OMB to add internal controls requirements to PMA scorecard

The Office of Management and Budget will add implementation of milestones for tighter internal controls to federal agencies’ ratings for the President’s Management Agenda scorecard during fiscal 2006. Agencies are required under OMB’s revised Circular A-123 to have a framework in place to implement those financial management practices by October 2006, said Dave Zavada, branch chief of financial standards and grants in OMB’s Office of Federal Financial Management. An example of an internal control would be an agency performing routine reconciliation and analysis of its accounts throughout the year instead of quarterly or annually, he said.The first management statement assuring internal controls over financial reports is due in June 2006. That statement will accompany the agency’s year-end financial statement, which must be completed Nov. 15, 45 days after the close of the fiscal year. Prior to 2004, agencies had 90 days from Sept. 30 to finish their year-end reports. “We saw a lot of process improvement last year to meet that deadline. The requirement for internal controls is a follow-on to that,” Zavada said at an event sponsored by the Bethesda chapter of the Armed Forces Communications and Electronics Association in North Bethesda, Md.Internal controls already are included in the financial management component of the PMA, but agencies will now have to document their controls, test for risk, take corrective actions and document those actions. This will take agencies to the next level of accountability, he said. Auditors assess agency financial reports for weaknesses in internal controls. Circular A-123 requirements will complement the audits. Internal controls are good financial management practices, but they start at the program level, said Robert Suda, assistant commissioner in the Office of IT Solutions in the General Services Administration’s Federal Technology Service. Internal controls need to be adopted by program business owners, not just in the IT office.“Internal controls are the foundation of what we do in government,” Suda said. Circular A-123 has similarities with requirements private corporations must comply with under the Sarbanes-Oxley bill, which was passed in the wake of corporate scandals to make them more accountable for their financial and accounting information.