CGFM Exam Dumps - CGFM Certified Government Financial Manager

Definition of a Repurchase Agreement (Repo):A repurchase agreement is a short-term financial transaction where one party sells securities to another with an agreement to repurchase them at a later date for a specified price, which includes interest. It functions as a secured loan.

Transaction Description:

The state transfers cash to a broker.

The broker provides securities as collateral and agrees to repay the cash plus interest in exchange for the return of the same securities.This arrangement matches the definition of arepurchase agreement.

Explanation of Answer Choices:

A. Arbitrage agreement: Arbitrage involves exploiting price differences in markets, unrelated to this transaction.

B. Repurchase agreement: Correct, as it fits the definition.

C. Mutual buy-sell agreement: This involves agreements to buy and sell assets, unrelated to this financial transaction.

D. Reverse repurchase agreement: Incorrect, as the state would be the borrower, not the lender, in a reverse repo.

References:

U.S. Department of the Treasury,Guide to Federal Investments.

Financial Accounting Standards Board (FASB),Accounting for Repurchase Agreements.

ï‚·What Is Pay.gov?

Pay.govis anelectronic lockbox systemmanaged by the U.S. Department of the Treasury. It allows federal agencies to collect payments electronically, improving efficiency and reducing the time and cost associated with manual payment processing.

It supports online payments for taxes, fees, and other government-related obligations.

ï‚·Why Is It an Electronic Lockbox?

Pay.gov consolidates and processes payments on behalf of federal agencies, similar to how a lockbox service processes payments for private businesses.

ï‚·Why Other Options Are Incorrect:

A. Zero-balance account:This refers to a type of bank account that maintains a balance of zero by automatically transferring funds as needed, unrelated to Pay.gov’s purpose.

B. Concentration system:Refers to pooling funds from multiple accounts into one central account, not payment processing.

D. Data warehouse system:A data warehouse stores and organizes large amounts of data for analysis, unrelated to payment collection.

ï‚·References and Documents:

U.S. Treasury Pay.gov Website:Describes Pay.gov as an electronic lockbox for federal payment processing.

GAO Financial Management Systems Guide:Highlights the role of electronic lockboxes like Pay.gov in improving efficiency.

ï‚·What Does GPRA Require?TheGovernment Performance and Results Act (GPRA)mandates that federal agencies prepare:

Astrategic planoutlining long-term goals.

Anannual performance plandetailing the objectives and performance measures for the upcoming year.

Anannual performance reportevaluating the agency’s success in meeting the goals outlined in the annual performance plan.

ï‚·Why Is the Annual Performance Report Important?

The annual performance report provides accountability and transparency by comparing actual results to planned goals. It allows Congress and the public to assess how effectively the agency is achieving its mission.

ï‚·Why Other Options Are Incorrect:

A. A five-year performance plan:GPRA requires a strategic plan (updated every four years), not a separate five-year performance plan.

C. SEA Report:This refers to Service Efforts and Accomplishments reporting, which is not mandated by GPRA.

D. The prior year’s audited financial report:While financial reports are important, they are separate from the performance reporting requirements of GPRA.

ï‚·References and Documents:

Government Performance and Results Act (1993):Requires agencies to submit strategic plans, annual performance plans, and annual performance reports.

GAO Reports on GPRA Compliance:Emphasizes the role of annual performance reports in promoting accountability.

Understanding the Procurement Process for Contractors:

When selecting contractors for government projects, the goal is to ensure the selection of aresponsible and responsive bidderwho meets all requirements outlined in the Request for Proposal (RFP) or bidding documents.

Key considerations include the contractor’s ability to meet deadlines, quality of work, and compliance with laws and regulations.

Analyzing the Answer Options:

A. The contractor with the lowest bid who has a history of delayed projects:While cost savings are important, a contractor with a history of delays poses a significant risk to project timelines and community satisfaction. This bidder is not considered "responsible" based on their track record.

B. The contractor with the second-lowest bid, who has no prior violations and meets all bid specifications:Although this is not the lowest bid, it is the best choice because the contractor meets allrequirements and has a clean history. Selecting a reliable bidder ensures the project is completed on time and within acceptable quality standards. This is the most responsible and justified decision.

C. The contractor with the highest bid, who includes luxury, non-requested upgrades to the design:Selecting a contractor who proposes unnecessary and expensive upgrades is not cost-effective. Government procurement prioritizes fulfilling project specifications within the approved budget, making this choice impractical.

D. The contractor whose bid was submitted past the deadline but offers a discount for early payment:Late bids violate procurement rules, which emphasize fairness and transparency. Accepting this bid could lead to legal challenges or allegations of favoritism. Discounts do not justify breaching procurement guidelines.

Why Option B is Correct:

The second-lowest bid is the most responsible choice because the contractor:

Meets all bid requirements.

Has a strong history of compliance with regulations.

Avoids risks associated with unreliable or excessively expensive options.

This selection aligns with government procurement standards that prioritize balancing cost, quality, and reliability.

References and Documentation from the Government Financial Manager (GFM) by AGA:

Procurement Best Practices: The AGA emphasizes the importance of selecting bidders who demonstrate responsibility, reliability, and compliance with the bidding process.

Ethical Procurement Standards: TheYellow Book (Government Auditing Standards)highlights the importance of fairness, transparency, and accountability in contractor selection.

Source: AGA Certified Government Financial Manager (CGFM) study guides, Section IV: Internal Controls, Procurement, and Ethics.

ï‚·Definition of Inherent Risk:Inherent risk refers to the risk of material misstatement in financial statements or other reports due to the nature of the subject matter, without considering any controls in place. It arises from the complexity, judgment, or uncertainty involved in the underlying transactions or calculations.

ï‚·Why This Is Inherent Risk:

TheFederal Credit Reform Actrequires complex calculations to estimate loan subsidies, interest rates, and cash flows. These calculations inherently involve significant judgment and estimation, making them prone to errors. This is a classic example of inherent risk because the complexity exists regardless of controls.

ï‚·Why Other Options Are Incorrect:

A. Audit Risk:This refers to the overall risk that the auditor may issue an incorrect opinion. In this case, the issue is about the inherent complexity of the calculations, not the auditor’s procedures.

B. Control Risk:This is the risk that errors will not be prevented or detected due to weak internal controls. While control risk could contribute to misstatements, it is not the primary issue in this example.

C. Detection Risk:This is the risk that auditors will not detect a misstatement. This risk relates to audit procedures, not the inherent complexity of the calculations.

ï‚·References and Documents:

GAO Yellow Book on Risk Assessment:Explains inherent risk in the context of government financial reporting.

AICPA Standards on Audit Risk (AU-C 315):Highlights inherent risk as arising from the nature of transactions or subject matter.

Understanding Resource Allocation in Street Maintenance:When additional resources are provided for street maintenance, their allocation should address the most pressing infrastructure needs to maximize impact and public benefit.

Key Indicator (Pavement Rating Scores):Pavement rating scores are used to evaluate the condition of roads. Areas with the lowest scores (representing unmet needs) require prioritized funding to bring the infrastructure to acceptable levels.

Explanation of Answer Choices:

A. Number of intersections: The number of intersections is not directly related to road conditions or pavement scores.

B. Historical budgeted amounts: Allocating based on past budgets does not address current infrastructure conditions or unmet needs.

C. Lane miles rated as acceptable by citizens: Roads already rated as "acceptable" do not require immediate attention.

D. Lane miles with unmet needs: Correct, as this aligns with addressing the most critical deficiencies based on the pavement scores.

References:

Government Finance Officers Association (GFOA),Best Practices in Capital Asset Management.

Federal Highway Administration (FHWA),Performance-Based Planning and Programming Guidebook.

Definition of Cloud Computing:

Cloud computing refers to the delivery of computing services (e.g., servers, storage, databases, networking, software) over the internet.

A common feature of cloud computing is the "hosted" service model, where applications, storage, or infrastructure are hosted and managed by a cloud service provider.

Explanation of Answer Choices:

A. Satellite-to-satellite: This involves communication between satellites, unrelated to cloud computing.

B. Hosted: Correct. Hosted services are a fundamental aspect of cloud computing, where applications or data are stored and accessed on remote servers.

C. Gateway transmission: Refers to communication gateways, unrelated to cloud computing services.

D. Mainframe computing: Mainframes are large on-premises computers, not part of the cloud model.

References:

National Institute of Standards and Technology (NIST),Cloud Computing Reference Architecture.

Federal Risk and Authorization Management Program (FedRAMP),Cloud Service Providers Guidance.

ï‚·What Is the Current Ratio?

Thecurrent ratiomeasures an entity’s ability to cover its short-term liabilities with its short-term assets. The formula is: Current Ratio=Total Current AssetsTotal Current Liabilities\text{Current Ratio} = \frac{\text{Total Current Assets}}{\text{Total Current Liabilities}}Current Ratio=Total Current LiabilitiesTotal Current Assets​

ï‚·Calculation:

Total Current Assets = $1,320

Total Current Liabilities = $810

Current Ratio=1,320810\text{Current Ratio} = \frac{1,320}{810}Current Ratio=8101,320​ Current Ratio≈1.63\text{Current Ratio} ≈ 1.63Current Ratio≈1.63

ï‚·Why the Current Ratio Matters:

A current ratio above 1 indicates that the entity has more current assets than current liabilities, suggesting good short-term liquidity.

ï‚·Why Other Options Are Incorrect:

A. 0.61, B. 0.98, C. 1.14:These values result from incorrect calculations or misinterpretations of the formula.

ï‚·References and Documents:

GAO Financial Analysis Guide:Provides guidance on using the current ratio to assess liquidity.

GASB Financial Reporting Requirements:Highlights the importance of liquidity measures in government financial statements.