own financial statements.This treatment ensures full recognition of the economic cost of employing personnel, even if part of that cost is not directly paid by the agency.
Key references and standards:
* Federal Accounting Standards Advisory Board (FASAB) SFFAS No. 5, "Accounting for Liabilities of the Federal Government":
"Employing entities should recognize the cost of pensions and other postemployment benefits during their employees' active years of service. The cost recognized includes the amount contributed by the employing entity and the portion contributed by other entities on the entity's behalf, which is called an imputed cost."
* FASAB SFFAS No. 4, "Managerial Cost Accounting Standards and Concepts":
"Costs that are incurred by one entity but paid by another entity, and that benefit the reporting entity, should be recognized by the reporting entity as imputed costs and imputed financing."
* OMB Circular A-136, Section II.2.7.3:
"Imputed costs are to be recognized for the costs of goods and services received from other federal entities at no or reduced cost, such as pension and postretirement health benefits..." Therefore, answer choice C is correct: the agency recognizes the imputed cost.
Disclaimer: This custom GPT is continuously improving, but it may not always provide accurate information and can make mistakes. Validate important information for relevancy, completeness and accuracy with your subject matter experts (SMEs).
NEW QUESTION # 55
A special-purpose government is considered a primary government when it has any of the following characteristics EXCEPT that it
- A. has a board determined via general election.
- B. has the ability to levy taxes.
- C. relies on revenue projections from another government entity.
- D. provides an ongoing financial benefit to another government entity.
Answer: C
Explanation:
A special-purpose government (e.g., a school district, utility authority) is considered a primary government when it meets at least one of the following conditions:
Has a separately elected governing body
Is legally separate
Is fiscally independent of other governments
The reliance on revenue projections from another entity does not preclude a government from being a primary government. What matters is legal and fiscal independence.
Relevant References:
GASB Statement No. 14 - The Financial Reporting Entity
GASB Statement No. 39 and No. 61 (Amendments to Statement 14)
GASB Codification Section 2100 - Defining the Financial Reporting Entity A). relies on revenue projections from another government entity
NEW QUESTION # 56
A federal AFR includes all of the following EXCEPT
- A. the RSI.
- B. a standard general ledger trial balance.
- C. the MD&A.
- D. an audit opinion.
Answer: B
Explanation:
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
C). a standard general ledger trial balance
NEW QUESTION # 57
The summary of significant accounting policies in the notes to the financial statements includes all of the following information EXCEPT
- A. summary of changes to the GAAP impacting the financial statements.
- B. disclosure of receipt of budget authority from the entity.
- C. a description of the reporting entity and major components.
- D. summary of accounting principles followed by the entity, and methods followed applying those principles.
Answer: B
Explanation:
The Summary of Significant Accounting Policies (SSAP), included in the notes to the financial statements, typically includes:
Description of the reporting entity
Basis of presentation and accounting principles
Methods used to apply those principles
Policy changes from prior years
However, disclosures regarding receipt or use of budget authority are not included in the SSAP. Budget authority and execution are typically addressed in the Required Supplementary Information (RSI) or other budgetary sections of federal financial reports.
Relevant References:
FASAB SFFAS No. 34 - Notes to the Financial Statements
OMB Circular A-136 - Section II.4.4: Summary of Significant Accounting Policies GAO Federal Accounting Handbook C). disclosure of receipt of budget authority from the entity
NEW QUESTION # 58
The four general government auditing standards are
- A. supervision, planning, management controls and evidence.
- B. planning, internal controls, independence and irregularities.
- C. compliance, timeliness, qualifications and due professional care.
- D. qualifications, independence, due professional care and quality control.
Answer: D
Explanation:
What Are the Four General Government Auditing Standards?
* These standards, as defined in theGAO 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.
References 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.
NEW QUESTION # 59
An agency operates out of a building that is on the Register of Historic Places; the building is classified as a multi-use federal asset. If the agency recently paid to renovate the office space in the building, the cost for the renovation should be treated as a
- A. mission property.
- B. heritage asset.
- C. stewardship investment.
- D. general property, plant and equipment expense.
Answer: D
Explanation:
Although the building is listed on the National Register of Historic Places (a heritage asset), renovations that support current operations and serve general purposes (e.g., office upgrades) are considered capitalizable or expensed under general property, plant, and equipment (G-PP&E), not stewardship or heritage classifications.
Stewardship or heritage classifications apply to assets whose primary purpose is historical preservation, not ongoing operations.
Relevant References:
FASAB SFFAS No. 29 - Heritage Assets and Stewardship Land
FASAB SFFAS No. 6 - General PP&E Accounting
OMB Circular A-136 - Capital Asset Guidance
D). general property, plant and equipment expense
NEW QUESTION # 60
According to GASB, when should landfill closure and post-closure costs be recognized?
- A. every five years until the landfill is closed
- B. when payments for costs are made
- C. when the landfill is closed
- D. each year the landfill is operating
Answer: D
Explanation:
Comprehensive Detailed Explanation:
According to GASB Statement No. 18 (Accounting for Municipal Solid Waste Landfill Closure and Postclosure Care Costs), governments must recognize a portion of closure and post-closure costs each year as the landfill's capacity is used.
This is done using the "units-of-consumption" method, meaning costs are accrued in proportion to how much of the landfill's total capacity has been filled. The total estimated cost is spread over the useful life of the landfill.
Relevant References:
GASB Statement No. 18 - Landfill Closure and Postclosure Costs
GASB Codification Section L10.103
GFOA Environmental Liabilities Guidance
D). each year the landfill is operating
NEW QUESTION # 61
GASB considers interperiod (intergenerational) equity when
- A. issuing financial reporting guidelines.
- B. evaluating grant recipient awards.
- C. performing historical trend analysis.
- D. selecting alternatives in budgeting procedures.
Answer: A
Explanation:
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 C). issuing financial reporting guidelines
NEW QUESTION # 62
Which of the following events is an example of an expenditure but not an expense?
- A. At the end of the fiscal year, the government pays for ten vehicles which will be depreciated over five years.
- B. At the end of the fiscal year, the government signs a contract to buy office furniture.
- C. At the end of the fiscal year, the government receives and pays its electric bill for the previous month.
- D. At the end of the fiscal year, the government pays its employees for work performed.
Answer: A
Explanation:
Comprehensive Detailed Explanation:
In governmental funds (using the modified accrual basis), expenditures are recorded when financial resources are used - typically when cash is disbursed. However, in government-wide statements (accrual basis), only the portion of the asset's cost consumed in the period is recorded as an expense (i.e., depreciation).
Paying for capital assets such as vehicles is an expenditure in the governmental funds, but not an expense in the accrual-based government-wide financials. Instead, the cost is capitalized and depreciated over time.
Relevant References:
GASB Statement No. 34 - Government-wide vs. Fund Financial Reporting
GASB Codification Section 1300 - Modified Accrual Accounting
GFOA Best Practices - Capital Asset Reporting
C). At the end of the fiscal year, the government pays for ten vehicles which will be depreciated over five years.
NEW QUESTION # 63
The objectives of federal financial reporting include all of the following EXCEPT
- A. mission readiness.
- B. budgetary integrity.
- C. stewardship.
- D. systems and control.
Answer: A
Explanation:
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.
C). mission readiness
Relevant References:
FASAB SFFAC No. 1 - Objectives of Federal Financial Reporting
FASAB Handbook of Accounting Standards and Other Pronouncements
NEW QUESTION # 64
What is the annual projected sales tax revenue if in nine months the revenue earned is $26.5 million, and no other factors are known?
- A. $40.0 million
- B. $35.3 million
- C. $53.0 million
- D. $26.5 million
Answer: B
Explanation:
To annualize the projected sales tax revenue from 9 months of actual data:
Step 1: Determine the monthly average:
$26.5 million ÷ 9 months = $2.944 million/month
Step 2: Project for 12 months:
$2.944 million × 12 = $35.33 million # $35.3 million
However, the closest and most likely answer choice based on rounding is:
B). $35.3 million
Correction to earlier assumption: The original intended answer was marked as C. $40.0 million, but that would only apply if growth or seasonal adjustments were involved, which the question states are unknown.
Therefore, the correct projected revenue based on straight-line extrapolation is:
B). $35.3 million
NEW QUESTION # 65
A local government is evaluating different financing options for an upcoming capital project. Which of the following debt instruments will typically offer the lowest interest rate?
- A. general obligation bonds
- B. certificate of deposit
- C. revenue bonds
- D. commercial paper
Answer: A
Explanation:
General obligation (GO) bonds are backed by the full faith and credit of the issuing government, meaning they are secured by the government's taxing power. Because of this strong security, GO bonds typically carry lower interest rates compared to other financing options like revenue bonds or commercial paper.
Revenue bonds, by contrast, are supported only by the revenues from a specific project or source (e.g., tolls or utility fees), which generally results in higher perceived risk and thus higher interest rates. Certificates of deposit are not debt instruments used for financing projects but rather for investment.
Relevant Standards and References:
GFOA Best Practices - Debt Management
Government Finance Officers Association (GFOA) Debt 101
MSRB (Municipal Securities Rulemaking Board): GO vs. Revenue Bonds
GASB Concepts Statement No. 1, Objective of Financial Reporting
Therefore, Option B is correct.
NEW QUESTION # 66
To capitalize a research and development asset, it must
- A. be approved by the agency head.
- B. have alternative future use.
- C. be used for a federal research project.
- D. have acquisition value of at least $100.000.
Answer: B
Explanation:
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
D). have alternative future use
NEW QUESTION # 67
Which of the following revenue sources is an exchange-like transaction?
- A. income taxes
- B. grants
- C. fines
- D. operating permits
Answer: D
Explanation:
Exchange and exchange-like transactions occur when each party receives and gives up essentially equal value.
In the case of operating permits (e.g., business licenses or environmental permits), the payer receives a direct and proportional benefit in exchange for the fee paid, making this an exchange-like transaction.
In contrast:
Income taxes and fines are non-exchange revenues.
Grants may or may not be exchange-like, depending on stipulations, but generally are non-exchange.
Relevant Standards and References:
GASB Statement No. 33, Accounting and Financial Reporting for Nonexchange Transactions GASB Codification Section N50, Nonexchange Transactions GFOA Best Practices - Revenue Recognition Therefore, Option B is correct.
NEW QUESTION # 68
GAAP requires that the ACFR be accompanied by separate financial statements documenting
- A. fiduciary and proprietary funds.
- B. program goals and objectives.
- C. annual appropriations.
- D. statistical data on the population.
Answer: A
Explanation:
The Annual Comprehensive Financial Report (ACFR) includes three categories of fund financial statements:
Governmental funds
Proprietary funds (e.g., enterprise and internal service funds)
Fiduciary funds (e.g., pension trust, custodial funds)
GAAP (specifically GASB Statement No. 34) requires separate financial statements for proprietary and fiduciary funds because they use different accounting bases (full accrual) than governmental funds (modified accrual). These are included in the basic financial statements section of the ACFR.
Relevant References:
GASB Statement No. 34 - Basic Financial Statements
GASB Codification Section 2200 - Financial Reporting
GFOA Governmental Reporting Guidelines
B). fiduciary and proprietary funds
NEW QUESTION # 69
A federal agency submits its budget request to which of the following?
- A. the U.S. Department of the Treasury
- B. Congress
- C. GAO
- D. OMB
Answer: D
Explanation:
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
B). OMB
NEW QUESTION # 70
What is the term used to describe categories that present obligations by the items or services purchased by the federal government?
- A. object classes
- B. treasury fund accounts
- C. general ledger accounts
- D. programs
Answer: A
Explanation:
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
B). object classes
NEW QUESTION # 71
The quarterly inventory record below has been provided for use in preparing the organization's financial statements. Based upon the information provided, what method of inventory valuation is used by the organization?
- A. LIFO
- B. average cost
- C. net weight scale
- D. FIFO
Answer: B
Explanation:
The organization's inventory records show that the beginning and ending amounts and values change each month, and the relationship between units and dollar values suggests that the cost per unit is averaged, not fixed (as with FIFO or LIFO). Let's evaluate January:
Beginning: 1,200 units / $2,400 # $2.00 per unit
Purchased: 800 units / $2,000 # $2.50 per unit
Ending: 600 units / $1,500 # $2.50 per unit
The ending value of $1,500 for 600 units gives a per-unit cost of $2.50, matching the purchase cost in January. This suggests the system uses a weighted average cost method rather than tracking the specific cost layers (as FIFO or LIFO would).
Relevant References:
FASAB SFFAS No. 3 - Accounting for Inventory and Related Property
GAAP and GASB guidelines on inventory valuation
GFOA Best Practices - Inventory and Supply Chain Management
B). average cost
NEW QUESTION # 72
When a rural community creates a fire district to serve an area previously served by the county government, and the fire district receives no money or equipment from the county, this is an example of
- A. a government merger.
- B. a transfer of operations.
- C. a government acquisition.
- D. intergovernmental operations.
Answer: B
Explanation:
According to GASB Statement No. 69 (Government Combinations and Disposals of Government Operations), a transfer of operations occurs when one government relinquishes or ceases operations and another government assumes those operations, but no significant consideration (money, assets, or liabilities) is exchanged.
In this case, the fire district is assuming responsibility for fire protection without receiving funds or assets from the county. That aligns with the definition of a transfer of operations - not a merger or acquisition.
Relevant References:
GASB Statement No. 69 - Government Combinations and Disposals of Government Operations GASB Codification Section G60 - Combinations and Transfers GFOA Guidance on Intergovernmental Restructuring C). a transfer of operations
NEW QUESTION # 73
A city utilizing a 60-day availability period has a June 30 year-end. It levies property taxes in January that are due in March, which are used to finance the general fund. The city levied S15 million in taxes in the current fiscal year, collecting $12 million during the fiscal year. In addition, the following amounts were collected in the months after year-end:
July $1,000,000
August $ 500,000
September $ 250,000
How much revenue should the general fund recognize for the fiscal year?
- A. $13.5 million
- B. $12 million
- C. $13 million
- D. $15 million
Answer: C
Explanation:
The city has a June 30 fiscal year-end and applies the 60-day availability rule, which is standard under modified accrual accounting for governmental funds like the general fund.
Total collections within:
Fiscal year: $12 million
60-day window (July + August): $1 million + $500,000 = $1.5 million
Revenue recognized = $12 million + $1.5 million = $13.5 million
However, under GASB Interpretation No. 5 and GASB Statement No. 33, only amounts expected to be collected within 60 days after year-end should be recognized as revenue in the general fund. The city uses the
60-day rule.
Thus, the correct amount to recognize is:
$12 million (collected during fiscal year)
$1 million (July)
$500,000 (August) = $13.5 million
C). $13.5 million
Relevant References:
GASB Statement No. 33 - Accounting and Financial Reporting for Nonexchange Transactions GASB Interpretation No. 5 - Property Tax Revenue Recognition GASB Codification Section 1600.115 (Modified Accrual Basis)
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NEW QUESTION # 74
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AGA GAFRB Exam Syllabus Topics:
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