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

Understanding the Scenario:The table compares the costs of four printing jobs performed by an "Internal Print Shop" versus three external vendors (Ace Printing, ABC Printing, and Printing, Inc.). Each vendor's pricing varies by print job type. The task is to evaluate whether outsourcing (hiring external vendors) is a reasonable alternative to keeping the work in-house.

Key Considerations in Outsourcing:According to governmental accounting principles and budgeting practices outlined by theAssociation of Government Accountants (AGA), the decision to outsource should consider:

Cost-effectiveness: Does outsourcing reduce costs without compromising quality or service delivery?

Operational efficiency: Can outsourcing free up internal resources for other priorities?

Comparative pricing: How do external vendor rates compare to internal costs for identical services?

Analysis of the Print Jobs:Let’s break down the cost comparison for each print job:

Zone Map:Internal cost = $4.23.Cheapest vendor = Printing, Inc., at $4.00.Outsourcing is cheaper for this job.

Agenda Packet:Internal cost = $23.18.Cheapest vendor = Printing, Inc., at $22.00.Outsourcing is cheaper for this job.

Budget Cover:Internal cost = $840.00.Cheapest vendor = ABC Printing, at $624.30.Outsourcing is significantly cheaper for this job.

Employee Benefit Brochure:Internal cost = $6.14.Cheapest vendor = ABC Printing, at $4.90.Outsourcing is cheaper for this job.

Conclusion Based on Analysis:

Across all four print jobs, the lowest-cost external vendor always beats the Internal Print Shop's costs.

From abudgetary perspective, outsourcing is feasible as it offers cost savings across all jobs.

Why Not A, C, or D?:

Option A(Keep printing in-house): Incorrect, as in-house costs are consistently higher than the cheapest external vendor.

Option C(Outsourcing is necessary): Incorrect, as feasibility doesn’t mean necessity; internal printing is still an option if other factors (like quality or control) outweigh costs.

Option D(Award contract to ABC Printing): Incorrect, since the best vendor depends on the job (e.g., Printing, Inc. is cheaper for Zone Map and Agenda Packet).

 Why Pay on the Discount Date?

Discount termsare offered by vendors to encourage early payment, such as "2/10, net 30" (2% discount if paid within 10 days). Paying on the discount date ensures the organization takes advantage of cost savings while still making timely payments.

This approach optimizes cash management by reducing payment obligations while maintaining good vendor relationships.

 Why Other Options Are Incorrect:

A. After the due date:Late payments can damage vendor relationships and incur penalties.

B. Prior to the due date:Paying too early does not provide additional benefits and can unnecessarily deplete cash reserves.

C. On the due date:If a discount is offered, waiting until the due date means missing the opportunity to save money.

 References and Documents:

GAO Financial Management Guide:Recommends paying invoices with discounts on the discount date to maximize cost savings.

Best Practices in Governmental Cash Management (AGA):Highlights the importance of managing vendor payments to take advantage of discounts.

Fraud Audit Objective:Fraud audits aim to detect and investigate fraudulent activities, strengthen internal controls, and report findings to stakeholders.

Basic Steps in Fraud Audits:

Consulting Legal Counsel: Ensures compliance with legal requirements and protects the organization.

Reporting the Results: Essential to inform stakeholders of findings and corrective actions.

Follow-up on Control Weaknesses: Addresses identified vulnerabilities to prevent future fraud.

Explanation of Incorrect Answer:

D. Considering political ramifications: Irrelevant to fraud audits, as these audits focus on financial and legal matters rather than political considerations.