GAFRB Exam Dumps - Examination 2: Governmental Accounting, Financial Reporting and Budgeting (GAFRB)

The primary purpose of accumulating and reporting cost information—especially in government and nonprofit environments—is to support internal decision-making. Cost data help managers assess program efficiency, evaluate resource use, and make policy or operational decisions.

While external financial statements may incorporate summarized cost information, and stockholders and regulatory agencies may have interests in private-sector settings, the most direct and core purpose is to support management.

Relevant References:

FASAB SFFAS No. 4 – Managerial Cost Accounting Concepts and Standards

GFOA – Cost Accounting for Decision-Making

OMB Circular A-136 and A-11 (federal reporting objectives)

Answer: B. provide a means for management to assess decision performance

A committed fund balance is established when the highest level of decision-making authority (e.g., county board or city council) formally sets aside resources for a specific purpose through resolution or ordinance before the end of the fiscal year.

Since the county board — the highest authority — has set aside $7 million specifically to address a projected budget deficit, the classification should be committed fund balance.

Assigned fund balance (Option B) is typically used when intent is expressed by a lower level of authority (e.g., finance director).

Relevant References:

GASB Statement No. 54 – Fund Balance Reporting

GASB Codification Section 1800.176 – Fund Balance Classifications

GFOA Guidance on Fund Balance Policies

Answer: D. Committed Fund Balance

The governmental fund category is used to account for the core services of a government that are primarily supported by taxes and other non-exchange revenues. These services include public safety, education, health, transportation, and social services. It includes the general fund, special revenue funds, capital projects funds, debt service funds, and permanent funds.

While option D (general fund) is technically a fund within the governmental category, the broader and more accurate classification is "governmental."

Relevant References:

GASB Statement No. 34 – Basic Financial Statements for State and Local Governments

GASB Codification Section 1300 – Fund Types

GFOA Fund Structure Guidance

Answer: B. governmental

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Comprehensive Detailed Explanation:

Budget authority is the legal authorization provided by Congress that allows federal agencies to enter into obligations that will result in outlays, either immediately or in the future. It is a prerequisite for agencies to spend federal funds.

Commitment authority is not an official federal term; transfer authority allows movement of funds between accounts and is more restrictive; expenditure authority is an informal term and not defined in U.S. Code.

Relevant References:

U.S. Code Title 31 – § 1341 and § 1102

GAO Red Book – Budget Concepts

OMB Circular A-11, Section 20 – Budget Authority Definition

Answer: B. a budget authority

According to GASB Statement No. 51 (Accounting and Financial Reporting for Intangible Assets), only costs incurred during the “application development stage” are capitalized for internally generated software. These include:

✔Development of the system – $500,000

✔Development of interfaces – $75,000

✔Data conversion necessary to make software operational – $50,000

✔Testing the software – $130,000

Excluded (should be expensed):

✘Evaluation of needs (preliminary) – $100,000

✘Selection of developer – $25,000

✘Staff training – $15,000

✘Ongoing maintenance – $20,000

Total Capitalizable Costs:

$500,000 + $75,000 + $50,000 + $130,000 = $755,000

Relevant References:

GASB Statement No. 51 – Paragraphs 6–12

GFOA Guidelines – Capitalization of Intangible Assets

Answer: C. $755,000

Comprehensive Detailed Explanation:

In governmental accounting, an exchange transaction occurs when each party receives and gives up essentially equal value. Exchange-like transactions are similar but may lack one or more of the characteristics of a pure exchange (e.g., pricing may not be market-based).

Examples:

A city charges fees for utilities: the user pays for services and the city provides equivalent value.

Grants and taxes are nonexchange transactions because the payer does not receive a direct, equivalent benefit in return.

Relevant References:

GASB Statement No. 33 – Accounting and Financial Reporting for Nonexchange Transactions

GASB Concepts Statement No. 4 – Elements of Financial Statements

Answer: B. receives value and gives up essentially the same value.

The Governmental Accounting Standards Board (GASB) issues accounting standards after a structured due process that includes:

Publication of a Discussion Document (e.g., Preliminary Views)

Publication of an Exposure Draft

Solicitation and analysis of public comments (written/oral)

Deliberation by the full Board

A majority vote (not unanimous) of the GASB board members is required to approve and issue a final standard.

Relevant References:

GASB Rules of Procedure

GASB Due Process Manual

GASB Website – Standard-Setting Process

Answer: D. vote of the majority of board members, after discussing the written and oral comments offered by interested parties on an exposure draft of a statement of proposed standards

The federal budget baseline is a projection of federal spending, revenues, deficits, and debt assuming no changes to current laws and policies. It serves as a neutral benchmark to compare the fiscal impact of proposed legislation or budget changes.

It is typically prepared by the Congressional Budget Office (CBO) and assumes continuation of current tax and spending laws without new legislation.

Relevant References:

Congressional Budget Act of 1974

Congressional Budget Office (CBO) – Baseline Concepts

OMB Circular A-11 – Section 80: Baseline Budget Estimates

Answer: C. receipts, outlays, and deficit or surplus that would result from continuing current law or policies