GFMC Exam Dumps : Examination 3: Governmental Financial Management and Control (GFMC)

Federal Credit Reform Act of 1990:This Act established a new accounting framework for federal credit programs, such as direct loans and loan guarantees. It requires using thenet present value (NPV)method to measure the costs of loans and guarantees by discounting future cash flows (e.g., loan repayments, defaults) to their present value.

Explanation of Financial Analytical Technique:

Net Present Value (NPV): Accounts for the time value of money by discounting future cash flows to the present. It provides an accurate measure of the economic cost to the government.

Other options:

A. Future value: Focuses on future cash flows, not their present cost.

C. Current value: Not a recognized technique for analyzing long-term cash flows.

D. Regression analysis: A statistical method, unrelated to calculating loan program costs.

Performance Audit Overview:

A performance audit focuses on evaluating the economy, efficiency, and effectiveness of government programs or activities.

Due professional care is a requirement inGovernment Auditing Standards (Yellow Book), ensuring auditors perform their duties responsibly and with professional judgment.

Key Requirement: Sufficient and Competent Evidence:

Auditors must collect sufficient and reliable evidence to support their findings, conclusions, and recommendations. This is the cornerstone of "due professional care."

Explanation of Answer Choices:

A. Obtain sufficient and competent evidence: Correct. This ensures audit findings are supported by reliable, documented evidence.

B. Determine scope: While part of audit planning, it is not directly related to due professional care.

C. Set materiality of financial statements: This applies to financial audits, not performance audits.

D. Present the findings in accordance with GAAP: GAAP is not a requirement for performance audits.

 What Does the Single Audit Act Require?

TheSingle Audit Actrequires non-federal entities (e.g., state and local governments, nonprofit organizations) that receive significant federal funds to undergo a single, organization-wide audit.

The audit focuses on both the entity’s financial statements and its compliance with federal program requirements.

 Why Is Option A Correct?

The Single Audit Act ensures accountability and transparency in the use of federal funds by requiring financial statement audits and compliance testing for grant recipients.

 Why Other Options Are Incorrect:

B. Using audits to manage acquisition risks:This relates to procurement and contract management, not the Single Audit Act.

C. Single audits of federal financial management systems:The act applies to non-federal entities, not federal agencies.

D. Establishing internal controls related to audits:While internal controls are assessed during a single audit, the act does not mandate their establishment.

 References and Documents:

Single Audit Act of 1984 (Amended 1996):Specifies the requirements for audits of non-federal entities receiving federal funds.

OMB Circular A-133 (Superseded by Uniform Guidance, 2 CFR Part 200):Provides detailed guidance on single audit requirements.