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Free CPFO Practice Questions

10 free, exam-style Certified Public Finance Officer (CPFO) practice questions with answers and explanations. No signup required. Work through them below, then take the full free CPFO practice test to study every exam domain.

Question 1

A city council passes a formal resolution setting aside $2 million of general fund balance for a future facility, and only the council can later release it. Under GASB Statement No. 54, this amount is reported as:

  1. Restricted fund balance
  2. Assigned fund balance
  3. Committed fund balance
  4. Nonspendable fund balance
Show answer & explanation

Correct answer: C - Committed fund balance

Question 2

During a bond sale, a finance director wants assurance that one member of the financing team is legally obligated to put the government's interests first. Which team member owes the issuer a fiduciary duty?

  1. The underwriter, who markets and prices the bonds
  2. The municipal advisor
  3. The underwriter's counsel
  4. Whichever firm offers the lowest fee
Show answer & explanation

Correct answer: B - The municipal advisor

Question 3

GFOA's best practice on creating an investment policy states the primary objectives of public fund investment, in priority order, are:

  1. Safety, liquidity, yield
  2. Yield, safety, liquidity
  3. Liquidity, yield, safety
  4. Yield, liquidity, safety
Show answer & explanation

Correct answer: A - Safety, liquidity, yield

Question 4

A government issues new bonds to refinance an outstanding bond 60 days before that bond's first call date. This transaction is classified as a:

  1. Taxable advance refunding now prohibited by federal law
  2. Forward delivery bond requiring SEC pre-clearance
  3. Current refunding
  4. Defeasance that cannot be done on a tax-exempt basis
Show answer & explanation

Correct answer: C - Current refunding

Question 5

A city budgets on a non-GAAP basis but prepares its financial statements under GAAP. The MOST accurate explanation of why this is permissible is that:

  1. The budget must always match the basis of accounting under GAAP
  2. The basis of budgeting can differ from the basis of accounting
  3. Budgets are not subject to any basis requirement whatsoever
  4. GASB requires all budgets to use the modified accrual basis
Show answer & explanation

Correct answer: B - The basis of budgeting can differ from the basis of accounting

Question 6

An employee compares two retirement plans offered by a government. In which plan does the EMPLOYER bear the investment risk of meeting the promised benefit?

  1. A 457(b) deferred compensation plan
  2. A defined contribution (DC) plan
  3. A defined contribution plan with an employer match
  4. A defined benefit (DB) plan
Show answer & explanation

Correct answer: D - A defined benefit (DB) plan

Question 7

A government must procure a complex consulting engagement where technical approach and qualifications matter more than price alone. Which source selection method is MOST appropriate?

  1. Request for Proposals (RFP)
  2. Invitation for Bids (IFB), awarding to the lowest responsive and responsible bidder
  3. Sole-source award to a preferred vendor
  4. Emergency procurement to bypass competition
Show answer & explanation

Correct answer: A - Request for Proposals (RFP)

Question 8

A finance department purchases an insurance policy to cover potential losses from a cyberattack. In enterprise risk management terms, this is an example of which risk response?

  1. Risk avoidance
  2. Risk acceptance
  3. Risk transfer
  4. Risk identification
Show answer & explanation

Correct answer: C - Risk transfer

Question 9

Under the modified accrual basis used in governmental funds, property tax revenue should be recognized when it is:

  1. Earned, regardless of when it will be collected
  2. Measurable and available
  3. Received in cash at the counter
  4. Appropriated in the adopted budget
Show answer & explanation

Correct answer: B - Measurable and available

Question 10

After issuing bonds, a government must file its annual financial information and notices of certain material events for investors. These continuing disclosure obligations arise under:

  1. GASB Statement No. 34, satisfied by issuing the annual government-wide financial statements
  2. The federal Single Audit Act, satisfied by submitting the SEFA each fiscal year
  3. The IRS arbitrage rebate rules governing the investment of bond proceeds
  4. SEC Rule 15c2-12, with filings made to the MSRB's EMMA system
Show answer & explanation

Correct answer: D - SEC Rule 15c2-12, with filings made to the MSRB's EMMA system

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