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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 Oct. 21, 2026 (see below)
An agency benefit program allows employees who commute by public transit up to 10 free taxi trips home per
calendar year. Employees can use the program for personal or family health emergencies. The most appropriate
method to check for abuse of this program is
* Why Verify Transit Use Before Taxi Use?
The program is intended for employees who commute by public transit. Verifying transit use on the day the taxi service was used ensures employees are adhering to program rules.
Random sampling is cost-effective and practical for identifying abuse without needing to review all records.
* Why Other Options Are Incorrect:
A . Looking for individuals using the service more than 10 times: This only identifies overuse but does not confirm whether program rules were followed.
B . Checking destination addresses for hospitals/clinics: This assumes all emergencies involve medical visits, which is not always the case.
C . Matching destination addresses to home addresses: This does not confirm transit use and may not identify abuse of the program.
* Reference and Documents:
GAO Fraud Prevention Guide: Recommends using random sampling to check compliance with program rules.
Best Practices for Internal Controls in Benefit Programs: Emphasizes verifying eligibility and usage to detect potential abuse.
The goal of shared gervices is to
Understanding Shared Services:
Shared services involve consolidating and centralizing resources, personnel, or processes to achieve efficiency and cost savings. This is common in government organizations looking to optimize operations.
Explanation of Answer Choices:
A . Reduce current staffing levels: While staff reductions may occur as a result, this is not the primary goal.
B . Transfer responsibilities to another entity: This describes outsourcing, not shared services.
C . Efficiently aggregate resources: Correct, as shared services aim to centralize resources for improved efficiency.
D . Provide private business opportunities: This is unrelated to shared services, which focus on internal government operations.
Association of Government Accountants (AGA), Shared Services in Government.
What is the basis for determining materiality for financial audits?
Definition of Materiality:
In financial audits, materiality is the threshold above which a misstatement or omission could influence the economic decisions of users of financial statements.
Auditors consider the needs of reasonable users when determining materiality, focusing on what would influence their decision-making.
Explanation of Answer Choices:
A . The auditee determines what is material: Incorrect. The auditor, not the auditee, is responsible for determining materiality.
B . The auditor establishes materiality based on whether a misstatement would influence the judgment made by a reasonable user of the financial statements: Correct. This aligns with auditing standards, such as those in the Yellow Book and AICPA guidance.
C . The entity's main provider of resources typically sets materiality levels: Incorrect. Materiality is not determined by resource providers but by the auditor based on the needs of users.
D . The auditor sets a standard percentage for all entities by transaction class: Incorrect. Materiality varies depending on the entity and its financial circumstances.
GAO, Government Auditing Standards (Yellow Book).
AICPA, Auditing Standards -- Materiality in Planning and Performing an Audit.
When planning for local government financial statement audit, what data source should the auditor consider first?
Importance of Prior Audit Findings:
When planning a local government financial statement audit, auditors should first review previous audit findings to identify recurring issues, control weaknesses, or non-compliance areas. This helps auditors focus on areas of higher risk and guides the development of an effective audit strategy.
Explanation of Answer Choices:
A . Government-wide financial statements: Important, but these are reviewed after identifying risk areas from prior findings.
B . Fund financial statements: These are part of the audit process but not the starting point for planning.
C . Reconciliations between fund financial statements: These are analyzed during the audit but come later in the process.
D . Previous audit findings: Correct. Reviewing past findings ensures the auditor addresses previously identified risks and compliance issues.
GAO, Government Auditing Standards (Yellow Book).
AICPA, Audit Planning and Risk Assessment Best Practices.
Which of the following acts requires federal agencies to pay interest to state government funds for entitlements that
are not provided in a timely manner?
* What Does the Cash Management Improvement Act (CMIA) Do?
CMIA governs the transfer of federal funds to state governments and ensures timely and efficient use of these funds.
If federal agencies fail to provide funds for entitlements (e.g., Medicaid) in a timely manner, CMIA requires them to pay interest to state governments for the delays.
This ensures states are compensated for any financial burden caused by delayed federal transfers.
* Why Other Options Are Incorrect:
A . Debt Collection Improvement Act: Focuses on improving debt collection practices for the federal government, not entitlements or interest payments to states.
B . CFO Act: Improves federal financial management but does not address payment timeliness or interest.
C . Accountability for Tax Dollars Act: Expands audit requirements but does not involve compensation for delays.
* Reference and Documents:
CMIA (1990): Requires federal agencies to pay interest on late entitlement payments to states.
Treasury Financial Manual: Details CMIA interest payment provisions.
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