Free Practice Questions for AGA GFMC Exam

 Why Is This the Best Measure for Performance?

Comparing thecost per acre maintainedto that of another jurisdiction provides a meaningful benchmark for performance evaluation. It allows the director to assess how efficiently the department is operating relative to similar organizations.

This comparison ensures that the department is managing resources effectively and identifies potential areas for improvement.

 Why Other Options Are Incorrect:

A. Use a single measure of citizen satisfaction:While citizen satisfaction is important, it is subjective and does not provide insight into operational efficiency.

B. Evaluate funds spent on grounds maintenance:Total spending does not measure efficiency or productivity; it merely reflects the amount allocated.

C. Analyze staffing levels:Staffing levels do not directly measure performance; they are only one factor in determining efficiency.

 References and Documents:

Governmental Performance Reporting (AGA):Recommends using comparative benchmarks for evaluating efficiency in service delivery.

Performance Management Framework by GAO:Highlights cost-effectiveness metrics such as cost per acre maintained.

Assumptions in Disaster Planning:

Financial continuity planning for natural disasters must account for scenarios where the event occurs suddenly and without warning.

This assumption ensures that governments are prepared to quickly resume critical financial operations even under challenging and unpredictable circumstances.

Explanation of Answer Choices:

A. Leadership and staff will reconvene at an alternate location: While this is part of disaster planning, it is not the primary assumption.

B. A fully redundant infrastructure will be available to staff at an alternate location: This may not always be realistic or feasible.

C. There may be no warning of the potential emergency: Correct. Disaster planning assumes that emergencies can occur without prior notice.

D. Government agencies will need to operate as standalone organizations: This is not a standard assumption in disaster planning.

Performance Audit Objectives:

Performance audits evaluate theeffectiveness,efficiency, andeconomyof government programs, operations, or activities.

These audits focus on improving operations, achieving program goals, and ensuring responsible use of public resources.

Explanation of Answer Choices:

A. Providing an opinion on the entity's financial statement: This is the objective of a financial statement audit, not a performance audit.

B. Assessing program effectiveness, economy, and efficiency: Correct. This is the primary objective of performance audits.

C. Providing an opinion on a subject matter that is the responsibility of another party: This aligns with attestation engagements, not performance audits.

D. Issuing a report of findings based upon an agreed-upon procedure: This describes agreed-upon procedures engagements, not performance audits.

 What Are We Solving For?

We are determining the present value (PV) of a $500,000 lump sum payment to be received in 10 years, using anopportunity rate of 12%. Inflation is not relevant here because the opportunity rate already reflects the expected return, including inflation adjustments.

 Formula for Present Value:

The present value (PV) is calculated using the formula:

PV=FV(1+r)nPV = \frac{FV}{(1 + r)^n}PV=(1+r)nFV​

Where:

FVFVFV = Future Value = $500,000

rrr = Opportunity rate = 12% or 0.12

nnn = Number of years = 10

 Calculation:

PV=500,000(1+0.12)10PV = \frac{500,000}{(1 + 0.12)^{10}}PV=(1+0.12)10500,000​ PV=500,000(1.12)10PV = \frac{500,000}{(1.12)^{10}}PV=(1.12)10500,000​ PV=500,0003.10585PV = \frac{500,000}{3.10585}PV=3.10585500,000​ PV≈160,986PV ≈ 160,986PV≈160,986

 Why Inflation Is Not Included:

The opportunity rate already incorporates the expected inflation. Using it ensures the PV reflects the real purchasing power of the future lump sum payment.

 Why Other Options Are Incorrect:

B. $186,023, C. $440,000, D. $485,000:These values result from incorrect calculations or the misuse of inflation in the formula.

 References and Documents:

GAO Financial Analysis Guide:Recommends using present value calculations with opportunity rates for investment decision-making.

AICPA Financial Management Guide:Provides detailed examples of calculating present value for lump sum payments.

 What Is Forensic Accounting?

Forensic accountinginvolves investigating financial records to detect fraud, gather evidence, and support legal proceedings. It focuses on identifying and responding to fraud rather than proactively preventing it.

 Tasks Performed in Forensic Accounting:

Auditing accounting records (Option A):Forensic accountants review records to uncover irregularities or fraud.

Interviewing related parties (Option C):They conduct interviews to gather information and evidence.

Serving as an expert witness (Option D):Forensic accountants often testify in court to explain their findings.

 Why Prevention Is Not Part of Forensic Accounting:

Preventing fraud is typically the responsibility ofinternal controls, management, and auditors, not forensic accountants. Forensic accounting is reactive, addressing fraud that has already occurred.

 References and Documents:

GAO Forensic Auditing Standards:Highlights the role of forensic accounting in investigating, not preventing, fraud.

AICPA Forensic and Valuation Services Practice Aid:Focuses on investigative and litigation support tasks performed by forensic accountants.

Responsibilities in Resolving Single Audit Findings:

Single audits assess compliance with federal program requirements.

Findings often highlight deficiencies or noncompliance issues that must be resolved by the entity receiving the federal funds.

Explanation of Answer Choices:

A. Awarding agency: The agency provides oversight and guidance but does not directly resolve findings.

B. Recipient agency: Correct. The entity receiving the funds is responsible for addressing and resolving findings to comply with federal regulations.

C. Audit committee: May oversee the process but doesn’t take direct responsibility for resolving findings.

D. External auditors: Identify the findings but do not resolve them.

 Investment Management Basics:

The first step in investment management is establishing theobjectivesof the investment program. This requires consensus among key stakeholders, such as managers, on what the investment goals are (e.g., risk tolerance, return expectations, liquidity needs).

Without clear objectives, subsequent steps like developing policies or selecting investments cannot be effectively carried out.

 Why Consensus Is Important:

Investment objectives must align with the organization’s mission, risk tolerance, and financial goals.

Consensus ensures that all managers are on the same page before developing specific strategies or policies.

 Why Other Options Are Incorrect:

A. Ensure employees understand their investment options:Employee understanding is not the first step; it comes later when the investment strategy is implemented.

C. Develop an investment policy manual:This happens after the objectives have been established.

D. Establish criteria for divesting:Divestment criteria are part of the investment policy and are determined later.

 References and Documents:

GAO Financial Management Guide:Highlights setting objectives as the first step in investment management.

COSO Framework for Investment Risk Management:Stresses the importance of aligning objectives before policy development.

 What Are Simplified Acquisition Processes?

Simplified acquisition processes are procurement methods designed to streamline purchasing for government agencies. These processes reduce the administrative burden for smaller purchases, typically below a certain dollar threshold (as defined in theFederal Acquisition Regulation (FAR)).

 How Do These Processes Assist Agencies?

Bulk Purchase Discounts:Simplified acquisition allows agencies to leverage economies of scale and negotiate bulk purchase discounts for commonly used goods and services.

Reduced Administrative Costs:By simplifying documentation, reducing oversight requirements, and accelerating the approval process, these methods lower administrative costs and increase efficiency.

 Why Other Options Are Incorrect:

A. Maintaining the competitive bid requirement and allowing credit card purchases:While simplified acquisitions may allow credit card purchases, the focus is not maintaining competitive bids but reducing costs and streamlining the process.

C. Increasing the number of requisitions processed:The goal is efficiency, not increasing the volume of requisitions.

D. Reducing acquisition staff and managerial oversight:These processes may simplify oversight but do not aim to reduce staff; instead, they help existing staff work more efficiently.

 References and Documents:

Federal Acquisition Regulation (FAR) Part 13:Covers simplified acquisition processes and their intended benefits.

GAO Reports on Federal Procurement (2020):Highlights the cost savings and efficiencies gained through simplified acquisition methods.

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.