Internal Control

Capabilities

The new Office of Management and Budget (OMB) Circular A-123 reinvigorates and strengthens federal managers’ responsibilities relating to the Federal Managers Financial Integrity Act (FMFIA) of 1982. FMFIA requires agencies to establish internal accounting and administrative controls to ensure that obligations and costs comply with laws; government assets are safeguarded against waste, loss, unauthorized use, or misappropriation; and revenue and expenditures are reliably reported.

Since the early 1980s, agencies have been preparing FMFIA assurance statements, but by the mid 1990s the process was widely perceived as a burdensome, costly administrative chore, totally unrelated to the quality of an agency’s operations. Consequently, federal agency internal controls and FMFIA reporting were deemphasized. Then came a series of management abuses in private industry, epitomized by the Enron and WorldCom scandals, which resulted in the passage of the Sarbanes-Oxley Act of 2002. This new emphasis on internal controls in private industry provided the impetus for the new OMB Circular A-123.  

LMI is helping agencies meet the challenge of increased emphasis on internal controls by

• training their staffs in internal control concepts,
• preparing workbooks for assessable unit managers to define and test controls,
• evaluating internal controls, and
• identifying areas for improved internal controls.

CLIENTS AND SOLUTIONS

OPM—Implementing Internal Control of Financial Reporting
The Office of Personnel Management (OPM) is serious about internal controls. It created the Center for Internal Control and Risk Management and recruited senior staff members to perfect its capability. LMI is supporting the center by training OPM managers and employees in internal controls and risk management, developing a self-assessment tool that managers and employees can use independently, and conducting risk management reviews. The self-assessment tool includes a risk readiness tool based on the Government Accountability Office “Green Book”—the bible of internal control—and a workbook to document controls and tests.

GSA PBS—Assuring Management Controls Are in Place
The Public Buildings Service (PBS) has been working with the Government Services Administration Office of the Chief Financial Officer to assess its internal controls in financial reporting. The next step is to bolster internal controls in program areas. LMI is helping provide internal control guidance to regions, assisting and training PBS business lines in developing internal control plans and evaluations, and reviewing internal controls for reimbursable work authorization orders, construction in process, and prior year recoveries.