Examination Two—Governmental Accounting, Financial Reporting and Budgeting
Two hours and 15 minutes
I: Governmental Financial Accounting, Reporting and Budgeting: General Knowledge (40%)
A. Demonstrate an understanding of the influences, objectives and role of standards, including:
- The unique financial aspects of the governmental environment that differ from the private sector (e.g., profit versus service, importance of budget).
- The concept of interperiod equity.
- The objectives of governmental financial reporting (e.g., financial accountability, budgetary accountability, program accountability).
- The major uses of governmental financial reporting (e.g., budgetary compliance, compliance with laws and regulations, assessing financial position, assessing results of operations, assessing sustainability).
- The characteristics of information in governmental financial reporting (e.g., understandability, reliability, relevance, timeliness, consistency, comparability).
- The roles of the Financial Accounting Standards Board (FASB), Governmental Accounting Standards Board (GASB) and Federal Accounting Standards Advisory Board (FASAB).
- The role of the International Public Sector Accounting Standards Board (IPSASB).
- Due process in the setting of accounting standards (e.g., discussion memorandum, invitation to comment, preliminary views, exposure draft, public hearing, task forces).
- The purpose of the hierarchy of generally accepted accounting principles for state/local and federal accounting and financial reporting.
- The basic concepts and requirements of Open Government financial reporting.
B. Demonstrate an understanding of the concepts of managerial cost accounting and fee establishment, including:
- The purposes for accumulating and reporting cost information.
- The concept of full cost of outputs, incorporating inter-entity costs.
- The requirements of FASAB Statement of Federal Financial Accounting Standards (SFFAS) 4, as amended: Managerial Cost Accounting Concepts and Standards.
- Determining the costs under an intergovernmental cost-reimbursement contract or grant (as outlined in the Uniform Guidance).
- Identification of the methods for assigning and allocating costs in a given situation (e.g., direct, indirect).
- Computation of the fee to be charged to a user.
- Various cost recovery objectives (e.g., total direct costs, operating costs, full costs, replacement costs, incremental costs).
C. Demonstrate an understanding of the concepts of budgeting, including:
- The key elements of the budget process, from provision of initial guidance through preparation, review, adoption, execution and accounting.
- The structure of the budget (e.g., organizational unit, program, function, category, character, fund, line item, object).
- The features of various budgetary approaches (e.g., baseline, line item, program, zero-base, performance).
- The various means for financing capital projects, including the role of a capital budget.
- The methods of forecasting revenues and expenditures.
- The various means of budgetary control (e.g., revenue monitoring, encumbrance/obligation control, vacancy controls, allotment, apportionment).
D. Demonstrate an understanding of the general principles of governmental financial accounting, including:
- Basic accounting processes (e.g., debits, credits, ledger accounts, stock and flow statements, accounting period).
- The differences among the various measurement focuses and bases of accounting (e.g., economic resources, current financial resources, cash, accrual, modified accrual).
- The effect of applying the various measurement focuses and bases of accounting to specific transactions.
- Exchange and exchange-like versus non-exchange transactions.
- How to adjust the allowance for doubtful accounts under alternative methods (e.g., percentage of sales or percentage of accounts receivable).
- The differences among various methods of valuing inventory (e.g., First-in, First-out (FIFO), Last-in, First-out (LIFO), average cost).
- Situations that require recording depreciation and calculation of the same.
- Recording contingencies (e.g., judgments, claims).
II: Demonstrate an Understanding of State and Local Financial Accounting and Reporting, Including: (30%)
A. The application of the GASB standards for determining the reporting entity, including component units.
B. The purpose of each fund type within each fund category, and its related basis of accounting.
C. The form and content of the Annual Comprehensive Financial Report (ACFR).
D. The purpose of popular reporting.
E. The form and content of the basic financial statements, including:
- Government-wide financial statements.
- Fund-level financial statements.
F. The reporting of fund balance in governmental funds.
G. The form and purpose of required supplementary information (RSI).
H. How to measure, record and report the purchase of capital assets, including assets acquired through a capital lease.
I. How to measure, record and report the incurrence and repayment of general long-term obligations in a governmental fund.
J. How to measure, record and report common, fundamental current assets and liabilities, revenue, expenditures, and other financing sources and uses when using modified accrual basis of accounting (e.g., property tax, grants, shared revenues, capital outlays, bond proceeds, debt service, payroll, accounts receivable).
K. How to measure, record and report common, fundamental assets, liabilities, revenue and expense transactions when using accrual basis of accounting (e.g., taxes, grants, shared revenues, capital assets, long-term debt, operating expenses, pensions, payroll, accounts receivable).
L. The types of interfund transactions, and how they are accounted for.
M. How to consolidate or eliminate transactions between the fund level and the government-wide level for governmental activities.
N. The required disclosures for cash deposits with financial institutions and investments, including repurchase agreements.
O. The option and criteria for using the modified approach for infrastructure.
P. The entries for recording the budget, modifying the budget and recording encumbrances and expenditures.
Q. How to reconcile the budgetary information to the generally accepted accounting principles
R. How to reconcile the fund financial statements to the government-wide financial statements.
S. Government combinations (e.g., mergers and acquisitions, transfers of operations).
III: Demonstrate an Understanding of Federal Financial Accounting and Reporting, Including: (30%)
A. The role of FASAB and the relationships among the Office of Management and Budget (OMB), U.S. Department of the Treasury and the Government Accountability Office (GAO) in federal financial accounting and reporting.
B. Key budgetary terms (e.g., appropriations, budget authority, budgetary resources, object class, outlays, receipts, offsetting collections, deficit).
C. The components of the budgetary equation.
D. The relationship and differences between budgetary and proprietary accounting.
E. Types of funds (e.g., general, trust, revolving).
F. The components and use of the U.S. Standard General Ledger.
G. How to record common, fundamental budgetary transactions (e.g., appropriation, apportionment, allotment, commitment, obligation, expenditure).
H. How to record common, fundamental proprietary transactions (e.g., warrants, accounts payable, payroll, accounts receivable, pensions, investments, depreciation).
I. Determining the reporting entity.
J. The form and content of an agency financial report (AFR) and a performance and accountability
K. The purposes, form and content of the basic financial statements.
L. The concepts of consolidation and intragovernmental transactions.
M. The purposes and form of the notes to the financial statements.
N. The purposes and form of required supplementary information (RSI).
O. The concept of Fund Balance with Treasury.
P. The concepts of accounting for loans and loan guarantees (Credit Reform Act).
Q. The basic requirements for the U.S. Consolidated Financial Report.