Governmental Financial Management CGFM Study Guide 3

What action results in the government becoming a collector of a guaranteed loan

A government agency becomes a collector of a guaranteed loan if the borrower fails to make payments on the loan to the lending institution. In these cases, the agency is obligated to pay off the loan to the original lending institution and it becomes both the lender and collector of the loan.

What is a heritage asset?

A heritage asset is an asset that governments retain for future generations because of its historical significance, natural beauty, artistic merit, etc.

Enterprise risk management is: a. the consistent implementation of internal controls across the enterprise. b. an agency-wide approach to addressing the full spectrum of the organization's significant risks by understanding the combined impact of risks as an interrelated portfolio, rather than addressing risks only within silos. c. developing a broad understanding of functional and programmatic risks, and aggregating those risks to create an enterprise risk profile. d. identification and treatment of strategic risks across the enterprise.

Answer: (b)

What is COTS and what are the pros and cons of a COTS solution? Answer:

COTS is an acronym for commercial off-the-shelf systems. There are three important realities of user requirements in COTS procurements. One is that in all likelihood, no COTS product will exactly meet the identified requirements. The second is that any COTS product designed for government will most likely support the accomplishment of the financial manager's objectives. The third is that the acquisition of a COTS product will only lead to success if the financial manager is willing to revise the way his or her financial information is processed in order to take maximum advantage of the capabilities of the acquired system (i.e. process redesign). The easiest transitions come about when the COTS product that causes the least change is procured

List the five components of internal control as set forth by COSO. Answers:

Control environment, risk assessment, control activities, information and communication, and monitoring.

Define data mining. Answer:

Data mining involves bringing together very large, disparate sources of information, combining them into a consistent format, and using filters and algorithms to extract meaningful information. In true data mining, the application, though guided by the user, provides insights beyond that obtained by filtering the data according to given criteria.

A government should establish a different bank account for each of its funds. True or false?

False. A government should concentrate its accounts for increased investment potential. The accounting system should be used to track the cash balances for each fund.

A poor control environment can be overcome by a strong risk assessment. True or false? Answer:

False. A poor control environment undermines the entire internal control structure. If you cannot trust management to act ethically or to take internal controls seriously, you cannot rely on the system. A strong risk assessment will mitigate against a poor control environment, but it cannot overcome it.

If a person defaults on a debt, the government will immediately bring legal action to collect the debt. True or false

False. Government agencies are usually the lender of last resort. The purpose of the program, which results in the loan, is more likely to be furthered if the loan can be re-scheduled or re-negotiated, than if the loan is foreclosed immediately.

Auditors are responsible for developing internal controls. True or false? Answer:

False. Management is responsible for establishing and maintaining effective internal controls. The auditors must understand them and evaluate them in order to properly conduct an audit.

The "shared services movement" is primarily a federal phenomenon. True or false? Answer:

False. Shared services are a prudent business operations option and many states and local entities are finding that through sharing common infrastructure and operations requirements, agencies are able to operate more economically and focus on providing services to the communities they serve.

Internal controls are relevant to the work environment, not to the home environment. True or false? Explain. Answer:

False. We use internal controls all of the time at home. We safeguard the passwords we use to log onto the Internet, we reconcile our bank statements and we set aside homework time for our children. These are all internal controls to achieve our objectives.

Explain the following components of a financial management system. a. funds management b. receivables management c. payables management d. reporting Answer:

Funds management consists of budget preparation, budget formulation, funds allocation, budget execution, and funds control. Receivables management consists of customer information maintenance, receivable establishment, debt management, and collections and offsets. Payables management consists of payee information maintenance, payment warehousing, payment execution, and payment confirmation and follow-up. Reporting consists of general reporting, external reporting, internal reporting, and responding to ad hoc queries

The Office of Management and Budget (OMB) at the federal level, provided guidance in 2010 to halt any new procurements of financial systems. Why was this decision made? Please select the best answer: a. Numerous agencies were spending large sums of money to identify commercially provided products to support their requirements. b. There were several high-profile financial systems failures. c. There were other priorities and new regulations on which the CFOs and their staff needed to focus their attention. d. CFOs and their staff were not very astute project managers. Answer:

(a) Answers a, b, c are all good answers to this question, however, A is the best answer to the question. An OMB review of the IT-spend across agencies determined that many hundreds of millions of dollars were being spent to review the commercial-off-the-shelf (COTS) marketplace and identify detailed requirements to help 'customize' the products to meet agency-unique requirements. Increased standardization, with a common account code structure and adherence to a standard set of governmentwide reporting requirements, was a key driver to OMB guidance to halt these procurement pro

Which of the following best describes the order of steps in the risk management process? a. establish the context, identify risk, analyze and evaluate, develop alternatives, respond to risks, monitor and review b. identify risk, analyze and evaluate, develop alternatives, establish the context, respond to risks, monitor and review c. monitor and review, identify risk, establish the context, analyze and evaluate, develop alternatives, respond to risks d. establish strategy, identify risk, analyze and evaluate, develop alternatives, respond to risks, monitor and review

(a).

A large school district advertises for bids to supply the district with its paper requirements for the year. It receives bids from six commercial vendors. What type of contract is most appropriate for this procurement? a. fixed price b. cost, plus a fixed fee c. time and materials d. cost sharing

(a). A fixed price contract is generally the most desirable type of contract and should be used when appropriate specifications can be prepared, leading to advertising for bids and effective price competition.

A warrant is: a. a request for funds drawn on the treasury of a government. b. a request for funds drawn on a financial institution regulated by the Federal Reserve System. c. a request for funds to cover a ZBA. d. a request for the payment of a recurring electronic payment.

(a). A request for funds drawn on a financial institution is a check. A request for funds to cover a ZBA is an intra-bank transfer. A request for the payment of a recurring electronic payment is a request for an electronic funds transfer.

The term "management controls": a. is considered synonymous with internal controls. b. refers to human relations activities only. c. relates only to private industry, not governmental agencies. d. is specifically related to the Foreign Corrupt Practices Act of 1977. Answer:

(a). Management controls is used interchangeably with internal controls.

The Depository Trust Company is responsible for: a. facilitating the exchange of ownership of securities. b. holding collateral as an interested third party. c. handling Federal Reserve System wire payments. d. validating the experience and knowledge of investment advisers.

(a). The Depository Trust Company (DTC) is a central repository through which members electronically settle trades in corporate, mortgage-backed and municipal securities, and electronically transfer security certificates.

Which of the following is not a duty of the Federal Reserve System? a. guaranteeing direct loans of the federal government b. maintaining stability of the financial system c. conducting monetary policy for the government. d. supervising and regulating banking institutions

(a). The Federal Reserve System does not guarantee loans of the federal government. Loans are guaranteed by agencies of the federal government.

Using dollar amounts in each situation, how is the inventory turnover calculated? a. supplies issued, divided by average inventory b. supplies issued, divided by supplies received c. defects found on inspection, divided by supplies received d. stock-outs, divided by supplies issued Answer:

(a). The inventory turnover calculation is a measure of how fast the inventory moves through the system. All other things equal, a high turnover is favorable because it means that, from an overall perspective, there is not likely to be very much slow-moving stock in inventory. The number of times the inventory "turns over" is calculated by dividing the dollar amount of supplies issued by the average inventory of supplies

Which of the following ratios provides the most rigorous measure of the ability of an entity to meet its short-term obligations? a. quick ratio b. slow ratio c. current ratio d. short ratio Answer:

(a). The quick ratio is the most rigorous measure of the ability of an entity to meet its short-term obligations because the numerator consists only of cash and assets readily convertible to cash. The current ratio contains some current assets that may not be readily converted to cash

Which of the following organizations is not an external shared service provider?? a. Department of Agriculture, National Finance Center (NFC) b. NASA Shared Service Center (NSSC) c. Department of Defense Finance and Accounting Service (DFAS) d. Department of Interior, Interior Business Center (IBC) Answer:

(b) the NASA Shared Service Center is an excellent example of an internal shared service provider. NSSC provides services only to user entities within NASA

How is a financial ratio calculated? a. by multiplying one data element by another b. by dividing one data element by another c. by adding one data element to another d. by subtracting one data element from another Answer:

(b). A ratio is the relationship of one data element to another. Therefore, to develop a ratio, one data element needs to be divided by another.

In supply control, which of the following is included in "administrative lead time?" a. time required to physically count the quantity of inventory on hand b. time required to order and receive delivery of stock c. time required to coordinate customer needs before the year begins d. time required to prepare periodic management reports Answer:

(b). Administrative lead time is one of the factors considered in determining when to replenish inventory levels. Administrative lead time includes the time needed to order and receive delivery of stock. The other three answers are irrelevan

A county government collects funds from property taxes in late December each year. The county releases property taxes collected on behalf of school districts on the following July 1. Which of the following investments would be the most prudent investment of this money for six months? a. bond funds b. commercial paper c. equities d. real estate e. checking account interest

(b). Commercial paper is a short-term investment instrument, which would be the most appropriate and prudent given the limited time period. Bond funds are long-term investments, while equities and real estate have a greater degree of risk. The interest from a checking account would be much less than the interest from commercial paper.

Following up on corrective actions identified after an internal control review: a. is not necessary, although many agencies do it. b. is one of the steps in the internal review process. c. is a function that is properly performed by auditors, not managers. d. creates a conflict of interest for managers conducting the next internal control review. Answer:

(b). Even after conducting a thorough internal control review and establishing corrective actions, we may find that the recommended corrective action may not always have the desired impact on the assessable unit. A detailed follow-up process is integral to an effective internal control process.

The technique that allows you to graphically represent a business process is: a. regression analysis. b. flowcharting. c. future value. d. efficiency ratio. Answer:

(b). Flowcharting allows you to represent a process in graphical form.

Which of the following is required for performance measurement to function effectively? a. an encumbrance accounting system b. an established goal or target c. quantifiable indicators of what a program is doing or achieving d. a cash flow statement Answer:

(b). For performance measurement to function effectively, there must be an established goal or target against which actual performance can be measured. None of the other three choices are relevant to measuring performance

The prudent expert rule states that: a. only persons with investment experience should sit on a board. b. board members must hire investment expertise if such knowledge is not otherwise available. c. it is sufficient for board members to be prudent in investing government funds. d. board members should perform due diligence by reading and understanding investment manager's reports before the board meetings.

(b). If the individual or board overseeing the government's investments does not have the knowledge or experience needed, then the individual or board must acquire competent individuals or firms to assist in the investment of those funds.

What is not a purpose of internal controls? a. achieve program objectives b. ensure timely budget passage c. comply with laws and regulations d. safeguard assets Answer:

(b). Internal controls can deal only with issues under the organization's control. The organization probably has no control over the legislature's ability or willingness to pass budgets on a timely basis. Accordingly, it cannot be one of the organization's internal control objectives

Internal controls provide what level of assurance that fraud, waste and mismanagement have been eliminated? a. absolute assurance b. reasonable assurance c. minimal assurance d. unqualified assurance e. qualified assurance Answer:

(b). Internal controls cannot guarantee either the success of an organization's programs or the absence of waste, fraud and mismanagement. Internal controls are intended to provide a reasonable level of confidence that the organization will achieve its programmatic goals and minimize fraud, waste and abuse. No matter how well-designed and operated, internal controls cannot provide absolute assurance that all of an organization's objectives will be met.

As a result of a severe storm, emergency repairs are needed to repair washed-out segments of several key roadways. How should the village seek a contractor to do the repairs, estimated to cost $75,000? a. contract with the first contractor listed in the telephone book b. get proposals from three contractors who have been pre-qualified to do repair work c. add a change order to a contract currently held by a contractor d. prepare detailed specifications of work needed, place an invitation for bids in the local newspaper, and allow 30 days to submit bids

(b). Laws or regulations generally provide criteria for obtaining contractors to perform emergency work. The objective of these laws or regulations is generally to get the work done as quickly as possible and, at the same time, seek competition among competent contractors to get reasonable prices. Answers (a) and (c) do not provide competition, and answer (d) will not get the work done promptly.

Which factor makes it very difficult for management to prevent fraud? a. multiple bank accounts b. collusion c. employee error d. annual audits by an external auditor Answer:

(b). Multiple bank accounts are a risk factor that management must deal with, but do not necessarily make it very difficult to prevent fraud. External audits can help management to prevent fraud. Employee error is always a possibility, but not an issue particularly related to fraud. Collusion, however, involves two or more employees plotting to evade the organization's control mechanisms. Techniques, such as separation of duties, can fail if a number of employees work together to commit fraud

A copy of the purchase order should go to the receiving department to alert it to incoming supplies. Regarding that copy, which of the following procedures is most likely to ensure accurate counts on inspection? a. show the quantities ordered on that copy b. do not show the quantities ordered on that cop c. show the unit cost of the quantities ordered on that copy d. do not show the unit cost of the quantities ordered on that copy Answer:

(b). Not showing quantities ordered on the receiving department's copy of the purchase order requires the inspector to physically count the items received. Showing the quantities (a) could result in the failure of the inspector to actually count the deliveries. Showing or not showing unit costs (c and d) are not likely to affect the inspection one way or the other.

Which statement about payback analysis is false? a. It asks how long it will take to recover the amount invested. b. It considers the time value of money. c. It is a simple straightforward technique. d. It is often used in combination with other analytical technique

(b). Payback analysis is a simple analytical technique that asks how many years it will take to recover the costs of an investment. It does not consider the cost of money because recovery in the fourth year is treated the same as recovery in the first year. For that reason, it is often used in tandem with other techniques

Which of the following statements is false regarding the uses of performance measurement and reporting? a. It helps decision-makers in the resource allocation process. b. It helps in assessing efficiency, but not effectiveness. c. It helps citizens assess government performance. d. It represents management's assertion regarding performance. Answer:

(b). Performance reporting, which represents management's assertion regarding an entity's performance, can help the user of the report assess both efficiency and effectiveness. Performance measurement also helps decision-makers in allocating resources.

Which organization publishes International Standards for the Professional Practice of Internal Auditing? a. The Government Accountability Office b. The Institute of Internal Auditors c. The Governmental Accounting Standards Board d. The Office of Management and Budget Answer:

(b). The Institute of Internal Auditors. The GAO publishes standards on government auditing. The GASB publishes standards on accounting and reporting. OMB does not publish accounting standards, but does provide guidance on other matters

Quotes for over-the-counter securities can be obtained on the: a. NYSE. b. NASDAQ. c. AMEX. d. Chicago Board of Trade.

(b). The NASDAQ provides the quotes for securities that are traded over-the-counter. The other markets provide quotes only for the securities that are listed on the appropriate exchange.

Which of the following is inappropriate? a. The person receiving a deposit makes out the deposit slip. b. The person making out the deposit slip makes the deposit. c. The person sending out the bill records the transaction in the system. d. The person recording transactions reconciles the bank statements.

(b). The person making the deposit slip has the ability to alter the deposit. Thus, these are not compatible duties. Often, the person receiving the deposit also makes out the deposit slip.

In assessing the financial condition of a general purpose local government, what does the ratio of "total unassigned fund balance" to "total revenues and transfers in" indicate? a. nothing that is useful b. the ability of an entity to meet future revenue shortfalls c. the ability of an entity to pay its short-term obligations d. the ability of an entity to pay its long-term obligations Answer:

(b). The size of the unassigned fund balance, relative to total revenues and transfers in, provides an indicator of the budgetary cushion. The greater the ratio, the greater the ability is to weather economic problems, like revenue shortfalls. A large unreserved fund balance may also help pay short-term obligations, but only if the assets are highly liquid

Critical challenges to effective implementation of ERM include: a. the establishment of a Chief Risk Officer reporting directly to the head of the agency b. the establishment of an effective internal control program c. ensuring an organizational culture that is willing to acknowledge risks and determine treatments that are in the best interest of the overall agency. d. establishing objectives that minimize enterprise risks. Answer:

(c)

Which item is false regarding the steps an agency should take on internal control deficiencies? a. design proposed corrective actions b. establish timetables for corrective actions, including assigning the responsible individual c. place all responsibility for the assessment and maintenance of internal controls under the agency CFO d. track progress to ensure timely and effective results e. establish follow-up procedures Answer:

(c). Although the CFO is very involved with internal controls, he or she cannot be solely responsible for them. Many internal controls relate to financial activities, of course, but others will relate to programmatic or non-financial activities. For example, in many social service programs, the organization must determine beneficiary eligibility. Programmatic managers need to be involved in such controls

Using an alarm clock to make sure we wake up at the right time is an example of: a. control environment. b. risk assessment. c. control activity. d. time management. Answer:

(c). An alarm clock is a clear example of a control activity. The risk is that we will oversleep. The technique we adopt is to set the alarm clock

Enterprise resource planning systems can be characterized as: a. large-scale integrated systems. b. systems that are designed to perform a single application for a single entity. c. systems that rethink how an organization operates in order to improve service and reduce costs. d. systems that are obtained from an organization that provides systems for several entities. Answer:

(c). By definition, an enterprise resource planning system is more than a large scale integrated system. It typically encompasses multiple systems, performing multiple applications. And the system can be operated internally or by an external party

Which of the following data elements is likely to be found in the calculation of the quick ratio? a. outstanding long-term debt b. merchandise inventory c. cash equivalents d. unassigned fund balance Answer:

(c). Cash equivalents are among the current assets used in calculating the quick ratio, because they are short-term liquid investments readily convertible to known amounts of cash, and are so close to maturity that there is little risk of loss of value if they need to be liquidated immediately. Merchandise inventory may not be converted to cash for many months

Debt service coverage shows the number of times an entity's debt service is covered by: a. its net assets (assets minus liabilities). b. its working capital (current assets minus current liabilities). c. its net revenues (gross revenues minus operating and maintenance expenses). d. its outstanding long-term debt (debt issued minus debt repaid). Answer:

(c). Debt service coverage is the number of times an entity's debt service is "covered" by the annual revenues that are available to pay debt service.

What information would probably not be documented in property record-keeping? a. replacement value b. acquisition cost c. depreciation d. accountability

(c). Depreciation is an accounting entry. Property management systems do not routinely track depreciatio

The primary difference between internal and external auditors is: a. external auditors must adopt audit standards. b. external auditors review only financial statements. c. internal auditors are not independent. d. internal auditors use the AICPA audit standards. Answer:

(c). External auditors must be independent of the organization they are auditing; internal auditors cannot be. They both must adopt audit standards. The external auditors are more likely than the internal auditors to audit in accordance with the AICPA standards. The internal auditors are more likely to use either Government Auditing Standards or the standards set forth by the Institute of Internal Auditors. External auditors can conduct performance audits in addition to financial statement audits.

Which federal agencies must have annual financial statements? a. the 15 cabinet agencies b. all agencies with more than $100 million in annual budgetary authority c. virtually all federal agencies d. none of the above Answer:

(c). Initially, only the largest federal agencies were required to have annual financial statements. However, the Accountability for Tax Dollars Act of 2002 extended the requirement for annual financial statements to virtually all federal agencies.

What step is not required in evaluating the internal control process? a. segment the agency b. train the evaluation staff c. audit each of the segments d. document the process Answer:

(c). It is not necessary to audit each segment. Indeed, the time involved would be so great that we would probably never complete the evaluation of internal controls.

A secure area for expensive electronic components is an example of: a. risk assessment. b. control environment. c. control activity. d. monitoring. Answer:

(c). Management wants to be sure that expensive items are not misused or stolen. As a result, they frequently secure such items in a controlled area. This is a control activity that is designed to deal with the increased risk of inherently risky assets.

Management monitors the internal control system to ensure: a. employees read the procedures handbooks. b. the auditors do their work correctly. c. the control mechanisms work effectively. d. employees do not make an unreasonable number of errors. Answer:

(c). Managers need to be sure that the control activities they have designed are both being implemented and are accomplishing their intentions. As a result, they monitor the mechanisms on an ongoing basis

From the perspective of the citizenry, what is the purpose of performance reporting? a. to see if the entity reports in accordance with GAAP b. to see if the entity's total expenditures do not exceed revenues c. to help citizens assess governments' results d. to see if the financial statements have been audited Answer:

(c). One of the major purposes of performance reporting is to enable citizens to assess the accountability of public officials. Citizen concern with the other three choices in this question can be answered through financial reporting, as distinguished from performance reporting

A government has a collateral agreement with its depository bank. The collateral is held in the bank's trust department. The government is subject to: a. interest rate risk. b. liquidity risk. c. custodial credit risk. d. systematic risk.

(c). Securities that are not held by the government or its agent, and particularly if they are not held in the owner's name, have the greatest custodial credit risk.

Which law first required audited financial statements from the largest federal agencies? a. Federal Financial Management Improvement Act b. Federal Managers' Financial Integrity Act c. Chief Financial Officers Act of 1990, as expanded by the Government Management Reform Act d. OMB Circular A-123 Answer:

(c). The CFO Act was the first time that federal agencies were required to produce audited financial statements. The CFO Act required audited financial statements from the largest agencies, but that requirement has now been extended by other laws to all federal agencies that receive annual budgetary authority of $25 million or more.

Which of the following should not be done through electronic payments? a. the payroll of the government b. payments to retirees c. a payment for a one-time purchase d. payments for the purchase of investments

(c). The amount of time involved in setting up an account for an electronic payment would be too costly for a one-time purchase. This is particularly true if the amount is small.

Which of the following best describes the basic objective of the acquisition process when acquiring goods and services? a. to obtain the highest quality product or service available b. to obtain at least three competitive proposals c. to obtain the best price considering quality and delivery requirements d. to ensure that all contractors on the bidders list have an opportunity to submit bids or proposals

(c). The basic objective of any procurement is to get the best price, considering quality and delivery requirements. Answer (a) may be "nice to have" but may cost far more than is necessary to satisfy user needs. Answers (b) and (d) are desirable goals, but do not describe the basic objective of procurement.

A state transportation department receives four bids to construct six miles of highway. Each bid is for a different price. Which of the following best describes the contractor who should be awarded the contract? a. the company that built a nearby state highway b. the most experienced builder of state highways c. the lowest responsible bidder d. the bidder with the greatest financial capacity

(c). The contract should be awarded to the lowest responsible bidder. By coincidence, the lowest responsible bidder may also happen to be the most experienced or the one with the greatest financial capacity.

You consider management philosophy and operating style in connection with a review of: a. risk assessment. b. monitoring. c. control environment. d. information and communication. Answer:

(c). The control environment is the basis of the entire internal control framework. It encompasses: integrity and ethical values; commitment to competence; management philosophy and operating style; and human resource policies and practice

What are the four C's of credit? a. character, capacity, communication, collectability b. character, communication, collateral, capital c. character, capacity, collateral, capital d. character, capital, collectability, communication

(c). The four C's of credit are character, capacity, collateral and capital. Character refers to the borrower's willingness to pay, capacity refers to ability to pay, collateral is the property that secures the loan, and capital is the financial interest the borrower has in the loan.

Which of the following pairs of factors are "traded off" against each other in determining the Economic Order Quantity? a. pilferage costs and obsolescence costs b. receiving costs and inspecting costs c. ordering costs and carrying costs d. perpetual inventory costs and periodic inventory costs Answer:

(c). The more orders placed for supplies, the greater the total ordering costs, and the lower the carrying costs. In the Economic Order Quantity formula, these costs are "traded off" against each other to arrive at the optimum quantity to order

Which statement best expresses the relationship of cost versus benefit in internal controls? a. The cost of a control should always exceed the benefits. b. The cost of controls is unimportant because elimination of risk is essential. c. The benefits of a control should exceed its cost. d. We should consider only financial costs and financial benefits in determining whether to institute an internal control mechanism. Answer:

(c). There is little point to establishing a control that exceeds the benefits to be derived. That is the reason that most organizations do not maintain close control over office supplies. However, we must always consider nonfinancial costs. We would be willing to spend substantial funds, for example, to alleviate serious danger to employees or clients

Which of these statements about financial ratio analysis is NOT true? a. Ratios should be compared with those of similar entities. b. Ratios should be traced over time within an entity. c. Only one ratio is needed to assess an entity's financial condition. d. Common-size financial statements provide useful data for analysis. Answer:

(c). This statement is not true because analysis of an entity's financial condition requires consideration of many factors, including ability to pay short-term obligations, ability to weather economic downturns, ability to pay long-term obligations, and economic and demographic trends

We usually consider the time value of money when: a. calculating depreciation costs. b. hiring new employees. c. making capital investments. d. purchasing supplies. Answer:

(c). We consider the time value of money when we are about to make a large commitment of funds that will benefit future years. Most commonly, this involves making capital investments

Which of the following situations should be considered when thinking about moving to a shared service provider? Please select the best answer. a. the agency's current systems and processes can no longer be maintained b. the interfaces to mission-based systems will need to be developed c. the number of staff eligible for retirement d. all of the above Answer:

(d) All of the above is the BEST answer. When an agency's computing platform is no longer capable of being updated to meet mandatory requirements, and/or is not supported by the vendor, then a change to a more sustainable and cost-effective business solution is a primary driver to moving to a shared service provider

In a typical migration to a shared service provider, which of the following is true? a. Agency accounting support staff will be relocated to the shared service provider's team. b. Migrating to a shared service provider will provide an agency access to modern technology and capabilities. c. Developing a service level agreement with the SSP will help the agency manage support expectations. d. B and C above Answer:

(d) The primary purpose of moving to a shared service provider is to gain access to a more modern and secure technology platform. A service level agreement is a standard best practice to document the responsibilities of each agency (the service provider and the entity seeking service from another). Not all shared service providers also provide the operational support (i.e. transaction processing)

Which of the following approaches to procurement is most likely to result in negotiation with the prospective providers of services, based on the best approach to providing the service? a. when the agency purchases from a statewide contract or catalog b. when the agency issues an invitation for bids (IFB) c. when the agency purchases from a blanket purchase agreement d. when the agency issues a request for proposals (RFP)

(d). A request for proposals is generally used to obtain proposals leading to negotiation of a contract based on a variety of factors, in addition to price, such as the contractor that proposes the best approach to providing the service. The procedures in answers (a), (b), and (c) are not used when there is need for negotiation based on which contractor provides the best approach.

Real property should be safeguarded from: a. terrorist attacks. b. fire. c. weather damaged d. all of the above.

(d). All of the above

What is the difference between economy and efficiency? a. There is no difference; the two terms may be used interchangeably. b. Economy is a resource-usage concept, and efficiency relates to the extent to which predetermined goals are achieved. c. Economy relates to the quality of outputs, and efficiency relates to the quantity of outputs. d. Both are least-cost notions, but economy relates to the acquisition of resources and efficiency relates to the usage of resources. Answer:

(d). Although the terms economy and efficiency tend to be used in the same breath, they have different meanings. Economy is concerned with acquiring resources at the least cost commensurate with needs, and efficiency is concerned with using resources at the least cost

Which of the following statements is true? a. Auditors and managers have the same responsibility for internal controls. b. Auditors design internal controls and managers implement them. c. Managers design internal controls and auditors implement them. d. Managers design and implement internal controls and auditors assess and report on them. Answer:

(d). Auditors are not responsible for operating or managing the organization. Indeed, if they step into that role, they render themselves ineligible to conduct audits because they would no longer be independent. However, the auditors must understand the internal control systems in order to perform their audits. As we will discuss in Section 2 of this course, Government Auditing Standards require specific reporting on internal controls

In the System Development Life Cycle process, the step that defines what the new system must do is called: a. general design. b. implementation. c. detailed design. d. requirements definition. Answer:

(d). General design and detailed design are the two steps that define how the system will operate in order to meet the requirements. Implementation occurs after the system is designed, coding is modified or completed, and the system is tested for bugs

Which of the following statements is NOT an appropriate denominator for calculating the debt burden of a city or county? a. full value of taxable real property b. personal income c. population d. value of government-owned propert

(d). Governments do not pay taxes on government-owned property, so that property is not part of the denominator for calculating debt burden. The other three items are all used in calculating debt burden

An assessable unit could be: a. a government agency. b. a very large governmental division. c. a property on the county's tax rolls. d. a governmental unit large enough to be significant, but small enough that an internal review team can deal with it as a whole. Answer:

(d). In conducting an internal control review, one technique is to segment the agency into components, programs and administrative functions in order to develop an inventory of assessable units. The units must be large enough to make the work on them worthwhile, but not so large that the team members cannot deal with the whole unit.

An accounting system is an example of: a. control environment. b. risk assessment. c. control activity. d. information and communication. e. monitoring. Answer:

(d). Information and communication refers to data that moves around an organization. It includes policies and procedures as well as accounting data and personnel records. Of course, an accounting system includes control activities also. However, it is included in the information and communication component.

Which of the following investments types is the most liquid? a. equities b. bonds c. debentures d. STIFs

(d). Short-term investment funds (STIFs) give governments the flexibility to purchase or redeem investments on a daily basis.

Which of the following is not normally a function of a financial management system? a. collect accurate, timely, complete, reliable and consistent information b. support policy decisions c. support budget execution d. maintain information on citizen inquiries e. facilitate preparation of the financial statements Answer:

(d). Such information is not financial in natur

A county government is able to issue debt securities at an interest rate of 4 percent and can invest that money in a U.S. government Treasury bill earning 5 percent. Which of the following could prevent this combined transaction from being profitable? a. total return b. benchmarking c. prudent expert rule d. arbitrage

(d). The federal government has arbitrage restrictions on the amount that can be earned from investments.

A county government is able to issue debt securities at an interest rate of 4 percent and can invest that money in a U.S. government Treasury bill earning 5 percent. Which of the following could prevent this combined transaction from being profitable? a. total return b. benchmarking c. prudent expert rule d. arbitrage

(d). The federal government has arbitrage restrictions on the amount that can be earned from investments.

Which of the following inventory/supply control rules is most likely to ensure that the optimum quantity of supplies is on hand? a. taking a physical inventory at year-end b. using all available supply funds before the end of the year c. storing supplies in such way as to prevent deterioration d. ordering enough to meet user demands, but not so much as to create excesses Answer:

(d). The most favorable amount of inventory to have on hand is the result of procedures and practices that ensure that quantities ordered are sufficient to meet user demands, without creating excess quantities that create excessive carrying costs. Answers (a) and (c) are useful procedures, but they don't necessarily ensure optimum amounts on hand. Answer (b) is a wasteful procedure

Which of the following data elements must be used in calculating the average receivables collection period? a. cost of goods sold b. merchandise inventory c. cash d. revenues Answer:

(d). To calculate the average receivables collection period, you first need to know either the revenues per day or the accounts receivable turnover, both of which require knowing the total revenues for the year. None of the other three items cited in the question are relevant to the calculatio

Options for treating risks include all except: a. accept. b. avoid. c. transfer or share. d. reduce. e. cancel. Answer:

(e).

Which of the following are the responsibilities of the financial manager in the implementation of a new financial management system? a. establishing an understanding both within and outside the financial management organization that it is the user of the system and what that entails b. developing and strengthening the interface among the system developer, the procurement activity and the user activities c. defining user requirements d. communicating and monitoring user requirements e. ensuring that all functional requirements can be supported by the new system f. all of the above Answer:

(f).

Give four reasons for initiating and maintaining internal controls. Answer:

1. to achieve program objectives 2. to produce reliable financial reports 3. to comply with laws and regulations 4. to safeguard assets Managers design and implement internal controls to accomplish their organizational objectives. These are four objectives that all managers should try to achieve.

Explain the difference between direct loans and guaranteed loans

A direct loan exists when a government agency disburses funds directly to the borrower and is repaid directly by the borrower. A direct loan becomes an outlay for the government agency at the time the loan is made. In a guaranteed loan, the loan to the borrower is made by a qualified lending institution, such as a bank. In these cases, the agency has a liability and has to expend funds to the lending institution only if the borrower defaults on the loan

The graph on page III-72 shows two lines coming from Box 3, "Conduct Risk Assessments." One line goes to Box 6, "Develop Control Plans." The other goes to "Corrective Action." Under what circumstances would you go from Conduct Risk Assessments directly to Corrective Action? Answer:

Sometimes the risk assessment clearly demonstrates that the current procedures are so poor that immediate action is needed. For example, if we were reviewing a hospital and found that controlled drugs were left in a supply cabinet, we would want to correct that problem immediately.

What are the two major strengths in data mining? Answer:

The analyst or auditor is able to review complete data sets instead of sampling the data. The analyst or auditor is able to link together multiple data sources, such as demographic information and service delivery data

Explain two limitations of regression analysis.

The database must be within a relevant range. We cannot project data that is outside our experience. If the database is inaccurate, any correlations derived from regression analysis will be unreliable. Garbage in = garbage out. Correlation is not causation. The fact that two sets of data seem to move in tandem does not mean that one causes the other. It might be coincidence or both sets of data may be influenced by another factor Answer: There are a number of limitations to regression analysis: You need a high correlation to demonstrate a valid relationship between two sets of data. The correlation coefficient must be at least .85

Define "a single integrated financial management system." Answer:

The term "single, integrated financial management system" means a unified set of financial systems and the financial portions of mixed systems encompassing the software, hardware, personnel, processes (manual and automated), procedures, controls, and data necessary to carry out financial management functions, manage financial operations of the agency, and report on the agency's financial status

Name three ways to dispose of property.

Three ways to dispose of property are to: A. sell it. B. trade it in. C. scrap it

Federal Inspectors General can act as both internal auditors and external auditors. True or false? Answer:

True. OIG auditors act as external auditors when they review grantees or contractors that have received awards from their agency. They can also act as internal auditors when they audit agency processes.

Internal controls should help prevent goods from being stolen. True or false? Answer:

True. One of the primary functions of internal control systems is to prevent loss, misuse or misappropriation of assets

Which is the most important component of internal controls and why? Answer:

While all of the internal control components are important, none is as essential as the control environment. It is the basic building block for the organization, laying the foundation for all other controls. It determines the organizational style, its ethical values and how it functions. The control environment tells people both within and outside the organization whether it can be trusted and whether its statements and its records can be relied upon

What are the three factors that must be considered in calculating net present value? Answer:

the amount we wish to have available at a future time; the interest rate; and the number of time periods in which the interest rate will compound.

Give three examples of potential tests for data mining. Answer:

using demographic data to determine whether persons receiving services met the criteria to receive the service examining medical service provided to determine whether female recipients received services that can only be provided to males, or vice versa; examining scholarships to ensure that students receiving awards maintained the appropriate number of hours and grade point averages; examining nutritional program information to ensure recipients met age, income and other programmatic requirements; and/or comparing services that were provided to birth or death records to ensure that individuals receiving services were alive at the time the service was reportedly provided

How does real property differ from personal property?

Real property consists of land, buildings, and other items attached to the land, i. e., items that cannot be moved. Personal property consists of all other types of assets, such as equipment, supplies, and intangible assets (copyrights, patents, stocks and bonds, etc.

What are key responsibilities of the financial manager in implementing a new financial management system? Answer:

Requirements definition, training, account cleanup, data clean-up and conversion, and training.

Name and describe the principal tools available to government agencies for the collection of delinquent debt.

It is important to remember that other than administrative offset, which exists as a common-law right, a government agency may only take those steps that are defined in the lending agreement or are defined by laws. Most agencies would have the following tools available: a. Dunning letters. Sending the borrower a series of demand letters expressing increasing concern and urgency. The seletters should include a list of steps the agency intends to take if the account is not made current. b. Offset. Agencies have a common-law right to offset defaulted loan amounts against payments owed to the borrower, including salary payments if the borrower is also an employee of the government. There are statutory limits as to the amount of a salary that may be offset. c. Tax Refund Offset. IRS tax refunds due to delinquent debtors by may be offset to satisfy the debt. Many states have similar provisions with respect to state income tax refunds. d. Collection Agencies. Government agencies may hire private collection agencies to pursue the collection of delinquent debts. Usually these firms charge a percentage of the loans collected. e. Asset Sales. Federal law and some state laws permit the sales of portfolios of delinquent loans or individual delinquent loans. Purchasers would then have the responsibility of collecting the debts f. Referral for Litigation. Government agencies that are frustrated in their attempts to collect debts may request their respective legal authorities (U.S. Department of Justice, for example) to file suit in court to recover the debt.

Which OMB Circular defines management's responsibility for internal control in federal agencies? Answer:

OMB Circular A-123 defines management's responsibility for internal control in federal agencies.