1. The financial reporting entity is composed of a) The primary government. b) The primary government and all legally separate governments for which the primary government is financial accountable. c) The primary government and all legally separate organizations for which the primary government is financially accountable. d) The primary government all legally separate organizations for which the primary government is financially accountable and any organizations whose omission would cause the primary governments financial statements to be misleading or incomplete. 2. Which of the following is NOT a primary government? a) A state government. b) A general purpose local government with the ability to determine its own budget. c) A general purpose local government whose tax levies must be approved by the state. d) A special purpose local government whose tax levies must be approved by the state. 3. Which of the following is necessary for a special purpose local government to be considered a primary government? a) It must operate for a single purpose. b) It must have a separately elected governing body. c) It must tax its citizens with ad valorem taxes. d) It must be fiscally dependent on another government. 4. Which of the following is necessary for a governmental entity to be considered fiscally independent? a) It must be able to hire its own management. b) It must be able to issue bonds that are tax-exempt. c) It must not be subsidized by another governmental entity. d) It must be able to levy taxes and/or set rates for its services. 5. Which of the following is a necessary characteristic of a component unit? a) It is fiscally dependent on a primary government. b) The primary government provides services that are used by both organizations. c) The primary government can impose its will on the unit or the unit has the potential to provide a financial benefit to or impose a financial burden on the primary government. d) The primary government appoints a voting majority of the component unit’s governing body or a voting majority of the unit’s governing body is composed of officials of the primary government. 6. The Marsh River School District a legally separate school district that has a separately elected governing body cannot enter into any debt agreements without the approval of the County Commission. Marsh River School District would be considered a(n): a) Primary government. b) Component unit. c) Related organization. d) Affiliated organization. 7. The County Commission appoints a voting majority of the members of the Board of a particular organization. The County Commission cannot impose its will upon the organization. There is no potential for the organization to provide any financial benefit to the County nor is there any potential for the organization to impose any financial burden on the county. The organization is an example of a(n): a) Primary government. b) Component unit. c) Related organization. d) Affiliated organization. 8. The State University Foundation is a legally separate tax-exempt 501(c)(3) entity organized for the purpose of raising funds to provide scholarships only to academically qualified students at the State University. The existing University Foundation board members elect new members of the board. The Foundation provides scholarships to students of the State University but the Foundation receives no financial support from the University. The Foundation is an example of: a) Primary government. b) Related organization. c) Affiliated organization. d) None of the above. 9. The governor of the state appoints the members of the Game and Fish Commission. The members of the Commission serve ten-year terms and can be removed only for cause. State law prohibits the reappointment of a Commissioner. The Commission receives no tax dollars. It is supported entirely by licenses and fees paid by hunters and anglers. The only bonds that can legally be issued by the Commission are revenue bonds backed by the licenses and fees paid by the sportsmen. The Game and Fish Commission is not a 501(c)(3) organization and does not have separate legal status. The Game and Fish Commission is an example of a: a) Primary government. b) Component unit. c) Related Organization. d) None of the above. 10. Of the following powers possessed by Government A which is an indication that Government A can impose its will on Government B? Government A: a) Can dismiss Government B’s chief operating officer. b) Can review Government B’s budget. c) Can remove appointed members of Government B’s governing board only for cause. d) Issues debt on behalf of Government B. 11. Of the following powers possessed by Government A which is NOT an indication that Government B should be included as a component unit of Government A? a) The governing documents state that if dissolved the assets of Government B will become the property of Government A. b) Government A issues revenue bonds in its name backed by the revenues of a project to be undertaken by Government B. Government A is neither legally nor morally liable for repayment. c) Government A has agreed to provide financial support to Government B if Government B operates at a deficit but in the entire 75 years that Government B has operated it has never operated at a loss. d) The governing documents state that once Government B has equity in excess of a certain amount 50% of all future operating profits will be used to reduce bonded debt of Government A.
