AGA GAFRB Exam Questions [2025]

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AGA GAFRB Exam Syllabus Topics:

Topic	Details
Topic 1	Governmental Financial Accounting, Reporting and Budgeting: General Knowledge:This section of the exam measures skills of government financial analysts and covers the unique aspects of governmental accounting that distinguish it from private sector practices, such as service over profit and the critical role of the budget. It emphasizes the objectives of financial reporting in the public sector, the role of standard-setting bodies like GASB, FASB, FASAB, and IPSASB, and the due process for setting accounting standards. It also includes knowledge of interperiod equity, budgetary compliance, sustainability, and the characteristics of quality financial information.
Topic 2	Federal Financial Accounting and Reporting: This section of the exam measures skills of government financial analysts and covers the roles of FASAB, OMB, Treasury, and GAO in federal accounting. It includes an understanding of federal budgetary terminology and the federal budgetary equation. The section differentiates between budgetary and proprietary accounting and outlines the structure and use of various federal fund types. It explains how to record key budgetary transactions like appropriations and obligations and proprietary transactions such as payroll and depreciation.
Topic 3	State and Local Financial Accounting and Reporting: This section of the exam measures skills of public sector accountants and focuses on applying GASB standards to define reporting entities and component units. It explores the structure and purpose of various fund types and the basis of accounting for each. Candidates must understand the format and content of the Annual Comprehensive Financial Report and the purpose of popular reports for public transparency.

AGA Examination 2: Governmental Accounting, Financial Reporting and Budgeting (GAFRB) Sample Questions (Q116-Q121):

NEW QUESTION # 116
When a rural community creates a fire district to serve an area previously served by the county government, and the fire district receives no money or equipment from the county, this is an example of

A. a government merger.
B. a transfer of operations.
C. intergovernmental operations.
D. a government acquisition.

Answer: B

Explanation:
According to GASB Statement No. 69 (Government Combinations and Disposals of Government Operations), a transfer of operations occurs when one government relinquishes or ceases operations and another government assumes those operations, but no significant consideration (money, assets, or liabilities) is exchanged.
In this case, the fire district is assuming responsibility for fire protection without receiving funds or assets from the county. That aligns with the definition of a transfer of operations - not a merger or acquisition.
Relevant References:
GASB Statement No. 69 - Government Combinations and Disposals of Government Operations GASB Codification Section G60 - Combinations and Transfers GFOA Guidance on Intergovernmental Restructuring C). a transfer of operations

NEW QUESTION # 117
The Department of the Interior has the following costs associated with the development of a new visitor tracking system.
Research cost determining if system should be internally or externally developed $100,000 Software configuration and system development $750,000 Cost of testing the new system for fiscal usage $225,000 Converting data from old tracking system to new tracking system $500,000 How much should be capitalized as the cost of the asset?

A. $750,000
B. $1,575,000
C. $975,000
D. $1,475,000

Answer: C

Explanation:
FASAB SFFAS No. 10 (Accounting for Internal Use Software) provides guidance for capitalizing software development costs. The following costs are capitalized:
Software configuration and development: $750,000
Testing for functionality (ready for use): $225,000
These fall within the "software development stage."
The following are not capitalized:
Research costs (e.g., feasibility studies): $100,000 # Expense
Data conversion costs: $500,000 # Expense (unless part of application development, which it's not here) Capitalized total = $750,000 + $225,000 = $975,000 Relevant References:
FASAB SFFAS No. 10 - Accounting for Internal Use Software
OMB Circular A-136 - Capitalization Guidance
Treasury Financial Manual (TFM) - Capital Assets
B). $975,000

NEW QUESTION # 118
In state and local financial audits, material weaknesses must be reported to the

A. taxpayers.
B. local media.
C. legislature.
D. governing body.

Answer: D

Explanation:
What Are Material Weaknesses?
* Amaterial weaknessin internal control is a deficiency or combination of deficiencies that creates a reasonable possibility of a material misstatement in the financial statements that would not be prevented or detected in a timely manner.
* In the context of state and local financial audits, material weaknesses must be reported to those charged with governance, as they are responsible for oversight and corrective actions.
Why Is the Governing Body the Correct Answer?
* Thegoverning body(e.g., city council, county board, or state commission) is directly responsible for overseeing the entity's financial operations and ensuring accountability. Reporting material weaknesses to them ensures that corrective actions can be implemented to strengthen internal controls.
* Auditors communicate such findings through anaudit reportor amanagement letteraddressed to the governing body.
Why Other Options Are Incorrect:
* A. Legislature:The legislature may have oversight of state budgets and appropriations but is not the direct governing body for financial audits.
* C. Taxpayers:While transparency is important, material weaknesses are not directly reported to taxpayers. They may be disclosed in public audit reports, but taxpayers are not the primary audience.
* D. Local media:Material weaknesses are not formally reported to the media; their disclosure depends on the entity's public reporting processes.
References and Documents:
* GAO Yellow Book (GAGAS):Requires auditors to report material weaknesses to those charged with governance.
* GASB (Governmental Accounting Standards Board):Emphasizes the importance of communicating significant audit findings to governing bodies.
* AICPA Audit Standards (AU-C 265):Requires auditors to communicate material weaknesses to management and those charged with governance.

NEW QUESTION # 119
The objectives of federal financial reporting include all of the following EXCEPT

A. budgetary integrity.
B. systems and control.
C. stewardship.
D. mission readiness.

Answer: D

Explanation:
Comprehensive Detailed Explanation:
According to FASAB's Objectives of Federal Financial Reporting (Statements of Federal Financial Accounting Concepts, particularly SFFAC No. 1), the four major objectives of federal financial reporting are:
Budgetary Integrity
Operating Performance
Stewardship
Systems and Control
Mission readiness is not one of the core federal financial reporting objectives under FASAB standards, although it may be a goal of some federal agencies operationally (e.g., DOD), it is not one of the defined financial reporting objectives.
C). mission readiness
Relevant References:
FASAB SFFAC No. 1 - Objectives of Federal Financial Reporting
FASAB Handbook of Accounting Standards and Other Pronouncements

NEW QUESTION # 120
An example of a federal principal financial statement is the

A. Statement of Net Income.
B. Statement of Budgetary Resources.
C. Statement of Operations.
D. Statement of Cash Flows.

Answer: B

Explanation:
Federal principal financial statements are required under OMB Circular A-136 and FASAB standards. They include:
Statement of Budgetary Resources (SBR)
Balance Sheet
Statement of Net Cost
Statement of Changes in Net Position
Statement of Custodial Activity (if applicable)
There is no "Statement of Cash Flows" or "Statement of Net Income" in federal accounting - those are private-sector financial statements.
Relevant References:
OMB Circular A-136
FASAB SFFAS No. 53 - Principal Financial Statements
Treasury Financial Manual (TFM) Volume I
B). Statement of Budgetary Resources

NEW QUESTION # 121
......

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AGA GAFRB Exam Questions [2025]

Free PDF Useful AGA - Reliable GAFRB Exam Dumps

AGA GAFRB Exam Syllabus Topics:

AGA Examination 2: Governmental Accounting, Financial Reporting and Budgeting (GAFRB) Sample Questions (Q116-Q121):

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