The $900,000 paid to the construction manager and $100,000 paid to the architect are capitalized as part of the building's total cost, totaling $1,000,000.
Using straight-line depreciation over 50 years with the half-year convention:
Annual depreciation = $1,000,000 ÷ 50 = $20,000
Since the half-year convention is used in the year the asset is placed in service, only 50% of the full-year depreciation is recorded.
Depreciation for the current year = $20,000 × 0.5 = $10,000
However, note: since both amounts ($900,000 + $100,000) were paid during construction and the school was completed and placed into service this year, the full capitalized amount applies.
GASB and GAAP allow the half-year rule unless the asset was placed into service at the beginning of the year. In this case, since placed during the year, the half-year rule applies.
Correct depreciation for the first year = $10,000
So, the correct answer is:
B). $10,000
Correction Note: While option C ($20,000) may seem valid for full-year depreciation, the use of the "half- year depreciation method" dictates that only half of the full-year amount is expensed in the first year.
Relevant References:
GASB Statement No. 34 - Capital Assets and Depreciation
GFOA Best Practices on Capital Asset Accounting and Reporting

What Are Material Weaknesses?
* Amaterial weaknessin internal control is a deficiency or combination of deficiencies that creates a reasonable possibility of a material misstatement in the financial statements that would not be prevented or detected in a timely manner.
* In the context of state and local financial audits, material weaknesses must be reported to those charged with governance, as they are responsible for oversight and corrective actions.
Why Is the Governing Body the Correct Answer?
* Thegoverning body(e.g., city council, county board, or state commission) is directly responsible for overseeing the entity's financial operations and ensuring accountability. Reporting material weaknesses to them ensures that corrective actions can be implemented to strengthen internal controls.
* Auditors communicate such findings through anaudit reportor amanagement letteraddressed to the governing body.
Why Other Options Are Incorrect:
* A. Legislature:The legislature may have oversight of state budgets and appropriations but is not the direct governing body for financial audits.
* C. Taxpayers:While transparency is important, material weaknesses are not directly reported to taxpayers. They may be disclosed in public audit reports, but taxpayers are not the primary audience.
* D. Local media:Material weaknesses are not formally reported to the media; their disclosure depends on the entity's public reporting processes.
References and Documents:
* GAO Yellow Book (GAGAS):Requires auditors to report material weaknesses to those charged with governance.
* GASB (Governmental Accounting Standards Board):Emphasizes the importance of communicating significant audit findings to governing bodies.
* AICPA Audit Standards (AU-C 265):Requires auditors to communicate material weaknesses to management and those charged with governance.

The Federal Accounting Standards Advisory Board (FASAB) establishes Generally Accepted Accounting Principles (GAAP) for federal government entities. FASAB is recognized by the American Institute of Certified Public Accountants (AICPA) as the authoritative source of GAAP for federal agencies.
Other agencies:
OMB: Issues financial reporting guidance and formats (e.g., A-136), but does not set GAAP.
GAO: Audits financial statements and issues internal control guidance.
FASB: Sets GAAP for private sector and some not-for-profit organizations-not federal.
Relevant References:
FASAB Memorandum of Understanding (GAO, Treasury, OMB)
AICPA Rule 203 Designation of FASAB as the GAAP Authority
SFFAS No. 34 - The Hierarchy of GAAP
A). FASAB

Governmental fund financial statements (such as the General Fund, Special Revenue Funds, Capital Projects Funds) use the current financial resources measurement focus and the modified accrual basis of accounting.
This focus reports inflows and outflows of current financial resources and excludes long-term assets and liabilities.
This differs from the government-wide financial statements, which use the economic resources measurement focus and full accrual basis.
Relevant References:
GASB Statement No. 34 - Basic Financial Statements
GASB Codification Section 1600 - Fund Accounting
GFOA Fund Accounting Guidance
C). current financial resources

When an agency is developing a fee to recover costs for providing a service, it must calculate the full cost of the service. According to cost accounting standards for federal government operations, "full cost" includes:
Direct costs: staffing, supplies, materials directly used in service provision Indirect costs: facility costs (e.g., location rent), equipment depreciation, administrative support, etc.
OMB Circular A-25, "User Charges," requires that user fees for government services be based on the full cost of providing that service unless otherwise mandated by law. Therefore, staffing (a direct cost), location rent (indirect cost), and equipment depreciation (a capital asset cost) are all appropriate to include.
Relevant Standards and References:
OMB Circular A-25, "User Charges," Section 6(d): "Full cost includes all direct and indirect costs to any part of the Federal Government of providing a good, resource, or service." FASAB SFFAS No. 4, Managerial Cost Accounting Concepts and Standards: Defines full cost components, including depreciation.
GAO "Principles of Federal Appropriations Law," Red Book, Vol. I: Cost recovery practices in federal user fee settings.
Therefore, Option B is correct.