The purpose for establishing a custodial fund is to
A.
Account for assets held in a trustee capacity.
B.
accumulate resources for payment of debt.
C.
track financial resources to be used for acquisition of capital facilities.
D.
provide services to the public on a fee basis.
Correct Answer: A
Explanation:
A custodial fund is a type of fiduciary fund used by state and local governments to report assets held
temporarily in a purely custodial capacity—for example, taxes collected by one government on
behalf of another. These funds do not involve administrative or financial control over the assets; the government is merely acting as an intermediary.
As per GASB Statement No. 84, custodial funds replace agency funds and are used to report fiduciary
activities that are not held in a trust agreement and where the government does not have discretion
over how the resources are spent.
Relevant Standards and Reference:
GASB Statement No. 84, Fiduciary Activities
GASB Codification Section 1300: Fiduciary Funds
GFOA Best Practices – Accounting and Financial Reporting for Fiduciary Activities
Therefore, Option A is correct.
Question #2 (Topic: demo questions)
What role do the U.S. Department of the Treasury, GAO and OMB have in the standard-setting
activities of FASAB?
A.
They are all non-voting advisory board members of FASAB.
B.
They are all members with authority to veto any standard approved by FASAB.
C.
They are all members whose agencies may be exempt from FASAB standards.
D.
They are all sponsors and voting members of FASAB.
Correct Answer: D
Explanation:
The Federal Accounting Standards Advisory Board (FASAB) was established in 1990 by the U.S.
Department of the Treasury, the Office of Management and Budget (OMB), and the Government
Accountability Office (GAO). These three entities are collectively known as the “sponsors” of FASAB.
Each has a representative who serves as a voting member of the board.
FASAB is responsible for establishing GAAP for federal entities. The sponsor organizations appoint
board members and have authority over standard-setting governance, but do not individually veto
standards. Final standards are issued only after due process, including public comment and sponsor
approval. FASAB Memorandum of Understanding (MOU) Among Treasury, OMB, and GAO (as amended):
“These three agencies are the sponsors of FASAB and each appoints one voting member to the
Board.”
FASAB Governance Manual (2023 Edition), Section 2: Identifies Treasury, OMB, and GAO as sponsors
and voting members.
AGA’s “CGFM Study Guide 2,” Chapter 2: Highlights the role of sponsors in the standard-setting
process.
Therefore, Option D is correct.
Question #3 (Topic: demo questions)
An agency is developing a lee for services to cover all direct operating expenditures. Which of the
following should be included in the fee calculation
A.
supplies, equipment depreciation, staffing
B.
staffing, location rent, equipment depreciation
C.
supplies, equipment depreciation, location rent
D.
staffing, location rent, supplies
Correct Answer: B
Explanation:
When an agency is developing a fee to recover costs for providing a service, it must calculate the full
cost of the service. According to cost accounting standards for federal government operations, “full
cost” includes:
Direct costs: staffing, supplies, materials directly used in service provision
Indirect costs: facility costs (e.g., location rent), equipment depreciation, administrative support, etc.
OMB Circular A-25, “User Charges,” requires that user fees for government services be based on the
full cost of providing that service unless otherwise mandated by law. Therefore, staffing (a direct
cost), location rent (indirect cost), and equipment depreciation (a capital asset cost) are all
appropriate to include.
Relevant Standards and Reference:
OMB Circular A-25, “User Charges,” Section 6(d): “Full cost includes all direct and indirect costs to
any part of the Federal Government of providing a good, resource, or service.”
FASAB SFFAS No. 4, Managerial Cost Accounting Concepts and Standards: Defines full cost
components, including depreciation.
Question #4 (Topic: demo questions)
The Prompt Payment Act requires federal agencies to
A.
pay invoices when received.
B.
take discounts when economically justified.
C.
pay invoices no later than sixty days from receiving the invoice.
D.
pay invoices by the invoice due date.
Correct Answer: D
Explanation:
The Prompt Payment Act (31 U.S.C. Chapter 39) mandates that federal agencies pay vendors on time.
Specifically, if a contract specifies a due date for payment, agencies are required to pay by that date. If
no specific due date is mentioned, payment must be made within 30 days after the later of either:
Receipt of a proper invoice, or
Acceptance of goods/services.
If agencies fail to pay by the due date, they must automatically calculate and pay interest penalties to
the vendor.
Relevant Standards and Reference:
31 U.S.C. § 3903 (Prompt Payment Act): “A payment is timely if it is made by the due date prescribed
by the contract or within 30 days after receipt of a proper invoice or acceptance of goods or
services.”
OMB Circular A-125, “Prompt Payment,” Section 7(a)
Treasury Financial Manual (TFM), Volume I, Part 6, Chapter 8040
Therefore, Option D is correct.