Selected GFMC Government Financial Manager Questions Answers

Government Auditing Standards (GAS):

GAS, often referred to as theYellow Book, outlines the responsibilities of auditors conducting financial statement audits for government entities.

One core requirement is that auditors must consider compliance with applicable laws, regulations, contracts, and grant agreements that could materially affect financial statements.

Explanation of Answer Choices:

A. Design tests to assess compliance with laws, regulations, contracts, and grant agreements: Correct. This is a required component under GAS to ensure financial statements are materially accurate and comply with legal and regulatory frameworks.

B. Identify violations of laws which could be punishable by monetary penalties: Incorrect. Auditors are not required to investigate or pursue penalties but to focus on material misstatements or risks.

C. Identify expenditures that exceed the related obligations: Incorrect. While this could indicate an issue, auditors are not required to specifically test for this unless it relates to material misstatements or compliance issues.

D. Design tests to detect fraud, waste, and abuse: Incorrect. Auditors are not specifically required to detect fraud, waste, and abuse, though they should be alert to indicators.

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.

 National Performance Management Advisory Commission Framework:

TheNational Performance Management Advisory Commissiondeveloped a comprehensive framework to integrateperformance measurementinto government operations.

One of its primary goals was to incorporate performance metrics into thebudget processto align resource allocation with program outcomes.

This ensures that budgeting decisions are informed by program performance, improving efficiency and accountability.

 Why the Budget Process?

By linking performance to budgeting, governments can prioritize funding for programs that demonstrate effectiveness and reduce funding for underperforming initiatives.

 Why Other Options Are Incorrect:

A. Internal control plan:Internal controls focus on risk management, not incorporating performance measurement.

B. Financial statements:Performance metrics are not reported in financial statements, which focus on financial position and results.

C. Audit procedures:Audits verify financial accuracy and compliance but do not incorporate performance measurement.

 References and Documents:

National Performance Management Advisory Commission Report (2010):Recommends integrating performance measurement into the budget process.

GAO Guide on Performance Budgeting:Explains how performance metrics inform budget decisions.