AGA CGFM Exam With Confidence Using Practice Dumps

Creditworthiness and Loan Approval:

When creditworthiness is a criterion for government loans, the applicant must demonstrate asatisfactory history of repaying debt, as this reflects their ability to fulfill repayment obligations in the future.

Why a Satisfactory History Is Required:

Past repayment behavior is considered the best indicator of future performance. Government agencies prioritize reducing the risk of defaults by ensuring applicants have a proven history of managing debt responsibly.

Why Other Options Are Incorrect:

A. A credit rating from a major bank:While a credit rating is helpful, it is not typically required for government loans. Instead, creditworthiness is evaluated based on repayment history and other financial factors.

C. Sufficient capitalization:This is important for business loans, but it does not address creditworthiness.

D. A promise to pay interest at the government borrowing rate:A promise is not sufficient to establish creditworthiness.

References and Documents:

OMB Circular A-129:Requires agencies to assess creditworthiness before granting loans.

GAO Loan Management Guide:Highlights repayment history as a key criterion for loan approval.

How to Prioritize Controls Based on Cost and Risk:

The priority of a control is based on its cost-effectiveness. Controls that protect assets with higher risk exposure relative to the cost of the control should be prioritized. The formula to calculate cost-effectiveness is: Cost-Effectiveness=Cost of ControlAsset Amount at Risk\text{Cost-Effectiveness} = \frac{\text{Cost of Control}}{\text{Asset Amount at Risk}}Cost-Effectiveness=Asset Amount at RiskCost of Control​

Lower ratios indicate more cost-effective controls.

Calculations:

Asset A:$15,000 / $150,000 = 0.10 (10%)

Asset B:$2,500 / $6,000 = 0.42 (42%)

Asset C:$50,000 / $2,000,000 = 0.025 (2.5%)

Asset D:$20,000 / $500,000 = 0.04 (4%)

Lowest Priority:

Asset Bhas the highest ratio (42%), meaning it is the least cost-effective and should be the lowest priority for controls.

References and Documents:

COSO Internal Control Framework:Discusses cost-benefit analysis for prioritizing controls.

GAO Risk Management Guide:Emphasizes evaluating control cost-effectiveness relative to asset risk.

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.