CGFM Examination 1

The United States operates under a federal system of government, which distributes power among three distinct levels: federal, state, and local. Understanding this structure is fundamental to government financial management because each level has unique authorities, responsibilities, and financial management requirements.

The federal government is the national government of the United States, established by the U.S. Constitution in 1787. It possesses enumerated powers specifically granted by the Constitution and implied powers necessary to carry out those enumerated powers. The federal government has exclusive authority over national defense, foreign affairs, interstate commerce, currency, immigration, and federal taxation.

The federal government operates through numerous departments, agencies, bureaus, and commissions. Major executive departments include the Department of the Treasury, Department of Defense, Department of Health and Human Services, and Department of Homeland Security. Independent agencies include the Environmental Protection Agency, Social Security Administration, and National Aeronautics and Space Administration. Regulatory commissions include the Securities and Exchange Commission and Federal Communications Commission.

Federal financial management is governed by numerous statutes including the Budget and Accounting Act of 1921, the Chief Financial Officers Act of 1990, the Government Performance and Results Act, and the Federal Financial Management Improvement Act. The Office of Management and Budget provides central oversight of federal budget formulation and execution.

The fifty states possess sovereignty under the U.S. Constitution through the Tenth Amendment, which reserves to the states all powers not delegated to the federal government nor prohibited to the states. Each state has its own constitution, which establishes the framework for state government operations.

State governments have primary responsibility for education, public safety, transportation, health and human services, and environmental protection within their borders. States also regulate intrastate commerce, professional licensing, and local governments. State tax systems typically include income taxes, sales taxes, and various excise taxes.

State government structure generally mirrors the federal model with executive, legislative, and judicial branches. Governors serve as chief executives, state legislatures enact laws and appropriate funds, and state courts interpret state laws and constitutions. State comptrollers or auditors oversee financial management and accountability.

Local governments are subdivisions of state governments and derive their authority from state constitutions and state enabling legislation. Unlike the federal and state governments, local governments do not possess inherent sovereignty. They exercise only those powers granted by the state through constitutional provisions, statutes, or local charters.

Local governments include counties, municipalities (cities, towns, villages), townships, school districts, and special districts. Counties typically provide services across larger geographic areas including law enforcement, courts, public health, and property records. Municipalities provide urban services such as police and fire protection, water and sewer services, parks, and local roads.

School districts are the most common type of special district, providing public education services. Other special districts provide specific services such as water supply, sewage treatment, fire protection, transit, and parks. These single-purpose entities are created when general-purpose governments cannot efficiently provide specialized services.