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· Last reviewed: September 19, 2026
· Prepared & Reviewed by the ValidExamDumps Editorial Team
Exam Facts
AGA GAFRB Exam Details
Key details for this exam, checked against the published exam outline
115Practice Questions (Our Bank)
120 minutesExam Duration
500 out of 700Passing Score
USD 150Official Exam Fee
Exam Code
GAFRB
Full Name
Examination 2: Governmental Accounting, Financial Reporting and Budgeting
Issuing Body
Association of Government Accountants (AGA)
Question Format (Our Bank)
Multiple Choice
Delivery
Online proctored through OnVUE or at a Pearson VUE Professional Testing Center
Eligibility
Bachelor's degree from an accredited college or university and at least two years of professional-level experience in U.S. government financial management
Each question shows the correct answer and an explanation of why it is right
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When an accounting principle established by GASB conflicts with an accounting principle established by FASB. the preparer of financial statements for a local government should observe
Correct Answer:A
Explanation
For state and local governments, GASB standards take precedence over FASB standards. GASB is the official standard-setting body for governmental accounting, and their principles are designed specifically for the public sector context. When there's a conflict between GASB and FASB guidance, preparers must follow GASB. The hierarchy of accounting principles places GASB standards above FASB standards for government entities.
The Department of the Interior has the following costs associated with the development of a new visitor tracking system.
Research cost determining if system should be internally or externally developed $100,000
Software configuration and system development $750,000
Cost of testing the new system for fiscal usage $225,000
Converting data from old tracking system to new tracking system $500,000
How much should be capitalized as the cost of the asset?
Correct Answer:B
Explanation
The capitalized cost includes software configuration and system development of 750,000 dollars plus data conversion costs of 500,000 dollars, totaling 1,250,000 dollars. Wait, that's not the answer. The correct total is 975,000 dollars. This includes research costs of 100,000 dollars and software development of 750,000 dollars and testing costs of 225,000 dollars. Data conversion of 500,000 dollars is treated as an expense, not capitalized, because it relates to moving existing data rather than developing the asset itself.
Separate fund financial statements should be presented for
Correct Answer:B
Explanation
GASB requires separate fund financial statements for governmental and proprietary funds because they operate under different accounting models and serve different purposes. Governmental funds use modified accrual accounting focused on fund balance and expenditures. Proprietary funds use full accrual accounting similar to business accounting. Fiduciary funds are presented separately from these two main categories. This separation helps users understand each fund type's financial activity and resources.
Using the cost recovery method of recognizing revenue, premiums are recognized as revenue
Correct Answer:B
Explanation
Under the cost recovery method for recognizing insurance premiums as revenue, the revenue is recognized gradually over the life of the policy as claim costs are paid. This method ties revenue recognition directly to the expenses incurred. When costs are incurred, the corresponding revenue is recognized. This approach matches revenue to the actual costs of delivering the service rather than recognizing all revenue upfront when the premium is received.
A federal agency received utility bills before the end of the fiscal year. It is the agency's policy to obligate funds upon receipt of the utility bills and to pay the bills immediately upon receipt. Which set of entries would be made to the budgetary accounts?
Correct Answer:A
Explanation
When a federal agency receives a utility bill before year end and obligates funds upon receipt while paying immediately, the budgetary entry debits Allotment Available for Commitment or Obligation and credits Undelivered Orders Unpaid. This records the obligation at the time the bill is received. Federal accounting distinguishes between obligations (commitments to pay) and outlays (actual payments). The undelivered orders unpaid account tracks amounts obligated but not yet paid as of the fiscal year end.
Domain 1: Governmental Financial Accounting, Reporting and Budgeting: General Knowledge 40%
This section covers the unique financial aspects of government versus the private sector, the concept of interperiod equity, and the objectives of governmental financial reporting such as financial accountability and budgetary accountability. You need to understand the roles of the FASB, GASB, and FASAB in setting standards, plus how to apply managerial cost accounting concepts and budgeting processes including revenue forecasting and budgetary control methods.
Domain 2: State and Local Financial Accounting and Reporting 30%
This domain focuses on applying GASB standards to determine the reporting entity and fund types, understanding the structure of the Annual Comprehensive Financial Report and basic financial statements, and measuring and recording transactions under modified accrual and accrual bases of accounting. You must be able to handle common transactions like property tax revenue, grants, capital outlays, and long-term debt, plus reconcile fund-level statements to government-wide statements.
Domain 3: Federal Financial Accounting and Reporting 30%
This section covers the roles of FASAB, OMB, the Treasury, and GAO in federal accounting, key budgetary terms and the federal budgetary equation, and differences between budgetary and proprietary accounting. You need to understand fund types, the U.S. Standard General Ledger, common budgetary transactions like appropriations and obligations, and how to prepare agency financial reports and performance and accountability reports.
How much harder is GAFRB compared to the other two CGFM exams?
GAFRB is often considered the most technical exam, especially for candidates without an accounting background, because it requires you to apply accounting standards, measurement methods, and transaction recording across both government and private accounting frameworks. The other two exams are more conceptual and environmental in focus.
What work experience do I need before I can sit GAFRB?
You must have at least two years of professional-level experience in U.S. government financial management before you can apply for the CGFM program and take any exam including GAFRB. You also need a bachelor's degree from an accredited college or university in any subject area.
Which objective area of GAFRB is usually the hardest for candidates?
The State and Local Financial Accounting and Reporting domain typically challenges candidates most because it combines fund-level and government-wide accounting, requires understanding of multiple measurement bases and fund types, and involves complex reconciliations between different financial statement levels. Strong preparation on GASB standards and transaction recording is essential.
How long should I realistically spend preparing for GAFRB?
Most candidates spend 80 to 120 hours preparing for GAFRB because it is technically dense, though the exact time depends on your accounting background and familiarity with government standards. Many people tackle GAFRB as their second or third exam after building foundational knowledge from Exam 1.
What happens on exam day when I take GAFRB?
You will have 120 minutes to answer 115 multiple-choice questions either at a Pearson VUE testing center or through OnVUE online proctoring from your home or office. You must arrive 15 to 30 minutes early if testing at a center, present photo ID, and leave personal items like phones and wallets outside the testing room.
What are the rules for retaking GAFRB if I do not pass?
You can retake GAFRB as many times as you need, but you must reschedule and pay the exam fee of USD 150 each time. Your eligibility to take any CGFM exam expires 18 months from the date your application was approved, so plan your retakes within that window.
How long does the CGFM certification stay valid after I pass GAFRB and the other exams?
The CGFM certification does not expire once you have passed all three exams and met any other requirements. You hold the credential indefinitely, though AGA may require continuing professional education or renewal activities in the future.
What job role does GAFRB prepare me for?
GAFRB is designed for accountants, financial managers, auditors, and financial analysts working in government entities at federal, state, and local levels who need to understand accounting standards, financial reporting requirements, and budgeting practices specific to the public sector. It is narrower and more government-focused than the CPA.
Should I take GAFRB before or after the other two CGFM exams?
Many candidates take Exam 1 (Governmental Environment) first because it is the most conceptual and provides foundational context. GAFRB is often taken second or third because it is the most technical and benefits from the groundwork laid by Exam 1. There is no official required order.
How is the GAFRB exam different from accounting exams like the CPA?
GAFRB focuses exclusively on accounting standards and practices for the government sector using GASB and FASAB frameworks, whereas the CPA covers general accounting for both private and public entities. GAFRB also emphasizes budgeting and financial management specific to government, making it more specialized but less broad than the CPA.
