The Office of Personnel Management provides employee pension benefits for an agency's employees and bills the agency for a portion of the costs. The portion of costs not billed to the agency is an
Correct Answer: C
When a federal agency participates in a pension plan administered by another government entity (such as the Office of Personnel Management, OPM), and OPM bills the agency for a portion of the cost while covering the remainder itself, the portion not billed is considered an "imputed cost" to the agency. This imputed cost represents the agency's share of employee pension benefits that are financed on its behalf by another entity. Accounting guidance requires that the employing agency recognize both the amount billed and the amount covered by OPM as a pension expense, recordingthe imputed cost as an expense and as an imputed financing source in its own financial statements.This treatment ensures full recognition of the economic cost of employing personnel, even if part of that cost is not directly paid by the agency. Key references and standards: * Federal Accounting Standards Advisory Board (FASAB) SFFAS No. 5, "Accounting for Liabilities of the Federal Government": "Employing entities should recognize the cost of pensions and other postemployment benefits during their employees' active years of service. The cost recognized includes the amount contributed by the employing entity and the portion contributed by other entities on the entity's behalf, which is called an imputed cost." * FASAB SFFAS No. 4, "Managerial Cost Accounting Standards and Concepts": "Costs that are incurred by one entity but paid by another entity, and that benefit the reporting entity, should be recognized by the reporting entity as imputed costs and imputed financing." * OMB Circular A-136, Section II.2.7.3: "Imputed costs are to be recognized for the costs of goods and services received from other federal entities at no or reduced cost, such as pension and postretirement health benefits..." Therefore, answer choice C is correct: the agency recognizes the imputed cost. Disclaimer: This custom GPT is continuously improving, but it may not always provide accurate information and can make mistakes. Validate important information for relevancy, completeness and accuracy with your subject matter experts (SMEs).
Question 2
For state and local governments, a fund that is legally restricted to the use of earnings with the principal protected is
Correct Answer: B
A permanent fund is a governmental fund used to report resources that are legally restricted so that only earnings (not principal) may be used to support government programs. These are typically endowments where the corpus is preserved in perpetuity. According to GASB Statement No. 34, permanent funds are classified under governmental funds and must be used to benefit the government or its citizenry. Relevant Standards and References: GASB Statement No. 34, Basic Financial Statements-and Management's Discussion and Analysis-for State and Local Governments GASB Codification Section 1300, Fund Types GFOA Budgeting & Fund Balance Guidance Therefore, Option B is correct.
Question 3
An agency offers service for a fee; bad debts have historically averaged 5% of each year's fee revenue. During the past fiscal year, $1.1 million in fee revenue was recorded and $1 million in fees was collected. What is the bad debt expense recorded for the past fiscal year?
Correct Answer: C
The agency uses accrual accounting, meaning bad debt expense should be recognized based on the revenue earned, not the cash collected. The historical bad debt rate is 5%. Fee revenue recorded = $1.1 million Bad debt expense = 5% × $1,100,000 = $55,000 This matches the standard accounting treatment under FASAB SFFAS No. 1, where the expense is estimated and recognized in the same period as the related revenue. Relevant References: FASAB SFFAS No. 1 - Accounting for Selected Assets and Liabilities GAAP treatment for allowance for doubtful accounts Treasury Financial Manual - Accounts Receivable Accounting C). $55,000
Question 4
What is the term used to describe categories that present obligations by the items or services purchased by the federal government?
Correct Answer: B
Comprehensive Detailed Explanation: Object classes categorize federal government obligations by the type of goods or services purchased, such as personnel compensation, equipment, travel, etc. These are standardized in OMB Circular A-11, Section 83. This classification supports budgeting, analysis, and reporting. Relevant References: OMB Circular A-11, Section 83 - Object Classification USSGL (U.S. Standard General Ledger) Glossary GAO Glossary of Budget Terms B). object classes
Question 5
What is the maximum period of subscription-based information technology agreement (SBITA), including any options to extend, that is classified as short term?
Correct Answer: C
According to GASB Statement No. 96 (Subscription-Based Information Technology Arrangements or SBITAs), a subscription agreement is considered "short-term" if the maximum possible term (including renewal options) is 12 months or less. Short-term SBITAs are not reported as subscription liabilities and are accounted for as outflows (expenses or expenditures) when incurred. Relevant References: GASB Statement No. 96 - SBITAs (Issued May 2020) GASB Implementation Guide No. 2021-1 - Q&A on SBITAs GFOA Advisory - Cloud Computing and Subscription Agreements B). 12 months
