To calculate the full cost of the vehicle fleet program, we must include:

✔Direct costs

✔Indirect costs (pro-rated)

Given:

Fleet personnel costs: $80,000 (direct)

Fuel: $10,000 (direct)

Fleet depreciation: $50,000 (direct)

Fleet garage rent: $40,000 (direct)

Subtotal direct costs: $180,000

Now calculate 20% of indirect personnel costs:

Procurement personnel: 20% of $200,000 = $40,000

Accounting personnel: 20% of $100,000 = $20,000

Subtotal indirect support: $60,000

Total full cost: $180,000 (direct) + $60,000 (indirect) = $240,000

Correction: This contradicts the initial selection of “C. $430,000.” Let’s recheck:

Ah! The earlier subtotal missed summing all elements:

Corrected breakdown:

Fleet personnel: $80,000

Fuel: $10,000

Fleet depreciation: $50,000

Fleet garage rent: $40,000

20% of procurement ($200,000): $40,000

20% of accounting ($100,000): $20,000

= Total: $80,000 + $10,000 + $50,000 + $40,000 + $40,000 + $20,000 = $240,000

✅Correct Answer: B. $240,000

Relevant References:

FASAB SFFAS 4 – Managerial Cost Accounting

OMB Circular A-136 – Full Cost Definition

GAO Cost Estimating Guide

Answer: B. $240,000

The governmental funds (e.g., general fund, special revenue fund, capital projects fund) are reported using the modified accrual basis and current financial resources measurement focus. Required financial statements for governmental funds include:

Balance Sheet

Statement of Revenues, Expenditures, and Changes in Fund Balances

There is no requirement for a statement of cash flows for governmental funds. The statement of cash flows is only required for proprietary funds (e.g., enterprise and internal service funds) and is prepared using the direct method.

Relevant References:

GASB Statement No. 34 – Basic Financial Statements

GASB Codification Section 2200

GFOA Governmental Fund Reporting Guidelines

Answer: D. statement of cash flows

The city has a June 30 fiscal year-end and applies the 60-day availability rule, which is standard under modified accrual accounting for governmental funds like the general fund.

Total collections within:

Fiscal year: $12 million

60-day window (July + August): $1 million + $500,000 = $1.5 million

Revenue recognized = $12 million + $1.5 million = $13.5 million

However, under GASB Interpretation No. 5 and GASB Statement No. 33, only amounts expected to be collected within 60 days after year-end should be recognized as revenue in the general fund. The city uses the 60-day rule.

Thus, the correct amount to recognize is:

$12 million (collected during fiscal year)

$1 million (July)

$500,000 (August) = $13.5 million

Answer: C. $13.5 million

Relevant References:

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

GASB Interpretation No. 5 – Property Tax Revenue Recognition

GASB Codification Section 1600.115 (Modified Accrual Basis)

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FASAB SFFAS No. 10 (Accounting for Internal Use Software) provides guidance for capitalizing software development costs. The following costs are capitalized:

Software configuration and development: $750,000

Testing for functionality (ready for use): $225,000

These fall within the "software development stage."

The following are not capitalized:

Research costs (e.g., feasibility studies): $100,000 → Expense

Data conversion costs: $500,000 → Expense (unless part of application development, which it’s not here)

Capitalized total = $750,000 + $225,000 = $975,000

Relevant References:

FASAB SFFAS No. 10 – Accounting for Internal Use Software

OMB Circular A-136 – Capitalization Guidance

Treasury Financial Manual (TFM) – Capital Assets

Answer: B. $975,000

Comprehensive Detailed Explanation:

In governmental funds (using the modified accrual basis), expenditures are recorded when financial resources are used — typically when cash is disbursed. However, in government-wide statements (accrual basis), only the portion of the asset’s cost consumed in the period is recorded as an expense (i.e., depreciation).

Paying for capital assets such as vehicles is an expenditure in the governmental funds, but not an expense in the accrual-based government-wide financials. Instead, the cost is capitalized and depreciated over time.

Relevant References:

GASB Statement No. 34 – Government-wide vs. Fund Financial Reporting

GASB Codification Section 1300 – Modified Accrual Accounting

GFOA Best Practices – Capital Asset Reporting

Answer: C. At the end of the fiscal year, the government pays for ten vehicles which will be depreciated over five years.

State and local government budgets primarily serve to:

Set public policy priorities

Provide legislative control over taxing and spending

Serve as a financial planning tool

Debt policy is typically established outside the annual budget process and guided by a separate debt management policy that sets borrowing limits, credit rating objectives, and debt service goals.

Relevant References:

GFOA Best Practices – Role of the Budget

NASBO Budgeting Handbook

GASB Concept Statements – Financial Reporting Objectives

Answer: C. determine debt policy

OMB Circular A-136 specifies the required components of the Agency Financial Report (AFR), which include:

A Message from the Head of the Agency

Management’s Discussion and Analysis (MD&A)

Financial Section (including statements and notes)

Other Information (e.g., improper payments, internal controls)

The Performance Section is not included in the AFR but is instead part of the alternative Performance and Accountability Report (PAR) or included separately in an Annual Performance Report (APR).

Relevant References:

OMB Circular A-136 – Financial Reporting Requirements (Section II)

GPRA Modernization Act of 2010

CFO Act of 1990

Answer: D. the performance section