CGFM Practice Questions (2026) — Free Sample Questions with Answers

Answer: D

a blended component unit: Blending requires a component unit (financial accountability by one primary government); no city appoints a voting majority.

a discretely presented component unit: Discrete presentation also requires a component unit; with each city appointing only a quarter of the board, none is financially accountable.

a joint venture: A joint venture requires joint control plus an ongoing financial interest or ongoing financial responsibility; the stem rules both out.

a jointly governed organization: Correct. Under GASB, a regional body governed by appointees of several governments is a jointly governed organization when no participant holds an ongoing financial interest or responsibility. The cities disclose their participation but do not report the authority's finances.

Shared appointment without majority control or ongoing financial interest/responsibility = jointly governed organization; add an ongoing financial interest or responsibility and it becomes a joint venture.

Answer: A

violates the Antideficiency Act by obligating funds before an appropriation exists: Correct. The Antideficiency Act bars an agency from involving the government in a contract or obligation before an appropriation is made, unless a law authorizes it. Signing a binding contract against an unenacted appropriation is a violation.

is permissible because the services will be performed in the new fiscal year: When the services occur does not matter; the obligation is created when the contract is signed, before any funds exist.

is permissible because a continuing resolution is expected by October 1: An expected appropriation is not an appropriation; the agency may not obligate in anticipation of one.

violates the bona fide needs rule but not the Antideficiency Act: Charging next year's funds for next year's services satisfies the bona fide needs rule; the problem is obligating before the funds are appropriated.

The Antideficiency Act prohibits obligations that exceed or come in advance of an appropriation, as well as obligations that exceed an apportionment or a formal allotment.

Answer: D

a project (discretionary) grant: Discretionary grants are awarded competitively by the agency to selected applicants, not to every state by formula.

a formula categorical grant: A formula categorical grant is also allocated by formula, but it is limited to a narrowly defined purpose with detailed federal conditions.

a cost-reimbursement contract: A contract buys goods or services for the federal government's own use; this is financial assistance.

a block grant: Correct. Block grants are allocated by formula to broad purpose areas and give recipients wide discretion with relatively few federal strings. Broad purpose and few requirements separate a block grant from a formula categorical grant.

Formula vs discretionary describes how funds are allocated; categorical vs block describes how narrowly the purpose and conditions are defined.

Answer: B

The department met its target in each of the last three fiscal years.: Results were 84% and 83% in FY2023 and FY2024, below the 85% target; only FY2025 met it.

Response performance improved overall but met the target only in FY2025.: Correct. Results rose from 78% to 88% over the period, with a dip in FY2024. Only FY2025 (88%) reached the 85% target.

Response performance improved in every year shown.: Performance fell from 84% in FY2023 to 83% in FY2024.

The department met its target in two of the five years shown.: Only FY2025 (88%) reached the 85% target; FY2023 (84%) fell just short.

Read SEA data carefully: compare actuals with targets year by year, and do not infer efficiency or causes the exhibit does not measure.

Answer: B

continue to serve and score all proposals objectively: Personal objectivity does not remove a real or perceived conflict that others can see.

disclose the relationship and withdraw from the evaluation: Correct. A spouse's employment with a bidder is a conflict of interest. The director should disclose it and recuse from the evaluation so the award is not tainted, consistent with the AGA Code of Ethics' emphasis on avoiding real and perceived conflicts.

ask the spouse's bank to withdraw its proposal: The bank has a right to compete; the conflict belongs to the director and is resolved by recusal.

disclose the relationship but continue to score all proposals: Disclosure alone is acceptable but not best: when the official's judgment directly affects the bidder, disclosure must be paired with recusal.

For a conflict of interest, disclose it and remove yourself from the decision; disclosure without recusal leaves the conflict in place.

Answer: A

1. 1. Goods available: 1,000 × $4 + 2,000 × $5 + 1,000 × $6 = $4,000 + $10,000 + $6,000 = $20,000 for 4,000 units.
2. 2. FIFO issues the oldest units first: 1,000 × $4 = $4,000.
3. 3. Next 2,000 units × $5 = $10,000.
4. 4. Cost of supplies issued = $4,000 + $10,000 = $14,000 (ending inventory 1,000 × $6 = $6,000).

$14,000: Correct. Under FIFO the oldest costs are issued first: 1,000 units at $4 plus 2,000 units at $5 = $14,000. The 1,000 units bought at $6 remain in ending inventory.

$15,000: Uses the weighted-average cost ($20,000 ÷ 4,000 units = $5.00) × 3,000 units.

$16,000: Uses LIFO: 1,000 units at $6 plus 2,000 units at $5.

$20,000: Uses the cost of all goods available, ignoring the 1,000 units still on hand.

FIFO charges the oldest costs to issues and leaves the newest costs in inventory; when prices rise, FIFO issue cost is lowest and LIFO highest.

Answer: A

GASB, FASAB and FASB: Correct. A hospital owned by a county is a governmental entity, so GASB sets its GAAP. FASAB sets GAAP for federal entities, and FASB sets GAAP for private nonprofits.

FASB, FASAB and FASB: A government-owned hospital follows GASB, not FASB, even though its services resemble those of private hospitals.

GASB, GASB and FASB: GASB covers state and local governments only; federal entities follow FASAB.

GASB, FASAB and GASB: A privately owned nonprofit is not governmental; it follows FASB.

Ownership, not activity, decides jurisdiction: state and local governmental entities → GASB; federal entities → FASAB; private businesses and nonprofits → FASB.

Answer: C

$550,000 committed and $0 assigned: The finance director cannot commit fund balance; commitment requires formal action by the highest decision-making authority, so the $150,000 is assigned.

$400,000 restricted and $150,000 assigned: Restrictions are imposed externally (creditors, grantors, other governments' laws) or by enabling legislation; a council ordinance setting aside its own money is a commitment.

$400,000 committed and $150,000 assigned: Correct. Under GASB 54, amounts constrained by formal action of the highest decision-making authority, changeable only by similar action, are committed. Intent expressed by an official to whom the governing body delegated authority produces assigned fund balance.

$0 committed and $550,000 assigned: The council's ordinance is formal action at the highest level that only another ordinance can reverse, which is the definition of committed fund balance.

Committed requires formal action by the highest decision-making authority that only similar action can undo; intent expressed by the governing body or a delegated official produces assigned fund balance.

Answer: D

offsetting receipts: Offsetting receipts are deposited in receipt accounts and generally need an appropriation before they can be spent.

governmental receipts: Governmental receipts come from the government's sovereign power (taxes, fines) and are not credited to an expenditure account.

custodial collections: Custodial collections are amounts collected on behalf of another entity, such as the general fund; here the agency keeps and spends the fees itself.

offsetting collections: Correct. Under OMB A-11, offsetting collections are credited directly to an expenditure account and offset its gross budget authority and outlays; they are usually available without further congressional action.

Collections credited to an expenditure account and spendable without further action are offsetting collections; those deposited to receipt accounts are offsetting receipts.

Answer: B

1. 1. Discount at the Treasury rate for comparable maturities: 4%, factor 3.630.
2. 2. PV of expected collections = $260,000 × 3.630 = $943,800.
3. 3. Subsidy cost = disbursement − PV of collections = $1,000,000 − $943,800 = $56,200.
4. 4. Recognize the subsidy cost when the direct loan is disbursed.

$33,580: Discounts at the 3% loan rate; the Credit Reform Act requires the Treasury rate for comparable maturities.

$56,200: Correct. PV of collections = $260,000 × 3.630 = $943,800, so the subsidy cost = $1,000,000 − $943,800 = $56,200, recorded when the loan is disbursed.

$78,040: Uses the 5% factor, which is neither the loan rate nor the Treasury rate given.

$943,800: This is the present value of expected collections, the net loan receivable, not the subsidy cost.

Credit Reform subsidy cost is the present value, at the Treasury rate, of the government's net cash outflows over the loan's life, recognized at disbursement.

Answer: B

The general fund ran an operating deficit in every year shown: A falling ratio can come from expenditure growth with flat fund balance; the exhibit does not show annual operating results.

The ratio fell each year and was below the 10% policy minimum only in FY2025: Correct. The ratio declined in each year (18, 16, 13, 11, 9) and was below 10% for the first time in FY2025.

Unassigned fund balance in dollars was cut in half from FY2021 to FY2025: The exhibit shows a ratio, not dollars; the dollar balance depends on expenditure levels that are not given.

The ratio will fall below 8% in FY2026 unless taxes are raised: This extrapolates a forecast and a cause that the historical trend does not establish.

Trend and ratio analysis supports conclusions about the measure shown; inferring dollars, causes or forecasts needs additional data.

Answer: B

1. 1. CPI = EV ÷ AC = $600,000 ÷ $750,000 = 0.80.
2. 2. SPI = EV ÷ PV = $600,000 ÷ $800,000 = 0.75 (schedule measure, not needed for this EAC).
3. 3. EAC (cost performance continues) = BAC ÷ CPI = $1,800,000 ÷ 0.80 = $2,250,000.

$1,950,000: BAC + (AC − EV) assumes the remaining work will be done at the budgeted rate, which contradicts the stated assumption.

$2,250,000: Correct. CPI = EV ÷ AC = 600,000 ÷ 750,000 = 0.80; EAC = BAC ÷ CPI = 1,800,000 ÷ 0.80 = $2,250,000.

$2,400,000: Divides BAC by the SPI (0.75) instead of the CPI; SPI measures schedule, not cost, efficiency.

$3,000,000: Divides BAC by CPI × SPI (0.60), a formula used when schedule pressure is also expected to drive cost, which the stem does not assume.

CPI = EV ÷ AC and SPI = EV ÷ PV; when current cost efficiency is expected to continue, EAC = BAC ÷ CPI.

Answer: C

a SOC 1 Type 1 report: Type 1 reports only on the design of controls at a point in time, not on whether they operated effectively during the year.

a SOC 2 Type 2 report: SOC 2 addresses controls over security, availability, processing integrity, confidentiality and privacy, not financial reporting.

a SOC 1 Type 2 report: Correct. A SOC 1 report covers controls at a service organization relevant to user entities' internal control over financial reporting. Type 2 adds the service auditor's opinion on operating effectiveness over a period.

a SOC 3 report: SOC 3 is a general-use summary of trust services criteria with no detailed tests of controls, so it does not support reliance on financial reporting controls.

For financial reporting controls at a service organization, use SOC 1; Type 2 is needed to rely on operating effectiveness over the period.

Answer: A

establish a baseline of current placement results: Correct. A baseline, the starting level of performance, is needed before realistic targets can be set and progress measured.

benchmark targets to the best-performing state's program: Benchmarking against peers is useful for judging what is achievable, but without a baseline the agency cannot set a realistic improvement path.

set stretch targets to encourage rapid improvement: Targets set without a baseline may be arbitrary; stretch goals come after the starting point is known.

commission an outcome evaluation of the program: A program evaluation assesses impact after the program has operated; it is not the first step in setting targets.

Measure where you are (baseline) before setting where you want to be (targets); benchmarks show what peers achieve.

Answer: B

2024-001 only, because 2024-002 was fully corrected: Fully corrected prior findings are still listed, with a statement that corrective action was taken.

2024-001 and 2024-002, noting that 2024-002 was corrected: Correct. The summary schedule reports the status of all findings from the prior audit. For a fully corrected finding it need only list it and state that corrective action was taken.

2024-001 and 2025-001, the findings still uncorrected: Current-year findings are addressed in the corrective action plan, not the summary schedule of prior findings.

all three findings, with their planned corrective actions: Combines two documents: 2025-001 belongs in the corrective action plan.

The summary schedule covers every prior-audit finding (listing corrected ones); new findings go in the corrective action plan.