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OMB A-123 Update

Mike Wetklow

Office of Federal Financial Management

Office of Management and Budget

CRTApril 20, 2015

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Internal Controls• 1981/1982/1983 –

− OMB Issued Circular No. A-123, Internal Control Systems and Internal Control Guidelines− Federal Managers Financial Integrity Act

 • 1986 – OMB Required Management Control Plans to guide efforts

 • 1995 – OMB updated A-123, Management Accountability and Control to reflect GPRA, CFO Act, IG Act

 • 2004 – OMB updated A-123, Management’s Responsibility for Internal Control and added Appendix A, Internal

Control Over Financial Reporting

• OMB’s vision for 2015 Update – transform and evolve existing internal control compliance frameworks so that it creates a more value added, integrated, risk based, and less burdensome set of requirements for agencies. The revised guidance will:− Clarify technical terminology to help program managers better understand and implement internal controls− Introduce ERM concepts as defined by the COSO framework− Replace “check the box” compliance approach with risk management-based approaches to support agency

missions− Streamline assurance statement reporting− Build on successful implementation of internal controls over financial reporting− Be put out for comment in Spring 2015 with an implementation date of 2016

ERM and Internal Controls

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Governance

ERM

Internal Controls

Internal Controls

A-123 Future State

A-123 Current State

Source: COSO

ERM and Internal Controls

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Source: COSO

Streamlining Assurance Statements

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Statement of Assurance

Material Weaknesses New Resolved ReassessedEnding Balance

[Name of weakness]

[Name of weakness]

[Name of weakness]

Total Material Weaknesses ## ## ## ##

Statement of Assurance

Material Weaknesses New Resolved ReassessedEnding Balance

[Name of weakness]

[Name of weakness]

[Name of weakness]

Total Material Weaknesses ## ## ## ##

Statement of Assurance

Non-Conformances New Resolved ReassessedEnding Balance

[Name of non-conformance]

[Name of non-conformance]

[Name of non-conformance]

Total non-conformances ## ## ## ##

2. Accounting StandardsNo lack of substantial compliance noted, or Lack of substantial

compliance notedNo lack of substantial compliance noted, or Lack of

substantial compliance noted

3. USSGL at Transaction LevelNo lack of substantial compliance noted, or Lack of substantial

compliance notedNo lack of substantial compliance noted, or Lack of

substantial compliance noted

Agency Auditor

1. System RequirementsNo lack of substantial compliance noted, or Lack of substantial

compliance notedNo lack of substantial compliance noted, or Lack of

substantial compliance noted

## ##

Compliance with Section 803(a) of the Federal Financial Management Improvement Act (FFMIA) 14

Beginning Balance Consolidated

## ##

Conformance with financial management system requirements (FMFIA § 4)

Systems conform, conform except for the below non-conformance(s), or do not conform to financial management system requirements

Effectiveness of Internal Control over Operations (FMFIA § 2)

Unqualified, qualified, or statement of no assurance

Beginning Balance Consolidated

## ##

Effectiveness of Internal Control over Financial Reporting (FMFIA § 2)

Unqualified, qualified, or statement of no assurance

Beginning Balance Consolidated

Additional Considerations

• Corrective Actions

• Service Organizations

• Internal Controls in Disaster Situations

• Fraud

• Internal Controls over Financial Assistance (i.e., Grants)

• Appendix A

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