Certified Government Financial Manager (CGFM) Practice Exam 2026 – Your All-in-One Guide to Exam Success!

A valid cost recovery objective is designed to ensure that all relevant expenses related to a project or a service are covered, which allows an organization to sustain its operations without incurring a loss. The objective mentioned in the chosen answer encompasses not only the operational costs but also financial obligations such as bond principal and interest, which are important components of the overall cost structure.

Including bond principal and interest in the cost recovery objective recognizes the full financial commitment of the organization to its funding mechanisms. This ensures that all costs associated with both operational and debt servicing are accounted for, providing a thorough foundation for pricing, budgeting, and financial planning. In turn, this approach helps maintain financial health and operational viability.

The other options fail to capture the full spectrum of costs needed for a valid cost recovery strategy. For instance, excluding direct costs or dividends can lead to a misrepresentation of financial needs, which can jeopardize the organization's financial stability. Thus, the inclusion of all expenses plus bond principal and interest is crucial for a comprehensive understanding of cost recovery.