AGA GAFRB Exam Questions Instant Access - No Installation Required

Question 1

A state grant will reimburse a city for 40% of the architectural, construction and project management costs to build an annex to a city building. A city employee, who is paid salary and benefits of 510,000 a month, works half-time on the project for six months.

The city reports the following project budgeted and actual costs:

Purpose Budget Actual

Architectural fees $ 100.000 $ 90,000

Construction costs $10,500,000 $10,000,000

Based upon the above information, what is the amount of allowable costs that the state will reimburse the city on the grant?

A$4.048.000

B$4.060.000

C$4,252,000

D$4.264.000
First, we calculate total eligible project costs:
Eligible categories (architectural, construction, project management):
Architectural (actual): $90,000
Construction (actual): $10,000,000
Project management (city employee at 50% time for 6 months):
$10,000/month 6 months 50% = $30,000
Total eligible cost = $90,000 + $10,000,000 + $30,000 = $10,120,000
State reimburses 40% of eligible cost:
0.40 $10,120,000 = $4,048,000
Relevant Reference:
OMB Uniform Guidance (2 CFR 200) -- Cost Principles
GFOA Best Practices -- Grant Compliance
State grant agreements outlining cost-sharing requirements
Answer : A. $4,048,000

Answer : A

Question 2

of the following are integral parts of state governments* formal financial statements EXCEPT the

Abasic financial statements.

Bnotes.

CRSI.

Dauditors letter.
The formal financial statements of a state or local government include:
Basic Financial Statements (government-wide and fund statements)
Notes to the Financial Statements
Required Supplementary Information (RSI), including MD&A and pension data
The auditor's letter (i.e., Independent Auditor's Report) is included in the financial section of the ACFR but is not technically part of the financial statements themselves. It is a separate document providing the auditor's opinion.
Relevant Reference:
GASB Statement No. 34
GFOA ACFR Reporting Guide
AICPA Governmental Audit Guide
Answer : D. auditor's letter

Answer : D

Question 3

The PAR includes all of the following elements EXCEPT the

Aagency-head message.

Bfinancial section.

Cperformance section.

Ddemographic section.
Comprehensive Detailed
The Performance and Accountability Report (PAR) is a consolidated report that federal agencies are required to submit. It typically includes:
Agency Head's Message
Performance Section (performance goals/results)
Financial Section (financial statements, audit report, notes)
Other Accompanying Information (e.g., improper payments, internal control reports)
There is no ''demographic section'' required or defined in the structure of a PAR.
Relevant Reference:
OMB Circular A-136 -- Financial Reporting Requirements
GPRA Modernization Act of 2010
CFO Act of 1990
Answer : D. demographic section

Answer : D

Question 4

A state had problems with its cash reconciliation resulting in a difference between the total cash per books versus cash balance with banks. The possible loss could only be estimated within a range of $100 million to $300 million with no amount within the range considered a better estimate than any other. The state should recognize a minimum liability of

A$100 million and disclose in the notes the exposure to an additional $200 million loss.

B$200 million and disclose in the notes the exposure to an additional $100 million loss.

C$300 million with no additional disclosure required.

Dan amount to be determined by external auditors.
GASB Statement No. 62 (based on FASB ASC 450-20) provides guidance on recognizing loss contingencies. If a loss is probable and the amount can only be estimated as a range, and no single amount within the range is better, the minimum amount in the range should be accrued.
The remainder of the range should be disclosed in the notes to the financial statements.
Thus:
Accrue: $100 million
Disclose: Additional exposure up to $200 million
Relevant Reference:
GASB Statement No. 62 -- Paragraph 96
GAAP Implementation Guide -- Loss Contingencies
AICPA Audit Guide -- Government Auditing Standards
Answer : A. $100 million and disclose in the notes the exposure to an additional $200
million loss

Answer : A

Question 5

When a new combined government replaces the separate governments of a city and a county, this is an example of

Aa government merger.

Ba government acquisition.

Ca transfer of operations.

Dintergovernmental operations.
A government merger occurs when two or more legally separate governments are combined to form a new government, and the original governments cease to exist. This includes combinations like a city and county merging to form a unified government, with combined assets, liabilities, and operations.
There is no acquiring government --- rather, the governments voluntarily combine into a new legal entity.
Relevant Reference:
GASB Statement No. 69 -- Government Combinations and Disposals of Government Operations
GASB Codification Section G60 -- Definitions of Mergers vs. Acquisitions
GFOA Government Restructuring Guidelines
Answer : A. a government merger

Answer : A

Question 6

What is the entry when rent of $500 is paid?

Adebit cash $500, credit payables $500

Bdebit cash $500, credit expense $500

Cdebit expense S500, credit payables $500

Ddebit expense $500, credit cash $500

Answer : D

When a payment is made for rent, an expense is incurred and cash is reduced. The correct journal entry is:

Debit Rent Expense $500 to recognize the cost

Credit Cash $500 to reflect the cash outflow

Answer : D. debit expense $500, credit cash $500

Relevant Reference:

FASAB SFFAS No. 4 -- Managerial Cost Accounting Concepts and Standards

Basic governmental and commercial accounting journal entry conventions

Question 7

The purpose for establishing a custodial fund is to

Aaccount for assets held in a trustee capacity.

Baccumulate resources for payment of debt.

Ctrack financial resources to be used for acquisition of capital facilities.

Dprovide services to the public on a fee basis.

Answer : A

A custodial fund is a type of fiduciary fund used by state and local governments to report assets held temporarily in a purely custodial capacity---for example, taxes collected by one government on behalf of another. These funds do not involve administrative or financial control over the assets; the government is merely acting as an intermediary.

As per GASB Statement No. 84, custodial funds replace agency funds and are used to report fiduciary activities that are not held in a trust agreement and where the government does not have discretion over how the resources are spent.

Relevant Standards and Reference:

GASB Statement No. 84, Fiduciary Activities

GASB Codification Section 1300: Fiduciary Funds

GFOA Best Practices -- Accounting and Financial Reporting for Fiduciary Activities

Therefore, Option A is correct.

AGA Examination 2: Governmental Accounting, Financial Reporting and Budgeting GAFRB Exam Questions