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Thursday, March 13, 2008

OMB seeks to improve value of internal controls reporting

The Office of Management and Budget is considering how to realign internal controls for financial reporting so it is more relevant and valuable to agencies. On April 13, OMB will conduct the first in a series of forums on integrating internal controls to help agencies expand the effectiveness and efficiency of their organizations, said Danny Werfel, OMB’s acting controller.

Agencies must report to OMB on the effectiveness of their internal controls not only for financial reporting. Some of those internal controls overlap into information security and procurement, he said.

Chief financial officers “are overwhelmed by compliance. The internal controls are numerous, complex and aren’t right-sized for added value,” Werfel said at the Federal Financial Management Conference March 11. CFOs often have the responsibility to fix material weaknesses but not the authority because the problem may reside in a program in one of the department’s operating agencies.

“We need to relook at financial reporting requirements and realign them to drive more value,” Werfel said.

OMB has asked agencies to evaluate internal controls not only for financial reporting, which OMB requires under Circular A-123, but where they overlap for acquisition and information security and where they can have greatest impact on mission effectiveness. OMB wants agencies to take an enterprisewide view of internal controls under A-123 and a broader view of risk. CFOs could find risk in procurement or information security.

OMB also wants agencies to take an integrated approach to internal controls. The CFO, chief information officer, chief acquisition officer and chief human capital officer each have internal controls to oversee.

Agencies can enhance their organizational capacity by being more efficient and effective so CFOs can move beyond compliance. Agencies need to become more standard in how they do business, such as through the Financial Management Line of Business, which focuses on common systems, business processes and accounting standards across government. CFOs also should work more with other agency CXOs to build more support throughout the agency. And agencies should integrate financial management throughout the organization.

OMB last month also asked the Federal Accounting Standards Advisory Board, of which it is a member, to take on the project to evaluate and integrate the standards for which agencies must report. The board tends to add to the standards that agencies must account for instead of integrating or consolidating or reducing them, Werfel said.

-Mary Mosquera, FCW.com

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