Financial Management in the Public Sector Final Exam

Course Introduction

This course explores the principles and practices of financial management within public sector organizations, focusing on budgeting, financial planning, revenue generation, expenditure control, and accountability. Students will examine the unique challenges faced by governmental and non-profit entities, such as balancing public accountability with operational efficiency, navigating complex regulatory environments, and responding to political, social, and economic pressures. Through case studies and practical exercises, the course provides tools for effective decision-making in resource allocation, financial reporting, and performance evaluation, preparing students to manage public funds responsibly and transparently.

Recommended Textbook

Introduction to Governmental and Not for Profit Accounting 7th Edition by Patton

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Chapter 1: Governmental and Not-For-Profit

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Q1) Which of the following activities is performed by governments but not by not-for-profit organizations?

A)Issuing federal tax-free debt

B)Receiving grants

C)Preparing budgets

D)Providing services to constituents

Answer: A

Q2) Which entity establishes financial accounting standards and principles for the federal government?

A)FASB

B)GASB

C)FASAB

D)None of the above.

Answer: C

Q3) A not-for-profit organization performs all of the following activities except

A)Charging a fee for services provided

B)Paying dividends to shareholders

C)Purchasing long-lived (capital)assets

D)Paying overtime to employees

Answer: B

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Chapter 2: The Use of Funds in Governmental Accounting

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Q1) Which of the following set of funds use the economic resources measurement focus?

A)Enterprise Fund,Special Revenue Fund,and General Fund

B)Internal Service Fund,Pension Trust Fund,and Enterprise Fund

C)Debt Service Fund,Internal Service Fund,and Pension Trust Fund

D)Enterprise Fund,Internal Service Fund,and Capital Projects Fund

Answer: B

Q2) Which of the following types of liabilities is least likely to appear in the balance sheet of a governmental-type fund?

A)amounts owed to suppliers of goods and services

B)amounts owed to bondholders over the entire 20-year life of a debt

C)amounts owed to other funds

D)amounts owed to employees for services performed before an accounting period ends

Answer: B

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Chapter 3: Budgetary Considerations in Governmental Accounting

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Q1) The City of Kent has estimated that it will spend $4,500,000 and have revenues of $4,800,000 next year.At the beginning of its new fiscal year,it will need to:

A)debit estimated expenditures for $4,500,000

B)debit estimated revenues for $4,800,000

C)debit budgetary fund balance for $300,000

D)debit appropriations for $4,500,000

E)none of the above.

Answer: B

Q2) Which of the following approaches to budgeting is most likely to contain the details of salaries (such as number of personnel within each position)as well as the details of each type of expenditure other than salaries (such as supplies and travel)?

A)object-of-expenditure approach

B)performance approach

C)planning-programming-budgeting approach

D)zero-based budgeting approach

Answer: A

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Chapter 4: The Governmental Fund Accounting Cycle

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Q1) At the beginning of its fiscal year,the Town of Harmon estimates that its revenues for street maintenance activities are $100,000,and it appropriates $90,000 for street maintenance supplies.It currently has outstanding encumbrances for street maintenance supplies of $40,000 and has incurred expenditures for street maintenance supplies of $30,000.How much does the Town of Harmon currently have available to spend for street maintenance supplies?

A)$20,000

B)$30,000

C)$40,000

D)$50,000

E)$60,000

Q2) The City of Seales has a December 31st fiscal year end.Salaries earned by city's General Fund employees for the period December 24th through December 31st will not be paid until January 7th of the next year.On December 31st,the City of Seales' accounting personnel would:

A)debit salaries expense and credit salaries payable.

B)debit expenditures-salaries and credit cash.

C)make no journal entry because cash has not yet been paid.

D)none of the above

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Chapter 5: The Governmental Fund Accounting Cycle

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Sample Questions

Q1) Which of the following best describes an assignment of fund balance?

A)it is a government's intent to spend resources for specific purposes

B)it is another term for a budgetary fund balance reserved for encumbrances

C)it is constrained as a result of a formal action by a government's legislative body

D)it is a legal segregation of fund balance,and must be used for the purpose assigned

Q2) The General Fund lends cash at the beginning of the year to an Enterprise Fund,expecting to be repaid before the end of the year.What account should be debited in the General Fund?

A)transfer out to enterprise fund

B)due from enterprise fund

C)other financing uses - enterprise fund

D)expenditures - enterprise fund loans

Q3) Governmental fund liabilities are:

A)claims against current financial resources

B)obligations not currently payable

C)both a and b

D)none of the above

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Chapter 6: The Governmental Fund Accounting Cycle

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Q1) Based on the preceding set of facts,how much should be reported as Other financing sources in the Capital Projects Fund?

A)$1,000,000

B)$3,000,000

C)$8,000,000

D)$10,000,000

Q2) Based on the preceding set of facts,what should be reported in the financial statements of the General Fund for the year?

A)other financing uses of $1 million

B)expenditures of $1 million

C)other financing sources of $2 million and other financing uses of $1 million

D)revenues of $2 million and other financing sources of $7 million

Q3) What type of fund is most likely used to account for the spending of income earned by a Permanent Fund?

A)agency fund

B)private-purpose trust fund

C)enterprise fund

D)special revenue fund

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Chapter 7: The Governmental Accounting Cycle

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Q1) Many Utility Enterprise Fund activities charge tap fees to their customers.Which of the following is most descriptive of those fees?

A)tap fees are assessed based on the amount of water a utility customer uses

B)tap fees replace capital grants

C)tap fees can only be used to purchase or construct capital assets

D)tap fees provide financing when a utility needs to expand its operating plant for new customers

Q2) City Parks Department activities are accounted for in the General Fund.The Parks Department receives two invoices,one from the Lighting Enterprise Fund (EF)and one from the Printing Internal Service Fund (ISF).On receiving the invoices,which accounts should the department debit?

A)due to lighting EF and due to printing ISF

B)expenditures (for lighting services)and expenditures (for printing services)

C)expenditures (for lighting services)and transfers (for printing services)

D)transfers (for lighting services)and expenditures (for printing services)

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Chapter 8: The Governmental Fund Accounting

Cycle--Fiduciary

Funds

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Q1) Assume a pension plan's actuarially-computed liabilities are greater than the actuarial value of the assets.How does this difference between assets and liabilities affect the actuarially determined contribution to the pension plan required for the following year?

A)It does not enter into the actuary's calculation if the actuarial value of plan assets exceeds their aggregate cost

B)It is not considered in establishing the required contribution,but it is disclosed in the schedule of funding progress

C)The entire amount of the unfunded actuarially accrued liability is included in the next year's required contribution to show "good faith" to retirees

D)A portion of the unfunded actuarial accrued liability is included in the next year's contribution by means of an amortization process

Q2) Under which of the following circumstances will a government maintain a Pension Trust Fund?

A)the government contributes to a defined benefit pension plan

B)the government sponsors a defined benefit pension plan

C)the government contributes to a defined contribution pension plan

D)the government has an unfunded actuarial pension liability

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Chapter 9: Reporting Principles and Preparation of Fund

Financial Statements

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Q1) Which basis of accounting is used when presenting governmental and proprietary funds in fund-level financial statements?

A)governmental - modified accrual;proprietary - modified accrual

B)governmental - accrual;proprietary - accrual

C)governmental - modified accrual;proprietary - accrual

D)governmental - accrual;proprietary - modified accrual

Q2) The General Fund and other funds for which individual fund financial information is presented in separate columns in the basic governmental fund financial statements are known as

A)principal funds

B)primary funds

C)major funds

D)master funds

Q3) The financial statements prepared for fiduciary funds are

A)statement of fiduciary net position

B)statement of changes in fiduciary net position

C)statement of fiduciary cash flows

D)only a and b

E)only b and c

Page 11

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Chapter 10: Government-Wide Financial Statements

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Q1) In 2013,Monks Town received a State grant of $300,000 that can only be used to hire additional police officers.How should this revenue be reported in the Town's government-wide statement of activities?

A)as a general revenue

B)as a program-specific capital grant

C)as a charge for services

D)as a program-specific operating grant

Q2) To what extent should fund or fund type data be displayed on the face of government-wide financial statements?

A)Information should be displayed for the government as a whole,but individual funds or fund types should not be displayed

B)Information should be displayed by fund type,with a total for the government as a whole

C)Information should be displayed by major fund,with a total for the government as a whole

D)Information should be displayed by major fund,except for fiduciary funds

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Chapter 11: Federal Government Accounting and Reporting

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Sample Questions

Q1) A federal agency received allotments of $95,000.It does not use commitment accounting.It placed three orders totaling $70,000,received all the supplies ordered,and approved invoices totaling $73,000 for the three orders.It then consumed $55,000 of those supplies.It then placed another order for $12,000,but the agency has not yet received delivery.How much of the agency's allotment is available for additional obligation?

A)$13,000

B)$33,000

C)$10,000

D)$40,000

Q2) Which of the following is the correct sequence of activities within the federal budgetary accounting cycle?

A)appropriation,apportionment,allotment,obligation

B)obligation,allotment,apportionment,appropriation

C)allotment,obligation,appropriation,apportionment

D)apportionment,allotment,obligation,appropriation

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Chapter 12: Accounting for Not-For-Profit Organizations

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Sample Questions

Q1) A not-for-profit entity receives a donation of 100 shares of securities listed on the American Stock Exchange.As a general rule,when it prepares its statement of financial position at year-end,the entity must report the securities at:

A)their fair value at time of donation

B)their fair value at date of the statement of financial position

C)the lower of their fair value at date of donation or their fair value at date of the statement of financial position

D)the lower of the cost to the donor or the fair value at date of the statement of financial position.

Q2) A not-for-profit arts organization receives a $300,000 gift from a donor who specifies that the gift must be maintained in perpetuity and that the income from the gift is to be used only to take disabled persons to the theater.How should the entity report the $300,000 gift in the net asset section of its statement of financial position?

A)as unrestricted

B)as temporarily restricted

C)as permanently restricted

D)as restricted for programs for the disabled

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Chapter 13: Accounting for Health Care Organizations

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Q1) In the statement of operations of a not-for-profit hospital,which of the following increases in net assets is not likely to appear as part of Excess of revenues over expenses?

A)net patient service revenue

B)premium revenue under capitation agreements

C)investment income

D)net assets released from restrictions used for purchase of equipment

Q2) When a hospital uses funds for internal record-keeping purposes,Plant Replacement and Expansion Funds are used to report:

A)resources contributed by outsiders that can only be used to replace or expand the hospital's existing physical plant

B)resources contributed by outsiders and those designated by the hospital's governing board that can only be used to replace or expand the hospital's existing physical plant

C)capital asset expenditures

D)resources restricted by any legal agreement,such as a bond agreement or a trust arrangement

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Chapter 14: Analysis of Financial Statements and Financial Condition

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Sample Questions

Q1) What is Olde Towne's interest coverage?

A)2.0 times

B)3.0 times

C)4.0 times

D)5.0 times

Q2) A village's legal debt limit is $20 million.Its outstanding general obligation debt is $9 million.The full value of its real property is $520 million,which includes $40 million of property that is exempt from taxation.What is the village's debt burden?

A)1.7%

B)1.9%

C)3.8%

D)4.2%

Q3) The most important reason for being concerned with a municipality's available fund balance as a percentage of its revenues and certain transfers in is that the ratio provides a good measure of:

A)the liquidity of its resources

B)the volatility of its revenue structure

C)its ability to weather future revenue shortfalls

D)its efficiency and effectiveness

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Chapter 15: Fundamentals of Accounting

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Sample Questions

Q1) Suzy Queue hires a salesperson for her business.Suzy agrees to pay the salesperson a commission of 10 percent of sales.By the end of the first month,the salesperson has done $50,000 of sales.Suzy wants to prepare accurate financial statements at the end of the month,but has not yet paid the salesperson.What journal entry should she make before preparing her financial statements for the month?

A)debit commissions expense ($5,000);and credit commissions payable ($5,000)

B)debit prepaid commissions ($5,000);and credit commissions payable ($5,000)

C)debit commissions expense ($50,000);and credit cash ($50,000)

D)debit prepaid commissions ($5,000);and credit cash ($5,000)

Q2) Robert Plant invests $50,000 of his own money in a business.What journal entry should be made to record Robert's investment in the business?

A)debit cash (business);and credit cash (personal)

B)debit cash;and credit Robert Plant,capital

C)debit cash;and credit loans payable

D)debit Robert Plant,capital;and credit cash

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