Exam 1: Section 3: The Government Management Cycle - Practice Questions

Which statement about the planning phase of the management cycle is least true?

a. Planning only occurs between the auditing and programming phases.

b. The role of planning is to determine how objectives will be achieved during the operations phase.

c. Planners are constrained by the expected level of resources.

d. Planning is the most creative phase of the management cycle.

Answer: A

Options (b), (c) and (d) are true statements. The planning phase receives the most emphasis between auditing and programming, but in fact, some level of planning occurs throughout the year.

Which of the following decisions is most likely to be made during the programming phase?

a. decisions about broad goals of government

b. decisions about whether to lease space or construct a new building

c. decisions about how to respond to an auditor's report

d. decisions about appropriate accounting methods

Answer: B

"Make or buy" is an important decision during the programming phase, when officials link goals and objectives to resources, and methods for achieving them. The other options are less appropriate.

Which is not a typical output of the programming phase?

a. most cost-effective means to achieve objectives

b. specific, measurable objectives

c. level of resources to be requested

d. reprogramming requests

Answer: D

Options (a), (b) and (c) are indeed primary outputs of the programming phase. Reprogramming usually comes later, after operations have commenced and it becomes apparent that added funds are needed for certain programs, or that priorities have shifted.

Typically, which type of budget will be in effect the longest?

a. operations budget

b. cash flow budget

c. capital budget

Answer: C

Because it may take several years to complete a capital investment project, capital budgets frequently have a life of two or more years.

What is the purpose of forecasting with regard to the budget?

Answer: Determine the likely level of economic activity and economic trends, and how they will impact revenue and expenses.

What publication of the national government provides an effective guide to internal controls and may be applied at all levels of government?

Answer: The publication is Standards for Internal Control in the Federal Government, published by the U.S. Government Accountability Office.

Which of the following is least supported through financial accounting?

a. information about expenses and intergovernmental transfers

b. information about fund levels and disbursements

c. information about deposits of earmarked receipts

d. information about achievement of program outcomes

Answer: D

Options (a), (b) and (c) are indeed supported by financial accounting. However, both financial and nonfinancial information are required to evaluate the achievement of program outcomes; financial information alone is inadequate.

Which reports make financial results easier for the general citizen to understand?

a. popular reports

b. audited annual financial reports

c. certified annual financial reports

d. unaudited comprehensive annual financial reports

Answer: A

"Popular report" is a term given to annual financial reports that have been summarized and presented in a manner easy for the typical citizen to comprehend.

Which body defines GAAP for state and local government?

a. FASAB

b. FASB

c. GASB

d. OMB

Answer: C

FASAB defines GAAP for the national government; FASB defines GAAP for private sector companies. OMB does not define GAAP.

Compare and contrast internal reports and external reports.

External reports are often formal and required at the end of the reporting period. The format and content of external reports may be prescribed by GAAP, legislation or covenants. In contrast, internal reports are issued at a time and in a format useful to management.

State governments are required by standard-setting bodies to issue performance reports. True or false?

Answer: False

GASB recommends, but does not require, performance reporting by state and local governments. In contrast, most federal agencies are required to report on performance achieved.

What is the primary purpose of an external financial audit?

a. provide independent assessment of cost-effectiveness of programs

b. provide a conclusion that program objectives have been met

c. provide an opinion whether the financial statements are presented fairly in accordance with GAAP

Answer: C

Performance audits and attestation engagements may fulfill objectives (a) or (b). The financial audit is an evaluation of financial statements.

How does the auditor's role differ from the accountant's role, regarding financial statements?

Answer: The accountant and other financial managers prepare the statements; the auditor examines the statements and provides an opinion on the fairness of the statement's presentations.

Which entities are required to submit both financial reports and performance reports?

a. all state governments

b. local governments

c. federal agencies

d. all of the above

Answer: C

Which entity provides detailed instructions for completing Performance and Accountability Reports, Agency Financial Reports, and Annual Performance Reports at the federal level?

a. AGA

b. OMB

c. GASB

d. FASAB

Answer: B