CGFM Practice Exams Questions

The CGFM exams, formally known as the Certified Government Financial Manager Examinations, are assessments for men and women who wish to enter the rewarding and rapidly growing field of government financial management. The exams are developed by the Association of Government Accountants in consultation with an expert team of test administrators.

There are three CGFM exams: Examination 1 covers the Governmental Environment; Examination 2 covers Governmental Accounting, Financial Reporting, and Budgeting; and Examination 3 covers Governmental Financial Management and Control.

Examination 1 consists of 115 multiple-choice questions and must be completed within two hours and 15 minutes. It covers seven general topics: the organization, structure, and authority of government (15 percent of the exam); legal and other aspects of the government environment (25 percent); the government management system, including planning, programming, budgeting, operations, accounting, reporting, and auditing (15 percent); the governmental financing process (25 percent); the concepts, definitions, and notions of public accountability (5 percent); ethical practice as a government financial manager (5 percent); and financial management responsibilities and skills (10 percent).

The second of the CGFM exams also consists of 115 multiple-choice questions and takes two hours and 15 minutes to complete. This portion has only three general content areas: general concepts of governmental financial accounting, reporting, and budgeting (40 percent of the exam); state and local financial accounting and reporting (30 percent); and federal financial accounting and reporting (30 percent).

Like its two counterparts, the third exam, Governmental Financial Management and Control, consists of 115 questions and must be completed within two hours and 15 minutes. This component of the CGFM exams has five general content areas: internal controls (25 percent of the exam); internal and external auditing (25 percent); performance measurement recording (13 percent); financial and managerial analysis techniques (7 percent); and financial and managerial concepts, controls, and techniques (30 percent).

Pass/fail scores for the CGFM Exams are delivered immediately upon completion. Candidates who do not pass receive a scaled score, including specific scores for each content area. The scaled score ranges from 200 to 700, with a minimum passing score of 500.

Practice Questions

1. Which system refers to the three levels of U.S. government working together on an equal basis to ensure that the fundamentals of the Constitution are followed?

a. Allocation of services
b. Checks and balances
c. Separation of powers
d. Functional consolidation

2. Which statement most adequately describes interperiod equity?

a. Previous year taxpayers have provided adequate resources to pay for the cost of current year services
b. Previous year tax revenue is equal to budget amounts
c. Current year costs are equal to the amount budgeted for the current year
d. Current year taxpayers have provided adequate resources to pay for the cost of current year services

3. What is the purpose of the Governmental Accounting Standards Board?

a. To establish standards of conduct for government accountants
b. To establish and improve standards of accounting and financial reporting for U.S. state and local governments
c. To indicate the differences between government accounting and private sector accounting
d. To establish and improve standards of accounting and financial reporting for the U.S. federal government

4. Which internal control component is used to assess the quality of internal control performance?

a. Control Environment
b. Risk Assessment
c. Information and Communication
d. Monitoring

5. What role does the Chief Executive Officer play in an organization’s internal control system?

a. Designing and implementing effective internal control
b. Providing governance, guidance and oversight of the internal control system
c. Measuring the effectiveness of internal controls
d. Establishing internal control policies and procedures

Answers

1. B: Checks and balances. The checks and balances system allows the executive, judicial and legislative branches of government to work together to maintain the fundamentals of the Constitution. The legislative branch makes laws, can override presidential vetoes, and sets jurisdiction of the court. The executive branch executes the laws, appoints judges, and can call emergency sessions of Congress. The judicial branch interprets laws, and investigates whether actions of the legislative and executives branches comply with the Constitution. This separation of powers helps to ensure transparency and prevents one branch of government from dominating the other two in that each branch checks on the actions performed by the other branches.

2. D: Current year taxpayers have provided adequate resources to pay for the cost of current year services. Interperiod equity is a concept wherein current taxpayers provide adequate funds to cover current benefits, leaving no burden to future taxpayers for current benefits. If interperiod equity exists, the government does not need to defer costs to the future, or use accumulated resources to pay for current period services, because current year revenues were sufficient to cover current year expenses. In financial reporting, interperiod equity is one of the criteria used to evaluate accountability and helps determine the future implications of a government’s fiscal decisions. Interperiod equity is not perceived as a goal; the Government Accounting Standards Board, for instance, does not take a position on the concept’s appropriateness

3. B: To establish and improve standards of accounting and financial reporting for U.S. state and local governments. The Governmental Accounting Standards Board (GASB) is an independent organization that establishes and improves standards of accounting and financial reporting for U.S. state and local governments. The GASB provides generally accepted accounting principles (GAAP) for use by state and local governments. Compliance with the GASB standards is enforced by state law and the audit process. By conforming with GASB standards, government officials maintain accountability and stewardship over public resources. The GASB also educates the public, financial statement preparers, and auditors regarding the information governments provide in financial statements.

4. D: Monitoring. Internal control helps to ensure that an organization’s objectives have been achieved. The objectives covered by internal control are effectiveness and efficiency of operations, reliability of financial reports and compliance with regulations and laws. The five components of internal control are:

  • The Control Environment— the foundation of the internal control process that provides an organization’s employees a basis to affect internal control processes
  • Risk Assessment— the identification, management and analysis of risks that may affect the performance of an organization
  • Information and Communication—systems that identify, collect, and distribute information for employees to perform their duties
  • Control Activities— processes that ensure management’s directions are followed
  • Monitoring— process used to determine the quality of internal control performance

5. A: Designing and implementing effective internal control. The Chief Executive Officer is responsible for designing and implementing effective internal controls, providing direction and leadership to senior management and ensuring that senior management is fostering an effective internal control environment. The internal control process involves employees at every level. Senior management is tasked with establishing internal control policies and procedures, and ensuring that each organizational unit is implementing internal control procedures effectively. Internal and external auditors measure the effectiveness of internal control, assess the design and implementation of internal controls, and recommend ways in which the internal control system may be improved. The Board of Directors provides governance, guidance and oversight of the internal control system.

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By Lindsay Downs

Last Updated: 06/20/2014

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