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AGA CGFM Exam Questions
- Topic 1: Governmental Financial Accounting
- Topic 2: Reporting and Budgeting: General Knowledge
- Topic 3: Demonstrate an Understanding of State and Local Financial Accounting and Reporting
- Topic 4: Demonstrate an Understanding of Federal Financial Accounting and Reporting.
Free AGA CGFM Exam Actual Questions
Note: Premium Questions for CGFM were last updated On Jul. 11, 2026 (see below)
In relation to financial reporting, who evaluates internal controls to support an opinion on a fair presentation of the financial statements?
* Role of the Independent Auditor in Financial Reporting:
Independent auditors evaluate internal controls as part of their audit procedures to support an opinion on the fair presentation of the financial statements. This includes assessing whether internal controls over financial reporting are designed and operating effectively.
This evaluation helps ensure that financial statements are free of material misstatements, whether due to error or fraud.
* Why Management Does Not Do This:
Management designs and implements internal controls but does not evaluate them to support the auditor's opinion. Management's responsibility is to certify the accuracy of the financial statements, while the auditor provides an independent opinion.
* Why Other Options Are Incorrect:
C . The program office: This entity oversees operations but does not perform evaluations to support an audit opinion.
D . The audit committee: The committee provides oversight of the audit process but does not perform the evaluation itself.
* Reference and Documents:
GAAS (Generally Accepted Auditing Standards): Outlines the responsibilities of independent auditors regarding internal control evaluation.
GAO Yellow Book: Specifies the role of external auditors in evaluating internal controls during financial audits.
In state and local financial audits, material weaknesses must be reported to the
* What Are Material Weaknesses?
A material weakness in 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?
The governing 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 an audit report or a management letter addressed 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.
* Reference 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.
A performance measurement that is measured the same way over several periods is
. timely.
* What Is Consistency in Performance Measurement?
A consistent performance measure is one that is calculated and reported in the same way over several periods. Consistency allows for meaningful comparisons and trend analysis, making it easier to evaluate performance over time.
* Why Consistency Is the Correct Answer :
Performance metrics must remain consistent in methodology, definitions, and scope to ensure the results are comparable across time periods. Without consistency, the reliability and usefulness of the data are diminished.
* Why Other Options Are Incorrect:
A . Timely: Timeliness refers to how quickly the information is reported, not whether it is measured consistently.
B . Relevant: Relevance ensures the measure is meaningful to the decision-making process, but it does not address consistency.
C . Reliable: Reliability refers to the accuracy and trustworthiness of the data, not its consistency over time.
* Reference and Documents:
GAO Performance Measurement Guide: Stresses the importance of consistency in tracking and reporting metrics over time.
As a way to ensure fiduciary responsiblity, a government entity should include which of the following in its investment
policy?
* Why Include Permissible and Non-Permissible Investment Securities?
An investment policy outlines the guidelines and restrictions for managing an entity's investments, ensuring compliance with laws and protecting public funds.
Listing permissible (e.g., government bonds, treasury securities) and non-permissible investments ensures clarity about what the entity can and cannot invest in, helping to mitigate risk and maintain fiduciary responsibility.
* Why Other Options Are Incorrect:
A . Prices and performance of investment securities: This information is important for monitoring investments but does not belong in the policy itself.
C . Historical allocations of investment securities: Historical data informs decision-making but is not relevant to the rules governing investments.
D . Key and non-key investment security controls: While controls are critical, they are part of the implementation process, not the investment policy.
* Reference and Documents:
GAO Investment Policy Guidelines: Recommends specifying permissible investments to ensure fiduciary responsibility.
GFOA Best Practices in Investment Management: Emphasizes clear investment guidelines in the policy.
All of the following represent selection criteria used to make contract awards EXCEPT contractor
Selection Criteria for Contract Awards:
When awarding contracts, federal, state, and local governments typically evaluate contractors based on objective criteria like staff expertise, past performance, and financial position to ensure the contractor can successfully fulfill the contract requirements.
Union affiliation is irrelevant to the contractor's ability to meet the contractual obligations and is not a valid selection criterion.
Explanation of Answer Choices:
A . Staff expertise: Correctly used to ensure the contractor has qualified personnel.
B . Past performance records: Correctly used to evaluate the contractor's historical success in fulfilling similar contracts.
C . Union affiliations: Correct. This is not considered a valid selection criterion for contract awards.
D . Financial position: Correctly used to assess the contractor's financial stability.
Federal Acquisition Regulation (FAR) Part 15, Contracting by Negotiation.
Office of Management and Budget (OMB) Circular A-102, Grant and Contract Management Requirements.
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