FMFIA and Internal Controls NOAA Finance Conference May 10, 2007
Outline <ul><li>Purpose </li></ul><ul><li>Internal Controls (I/C) </li></ul><ul><li>Legislative Requirements for (I/C) </l...
Purpose <ul><li>To provide an understanding of FMFIA and internal controls and why they are important to all NOAA staff (n...
Internal Controls
So what are Internal Controls? <ul><li>An integral component of an organization’s management that provides  reasonable ass...
So what are Internal Controls? <ul><li>Internal Controls ensure that what  should  happen  does  happen! </li></ul><ul><ul...
So what are Internal Controls? <ul><li>Management’s first line of defense in preventing or detecting noncompliance or abus...
Why are Internal Controls Important? <ul><li>They help ensure proper accountability for </li></ul><ul><ul><li>Validity and...
Why are Internal Controls Important? <ul><li>Controls are  fundamental  to the successful accomplishment of your mission. ...
How am I responsible? <ul><li>Management is responsible for having an effective system of internal controls,  but we all h...
Types of Internal Controls <ul><li>1. Managerial </li></ul><ul><ul><li>Include overall policy, planning & internal review ...
Types of Internal Controls <ul><li>3. Accounting </li></ul><ul><ul><li>Relates to the safeguarding assets and the reliabil...
Types of Internal Controls <ul><li>5. Financial </li></ul><ul><ul><li>Applies to activities and processes involving the au...
Internal Control Environment <ul><li>General Control Activities </li></ul><ul><ul><li>Reasonable Assurance </li></ul></ul>...
Internal Control Environment <ul><ul><li>Control Objectives </li></ul></ul><ul><ul><ul><li>The purpose of the control and ...
Internal Control Environment <ul><li>Control Techniques consist of: </li></ul><ul><ul><li>Documentation </li></ul></ul><ul...
Internal Control Environment <ul><ul><li>Segregation of Duties </li></ul></ul><ul><ul><ul><li>No individual should control...
Internal Control Environment Internal Control Activities General Control Activities Specific Control Activities <ul><li>Re...
Key Points <ul><li>People are what make internal controls work. </li></ul><ul><ul><li>We all have a responsibility for int...
Legislative Requirement for  Internal Controls
Legislative Requirements <ul><li>Key Legislation </li></ul><ul><ul><li>Federal Manager’s Financial Integrity Act (FMFIA) o...
Legislative Requirements <ul><li>Key Legislation </li></ul><ul><ul><li>Chief Financial Officers Act of 1990 (“CFO Act”) </...
OMB Circular A-123
OMB Circular A-123 <ul><li>Prescribes policies and standards for evaluating, improving, and reporting on internal controls...
What’s new? <ul><li>Major revision to A-123, December 2004   </li></ul><ul><ul><li>Addition of Appendix A </li></ul></ul><...
Why was A-123 revised? <ul><li>Passage of Sarbanes-Oxley Act of 2002 (SOX)   </li></ul><ul><ul><li>Requires that managemen...
Why was A-123 revised? <ul><ul><li>SOX served as the push for the Federal government to re-evaluate its current policies r...
Why was A-123 revised? <ul><li>“ Empty” Clean Opinions </li></ul><ul><ul><li>Intent of the CFO Act was that annual financi...
Why was A-123 revised? <ul><li>No consistency between agencies as to type of internal control audits and opinion issued by...
OMB Circular A-136
OMB Circular A-136 <ul><li>Provides guidance on financial reporting for Executive Branch departments, agencies, and entiti...
Key Points <ul><li>OMB Circular A-123 implements FMFIA </li></ul><ul><ul><li>Annual assertion on adequacy and effectivenes...
Audit and Internal Control Process
Audit and Internal Control Process <ul><li>Annual audit  and internal control process which consists of: </li></ul><ul><ul...
Audit and Internal Control Process CFO Act of 1990 FMFIA OMB A-136 OMB A-123 & Appendix A PAR OMB Circulars Audit Process ...
Audit and Internal Control Process <ul><li>FMFIA Program Reviews (OMB A-123) </li></ul><ul><ul><li>Test internal controls ...
Audit and Internal Control Process <ul><li>FMFIA Program Reviews (OMB A-123) </li></ul><ul><ul><li>Program Internal Contro...
Audit and Internal Control Process <ul><li>FMFIA Program Reviews (OMB A-123) </li></ul><ul><ul><li>Program Internal Contro...
Audit and Internal Control Process <ul><li>Program Internal Control Review </li></ul><ul><ul><li>Reviewing background info...
Audit and Internal Control Process <ul><li>Program Internal Control Review </li></ul><ul><ul><li>Testing internal controls...
Audit and Internal Control Process <ul><li>Program Internal Control Review </li></ul><ul><ul><li>Report findings. </li></u...
Audit and Internal Control Process <ul><li>Management Control Review  </li></ul><ul><ul><li>Evaluate internal controls of ...
Audit and Internal Control Process <ul><li>Management Control Review  </li></ul><ul><ul><li>Conducted by Line and Staff Of...
Audit and Internal Control Process <ul><li>Management Control Review </li></ul><ul><ul><li>Steps for conducting a MCR cons...
Key Points <ul><li>FMFIA Program Reviews (OMB-123) consist of: </li></ul><ul><ul><li>Program Internal Control Reviews (CFO...
Reporting Requirements
Reporting Requirements <ul><li>Annual audit and internal control process which consists of: </li></ul><ul><ul><li>FMFIA Pr...
Reporting Requirements <ul><li>FMFIA Program Reviews (OMB A-123) </li></ul><ul><ul><li>Program Internal Control Reviews (O...
Reporting Requirements <ul><li>FMFIA Program Reviews (OMB A-123) </li></ul><ul><ul><li>Management Control Reviews (LO/SO) ...
Reporting Requirements <ul><li>OMB A-123, Appendix A </li></ul><ul><ul><li>Completed August 31 for internal control in pla...
Reporting Requirements <ul><li>Financial Statement Audit </li></ul><ul><ul><li>Quarterly financial statements submitted to...
Reporting Requirements <ul><li>Financial Statement Audit </li></ul><ul><ul><li>Audit conducted by KPMG April to November. ...
Reporting Requirements <ul><li>  </li></ul>Financial Audit (KPMG) (OMB A-136) FMFIA Program Reviews  (OMB A-123) OMB A-123...
Audit and Internal Control Finding Process
Audit and Internal Control Findings Process <ul><li>FMFIA Program Reviews (OMB-123) </li></ul><ul><ul><li>Program Internal...
Audit and Internal Control Findings Process <ul><li>Management Control Reviews </li></ul><ul><ul><ul><li>Findings issued b...
Audit and Internal Control Findings Process <ul><li>Annual Financial Statement Audit </li></ul><ul><ul><li>KPMG issues dra...
Audit and Internal Control Findings Process <ul><li>Annual Financial Statement Audit </li></ul><ul><ul><li>Response requir...
Audit and Internal Control Findings Process <ul><li>Corrective Action Plans (CAPs) </li></ul><ul><ul><li>Once the Internal...
Audit and Internal Control Findings Process <ul><li>Developing Corrective Action Plans (CAPs) </li></ul><ul><ul><li>Use fo...
Annual KPMG Audit Process Draft Notice of Finding (NFR) Comment &  Concurrence Period KPMG Auditor Final NFR Draft Mgmt. L...
Key Points <ul><li>Corrective Action Plan (CAP) must be developed for findings. </li></ul><ul><ul><li>FMFIA Program Review...
How can I learn more? <ul><li>OMB Circular A-123   </li></ul><ul><ul><li>http://www.whitehouse.gov/omb/financial/offm_circ...
How can I learn more? <ul><li>OMB Circular A-136 </li></ul><ul><ul><li>http://www.whitehouse.gov/omb/circulars/a136/a136_r...
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FMFIA and Internal Controls NOAA Finance Conference May 10, 2007

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FMFIA and Internal Controls NOAA Finance Conference May 10, 2007

  1. 1. FMFIA and Internal Controls NOAA Finance Conference May 10, 2007
  2. 2. Outline <ul><li>Purpose </li></ul><ul><li>Internal Controls (I/C) </li></ul><ul><li>Legislative Requirements for (I/C) </li></ul><ul><li>OMB Circular A-123 </li></ul><ul><li>OMB Circular A-136 </li></ul><ul><li>Audit and Internal Control Process </li></ul><ul><li>Reporting Requirements </li></ul><ul><li>Audit and Internal Control Finding Process </li></ul>
  3. 3. Purpose <ul><li>To provide an understanding of FMFIA and internal controls and why they are important to all NOAA staff (not just the accountants). </li></ul><ul><li>Also, provide an understanding of the financial reporting requirements and annual audit process. </li></ul>
  4. 4. Internal Controls
  5. 5. So what are Internal Controls? <ul><li>An integral component of an organization’s management that provides reasonable assurance that the following objectives are being achieved : </li></ul><ul><ul><li>Effectiveness and efficiency of operations, </li></ul></ul><ul><ul><li>Reliability of financial reporting, and </li></ul></ul><ul><ul><li>Compliance with applicable laws and regulations. </li></ul></ul>
  6. 6. So what are Internal Controls? <ul><li>Internal Controls ensure that what should happen does happen! </li></ul><ul><ul><li>Policy </li></ul></ul><ul><ul><li>Procedures </li></ul></ul><ul><ul><li>Authorizations </li></ul></ul><ul><ul><li>Chain of custody </li></ul></ul><ul><ul><li>Devices (locks) </li></ul></ul>
  7. 7. So what are Internal Controls? <ul><li>Management’s first line of defense in preventing or detecting noncompliance or abuse. </li></ul>
  8. 8. Why are Internal Controls Important? <ul><li>They help ensure proper accountability for </li></ul><ul><ul><li>Validity and reliability of data; </li></ul></ul><ul><ul><li>Efficiency and economy of all activities; </li></ul></ul><ul><ul><li>Compliance with laws and regulations; </li></ul></ul><ul><ul><li>Achievement of agency objectives, and </li></ul></ul><ul><ul><li>Safeguarding of assets. </li></ul></ul>
  9. 9. Why are Internal Controls Important? <ul><li>Controls are fundamental to the successful accomplishment of your mission. </li></ul>
  10. 10. How am I responsible? <ul><li>Management is responsible for having an effective system of internal controls, but we all have a role in the effective implementation of these controls. </li></ul><ul><li>People are what make internal controls work. </li></ul>
  11. 11. Types of Internal Controls <ul><li>1. Managerial </li></ul><ul><ul><li>Include overall policy, planning & internal review functions. </li></ul></ul><ul><li>2. Program/Operational </li></ul><ul><ul><li>Involve agency activities that relate to the mission or role of the agency/program. </li></ul></ul><ul><ul><ul><li>These controls focus on program performance and economy and efficiency of operations. </li></ul></ul></ul>
  12. 12. Types of Internal Controls <ul><li>3. Accounting </li></ul><ul><ul><li>Relates to the safeguarding assets and the reliability of financial reports. </li></ul></ul><ul><li>4. Administrative </li></ul><ul><ul><li>Applies to actions leading to the authorization of transactions and events based on compliance with established policy and procedures. </li></ul></ul>
  13. 13. Types of Internal Controls <ul><li>5. Financial </li></ul><ul><ul><li>Applies to activities and processes involving the authorization and payment or collection of money. </li></ul></ul><ul><ul><ul><li>The focus is on the accountability of funds, authorization, and safeguards to protect money. </li></ul></ul></ul>
  14. 14. Internal Control Environment <ul><li>General Control Activities </li></ul><ul><ul><li>Reasonable Assurance </li></ul></ul><ul><ul><ul><li>Balance between cost and benefit of a control. </li></ul></ul></ul><ul><ul><li>Supportive Attitude </li></ul></ul><ul><ul><ul><li>Positive and supportive attitude towards controls. </li></ul></ul></ul><ul><ul><li>Competent Personnel </li></ul></ul><ul><ul><ul><li>Personnel have the skills and knowledge to perform their job. </li></ul></ul></ul>
  15. 15. Internal Control Environment <ul><ul><li>Control Objectives </li></ul></ul><ul><ul><ul><li>The purpose of the control and the specific targets to be achieved are clearly understood. </li></ul></ul></ul><ul><ul><ul><li>What is the control trying to prevent? </li></ul></ul></ul><ul><ul><li>Control Techniques </li></ul></ul><ul><ul><ul><li>Mechanisms used to achieve control objectives. </li></ul></ul></ul><ul><ul><ul><ul><li>Testing is conducted on control objectives to determine if the objective is effective and efficient. </li></ul></ul></ul></ul>
  16. 16. Internal Control Environment <ul><li>Control Techniques consist of: </li></ul><ul><ul><li>Documentation </li></ul></ul><ul><ul><ul><li>Written policies and procedures. </li></ul></ul></ul><ul><ul><li>Recording of transactions </li></ul></ul><ul><ul><ul><li>Accurate and timely recording of transactions. </li></ul></ul></ul><ul><ul><li>Execution of transactions </li></ul></ul><ul><ul><ul><li>Authorized and executed by persons acting within the scope of their authority. </li></ul></ul></ul>
  17. 17. Internal Control Environment <ul><ul><li>Segregation of Duties </li></ul></ul><ul><ul><ul><li>No individual should control over all aspects of a transaction or event. </li></ul></ul></ul><ul><ul><li>Supervision </li></ul></ul><ul><ul><ul><li>Work should be reviewed and approved by person other than the preparer. </li></ul></ul></ul><ul><ul><li>Security </li></ul></ul><ul><ul><ul><li>Physical control over vulnerable assets </li></ul></ul></ul><ul><ul><ul><ul><li>Limit access to authorized individuals </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Periodic reviews/inventories to account for resources. </li></ul></ul></ul></ul>
  18. 18. Internal Control Environment Internal Control Activities General Control Activities Specific Control Activities <ul><li>Reasonable Assurance </li></ul><ul><li>Supportive Attitude </li></ul><ul><li>Competent Personnel </li></ul><ul><li>Control Objectives </li></ul><ul><li>Documentation </li></ul><ul><li>Recording of Transactions </li></ul><ul><li>Execution of Transactions </li></ul><ul><li>Segregation of Duties </li></ul><ul><li>Supervision </li></ul><ul><li>Security </li></ul><ul><li>Control Techniques </li></ul>
  19. 19. Key Points <ul><li>People are what make internal controls work. </li></ul><ul><ul><li>We all have a responsibility for internal controls. </li></ul></ul><ul><li>The cost of an internal control should not exceed the benefit derived from the control. </li></ul><ul><li>The Internal Control Environment sets the tone for the organization. </li></ul><ul><ul><li>It determines how efficient and effective the controls will be in safeguarding assets, deterring waste, fraud, abuse and mismanagement. </li></ul></ul>
  20. 20. Legislative Requirement for Internal Controls
  21. 21. Legislative Requirements <ul><li>Key Legislation </li></ul><ul><ul><li>Federal Manager’s Financial Integrity Act (FMFIA) of 1982 (“Integrity Act”) </li></ul></ul><ul><ul><ul><li>Agency heads must annually evaluate internal controls and report </li></ul></ul></ul><ul><ul><ul><ul><li>Section 2: Assurance on overall adequacy and effectiveness of internal controls within the agency and on financial reporting . </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Section 4: Whether financial management systems </li></ul></ul></ul></ul><ul><ul><ul><ul><li>conform to government-wide requirements </li></ul></ul></ul></ul><ul><ul><ul><li>Implemented by OMB Circular A-123 </li></ul></ul></ul>
  22. 22. Legislative Requirements <ul><li>Key Legislation </li></ul><ul><ul><li>Chief Financial Officers Act of 1990 (“CFO Act”) </li></ul></ul><ul><ul><ul><li>Executive Branch departments, agencies, and entities required to submit audited financial statements and interim financial statements. </li></ul></ul></ul><ul><ul><ul><li>Implemented by OMB Circular A-136. </li></ul></ul></ul>
  23. 23. OMB Circular A-123
  24. 24. OMB Circular A-123 <ul><li>Prescribes policies and standards for evaluating, improving, and reporting on internal controls. </li></ul><ul><li>Implements the Federal Manager’s Financial Integrity Act (FMFIA) of 1982 (“Integrity Act”) </li></ul><ul><ul><li>Agencies must annually evaluate and report on </li></ul></ul><ul><ul><ul><li>Section 2 -Adequacy and effectiveness of internal controls </li></ul></ul></ul><ul><ul><ul><li>Section 4 – Financial management systems </li></ul></ul></ul>
  25. 25. What’s new? <ul><li>Major revision to A-123, December 2004 </li></ul><ul><ul><li>Addition of Appendix A </li></ul></ul><ul><ul><ul><li>Requires a separate assurance statement on the effectiveness of the internal controls over financial reporting. </li></ul></ul></ul><ul><ul><ul><li>Requires management to perform direct testing of the internal controls in place in order to support the new assurance statement. </li></ul></ul></ul><ul><ul><ul><li>New assurance statement as of June 30 will be part of the Performance and Accountability Report (PAR) which includes agency performance measures and audited financial statements as of September 30. </li></ul></ul></ul>
  26. 26. Why was A-123 revised? <ul><li>Passage of Sarbanes-Oxley Act of 2002 (SOX) </li></ul><ul><ul><li>Requires that management of publicly-traded companies strengthen their processes for assessing and reporting on internal controls over financial reporting. </li></ul></ul>
  27. 27. Why was A-123 revised? <ul><ul><li>SOX served as the push for the Federal government to re-evaluate its current policies relating to internal controls over financial reporting and management’s responsibilities. </li></ul></ul><ul><ul><ul><li>No government wide policy concerning audits of federal internal controls. </li></ul></ul></ul>
  28. 28. Why was A-123 revised? <ul><li>“ Empty” Clean Opinions </li></ul><ul><ul><li>Intent of the CFO Act was that annual financial statements would flow from, and be a routine by-product of an effective system of internal controls. </li></ul></ul><ul><ul><ul><li>Years of preparing financial statements have shown that this is not a reality. </li></ul></ul></ul><ul><ul><ul><li>“ Heroic” efforts to manually compile financial statements because financial systems are unable to produce financial statements. </li></ul></ul></ul>
  29. 29. Why was A-123 revised? <ul><li>No consistency between agencies as to type of internal control audits and opinion issued by auditors. </li></ul><ul><ul><li>Only eleven of the 24 CFO agencies reported an audit of internal controls. </li></ul></ul><ul><ul><li>Audit opinions referenced a variety of internal control criteria. </li></ul></ul>
  30. 30. OMB Circular A-136
  31. 31. OMB Circular A-136 <ul><li>Provides guidance on financial reporting for Executive Branch departments, agencies, and entities. </li></ul><ul><li>Establishes requirement to submit </li></ul><ul><ul><li>audited financial statements, </li></ul></ul><ul><ul><li>interim financial statements, and </li></ul></ul><ul><ul><li>Performance and Accountability Reports (PAR) under the Chief Financial Officers Act of 1990 (“CFO Act”). </li></ul></ul>
  32. 32. Key Points <ul><li>OMB Circular A-123 implements FMFIA </li></ul><ul><ul><li>Annual assertion on adequacy and effectiveness of internal controls. </li></ul></ul><ul><li>OMB Circular A-136 implements the CFO Act </li></ul><ul><ul><li>Quarterly financial statements </li></ul></ul><ul><ul><li>Annually, independent audit of agency financial statements </li></ul></ul>
  33. 33. Audit and Internal Control Process
  34. 34. Audit and Internal Control Process <ul><li>Annual audit and internal control process which consists of: </li></ul><ul><ul><li>FMFIA Program Reviews (OMB-123) </li></ul></ul><ul><ul><ul><li>Program Internal Control Reviews </li></ul></ul></ul><ul><ul><ul><li>Management Control Reviews </li></ul></ul></ul><ul><ul><li>OMB A-123, Appendix A Reviews </li></ul></ul><ul><ul><li>Financial statement audit by KPMG (OMB-136) </li></ul></ul>
  35. 35. Audit and Internal Control Process CFO Act of 1990 FMFIA OMB A-136 OMB A-123 & Appendix A PAR OMB Circulars Audit Process Internal Control Process
  36. 36. Audit and Internal Control Process <ul><li>FMFIA Program Reviews (OMB A-123) </li></ul><ul><ul><li>Test internal controls related to a non-financial program or process. </li></ul></ul><ul><ul><li>Requires testing internal controls over financial reporting (OMB A-123, Appendix A). </li></ul></ul><ul><li>Annual Financial Statement Audit (OMB A-136) </li></ul><ul><ul><li>Annual Departmental audit by KPMG </li></ul></ul><ul><ul><ul><li>Conducts the audit on behalf of the DOC Office of Inspector General. </li></ul></ul></ul>
  37. 37. Audit and Internal Control Process <ul><li>FMFIA Program Reviews (OMB A-123) </li></ul><ul><ul><li>Program Internal Control Review </li></ul></ul><ul><ul><li>Management Control Review (MCR) </li></ul></ul>
  38. 38. Audit and Internal Control Process <ul><li>FMFIA Program Reviews (OMB A-123) </li></ul><ul><ul><li>Program Internal Control Review </li></ul></ul><ul><ul><ul><li>Comprehensive look at the internal controls for a selected program. </li></ul></ul></ul><ul><ul><ul><li>Conducted by the Financial Policy & Compliance Division/Office of the CFO. </li></ul></ul></ul><ul><ul><ul><ul><li>Independence from program area. </li></ul></ul></ul></ul>
  39. 39. Audit and Internal Control Process <ul><li>Program Internal Control Review </li></ul><ul><ul><li>Reviewing background information and document the process cycle under review. </li></ul></ul><ul><ul><li>Analyzing the control environment. </li></ul></ul><ul><ul><ul><li>Organizational structure, </li></ul></ul></ul><ul><ul><ul><li>Policy and procedures, </li></ul></ul></ul><ul><ul><ul><li>Planning, and </li></ul></ul></ul><ul><ul><ul><li>Organizational checks and balances. </li></ul></ul></ul>
  40. 40. Audit and Internal Control Process <ul><li>Program Internal Control Review </li></ul><ul><ul><li>Testing internal controls. </li></ul></ul><ul><ul><ul><li>Focuses on written requirements and actions. </li></ul></ul></ul><ul><ul><ul><li>Testing verifies that actions have been taken as planned. </li></ul></ul></ul><ul><ul><li>Evaluating the Internal Controls </li></ul></ul><ul><ul><ul><li>What did the evidence tell us? </li></ul></ul></ul><ul><ul><ul><li>Is there compliance with the policy and procedures? </li></ul></ul></ul>
  41. 41. Audit and Internal Control Process <ul><li>Program Internal Control Review </li></ul><ul><ul><li>Report findings. </li></ul></ul><ul><ul><ul><li>Make recommendations and request corrective actions. </li></ul></ul></ul><ul><ul><ul><li>OCFO monitor corrective actions on a quarterly basis. </li></ul></ul></ul><ul><ul><ul><li>Corrective actions will be reviewed by internal auditor for completeness. </li></ul></ul></ul>
  42. 42. Audit and Internal Control Process <ul><li>Management Control Review </li></ul><ul><ul><li>Evaluate internal controls of a specific activity (within a program or process). </li></ul></ul><ul><ul><ul><li>Guidance issued by Financial Policy & Compliance Division/Office of the CFO. </li></ul></ul></ul><ul><ul><ul><ul><li>Available on the Finance Office web site. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>http://www.corporateservices.noaa.gov/~finance/Internal%20Controls.html </li></ul></ul></ul></ul>
  43. 43. Audit and Internal Control Process <ul><li>Management Control Review </li></ul><ul><ul><li>Conducted by Line and Staff Offices </li></ul></ul><ul><ul><ul><li>Self-assessment of their internal controls. </li></ul></ul></ul><ul><ul><li>Allows management to determine if </li></ul></ul><ul><ul><ul><li>A positive and supportive environment exists; </li></ul></ul></ul><ul><ul><ul><li>Laws, regulations, policies and procedures are being followed as directed; </li></ul></ul></ul><ul><ul><ul><li>Internal controls exist and they are cost effective; and </li></ul></ul></ul><ul><ul><ul><li>Corrective actions are needed. </li></ul></ul></ul>
  44. 44. Audit and Internal Control Process <ul><li>Management Control Review </li></ul><ul><ul><li>Steps for conducting a MCR consists of: </li></ul></ul><ul><ul><ul><li>Conducting a risk assessment; </li></ul></ul></ul><ul><ul><ul><li>Reviewing internal controls; </li></ul></ul></ul><ul><ul><ul><li>Reporting findings; and </li></ul></ul></ul><ul><ul><ul><li>Monitoring </li></ul></ul></ul><ul><ul><ul><ul><li>Developing corrective action plan, </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Implementing corrective actions, and </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Reporting progress to OCFO. </li></ul></ul></ul></ul>
  45. 45. Key Points <ul><li>FMFIA Program Reviews (OMB-123) consist of: </li></ul><ul><ul><li>Program Internal Control Reviews (CFO) </li></ul></ul><ul><ul><li>Management Control Reviews (LO/SO) </li></ul></ul><ul><li>Annual financial statement audit (OMB-136) conducted by KPMG. </li></ul><ul><ul><li>Independent CPA firm contracted by OIG. </li></ul></ul>
  46. 46. Reporting Requirements
  47. 47. Reporting Requirements <ul><li>Annual audit and internal control process which consists of: </li></ul><ul><ul><li>FMFIA Program Reviews (OMB-123) </li></ul></ul><ul><ul><ul><li>Program Internal Control Reviews </li></ul></ul></ul><ul><ul><ul><li>Management Control Reviews </li></ul></ul></ul><ul><ul><li>OMB A-123, Appendix A Reviews </li></ul></ul><ul><ul><li>Financial statement audit by KPMG (OMB-136). </li></ul></ul>
  48. 48. Reporting Requirements <ul><li>FMFIA Program Reviews (OMB A-123) </li></ul><ul><ul><li>Program Internal Control Reviews (OCFO) </li></ul></ul><ul><ul><ul><li>Written report issued by July 31 (or sooner). </li></ul></ul></ul><ul><ul><ul><ul><li>Draft report issued to program area for comments before Final report is issued. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Final report sent to Line Office CFO and Program area. </li></ul></ul></ul></ul><ul><ul><li>Departmental data call August/September. </li></ul></ul><ul><ul><li>Included in the FMFIA Report as of September 30. </li></ul></ul><ul><ul><li>Quarterly monitoring of corrective actions. </li></ul></ul>
  49. 49. Reporting Requirements <ul><li>FMFIA Program Reviews (OMB A-123) </li></ul><ul><ul><li>Management Control Reviews (LO/SO) </li></ul></ul><ul><ul><ul><li>Completed by June 30 with written report issued by July 31. </li></ul></ul></ul><ul><ul><li>Data call by DOC August/September </li></ul></ul><ul><ul><li>FMFIA Report as of September 30. </li></ul></ul><ul><ul><li>Quarterly monitoring of corrective actions. </li></ul></ul>
  50. 50. Reporting Requirements <ul><li>OMB A-123, Appendix A </li></ul><ul><ul><li>Completed August 31 for internal control in place as of June 30. </li></ul></ul><ul><ul><li>Assurance statement dated September 30. </li></ul></ul><ul><ul><li>Included in the PAR as of September 30. </li></ul></ul><ul><ul><li>Quarterly monitoring of corrective actions. </li></ul></ul>
  51. 51. Reporting Requirements <ul><li>Financial Statement Audit </li></ul><ul><ul><li>Quarterly financial statements submitted to DOC by: </li></ul></ul><ul><ul><ul><li>1 st Quarter – January 11 </li></ul></ul></ul><ul><ul><ul><li>2 nd Quarter – April 11 </li></ul></ul></ul><ul><ul><ul><li>3 rd Quarter – July 11 </li></ul></ul></ul><ul><ul><ul><li>4 th Quarter – October 11 </li></ul></ul></ul>
  52. 52. Reporting Requirements <ul><li>Financial Statement Audit </li></ul><ul><ul><li>Audit conducted by KPMG April to November. </li></ul></ul><ul><ul><li>Opinion issued on the financial statements as of September 30. </li></ul></ul><ul><ul><li>PAR issued by November 15 (includes auditor opinion). </li></ul></ul>
  53. 53. Reporting Requirements <ul><li> </li></ul>Financial Audit (KPMG) (OMB A-136) FMFIA Program Reviews (OMB A-123) OMB A-123 Appendix A NOAA FMFIA Report DOC FMFIA Report DOC Financial Statements DOC Performance & Accountability Report (PAR) DOC Appendix A Assurance Stmt.
  54. 54. Audit and Internal Control Finding Process
  55. 55. Audit and Internal Control Findings Process <ul><li>FMFIA Program Reviews (OMB-123) </li></ul><ul><ul><li>Program Internal Control Reviews </li></ul></ul><ul><ul><ul><li>Findings issued by NOAA CFO and monitored by the Financial Policy & Compliance Division (FPCD)/OCFO. </li></ul></ul></ul><ul><ul><ul><li>Quarterly monitoring. </li></ul></ul></ul><ul><ul><ul><ul><li>Request for updates on progress to remedy finding sent out by the15th of the month following the end of a quarter.  The due date is two weeks later. </li></ul></ul></ul></ul>
  56. 56. Audit and Internal Control Findings Process <ul><li>Management Control Reviews </li></ul><ul><ul><ul><li>Findings issued by LO/SO. </li></ul></ul></ul><ul><ul><ul><li>Monitored by both FPCD/OCFO and LO/SO. </li></ul></ul></ul><ul><ul><ul><li>Quarterly monitoring. </li></ul></ul></ul><ul><li>OMB A-123, Appendix A Reviews </li></ul><ul><ul><ul><li>Findings issued by NOAA CFO and monitored by FPCD/OCFO. </li></ul></ul></ul><ul><ul><ul><li>Quarterly monitoring. </li></ul></ul></ul>
  57. 57. Audit and Internal Control Findings Process <ul><li>Annual Financial Statement Audit </li></ul><ul><ul><li>KPMG issues draft Notice of Finding & Recommendation (NFR) </li></ul></ul><ul><ul><ul><li>Verify factual accuracy as much as possible before issuance of NFR form </li></ul></ul></ul><ul><ul><ul><li>Distribute (simultaneously) to: </li></ul></ul></ul><ul><ul><ul><ul><li>Bureau liaison (OCFO) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Commerce Office of Inspector General (OIG) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Commerce Office of Financial Management (OFM) </li></ul></ul></ul></ul>
  58. 58. Audit and Internal Control Findings Process <ul><li>Annual Financial Statement Audit </li></ul><ul><ul><li>Response requirements to NFR by Responsible Party </li></ul></ul><ul><ul><ul><li>In written format within one week of distribution </li></ul></ul></ul><ul><ul><ul><li>Signed and dated </li></ul></ul></ul><ul><ul><ul><li>Supporting documentation provided for “disagree” responses </li></ul></ul></ul><ul><ul><ul><li>KPMG replies to “disagree” responses in written format within one week of receipt of response </li></ul></ul></ul><ul><ul><li>KPMG does not have to accept a non-concurrence response to a NFR. </li></ul></ul>
  59. 59. Audit and Internal Control Findings Process <ul><li>Corrective Action Plans (CAPs) </li></ul><ul><ul><li>Once the Internal Control or Management Letter has been issued, a CAP needs to be developed for all findings. </li></ul></ul><ul><ul><ul><ul><li>CAPs need to address the finding even though you still may not agree with the finding. </li></ul></ul></ul></ul>
  60. 60. Audit and Internal Control Findings Process <ul><li>Developing Corrective Action Plans (CAPs) </li></ul><ul><ul><li>Use format provided with Internal Control or Management Letter. </li></ul></ul><ul><ul><li>Clearly state actions to be taken to remedy the finding with corresponding dates. </li></ul></ul><ul><ul><li>Provide overall date of completion. </li></ul></ul><ul><li>Monitoring by FPCD/OCFO. </li></ul><ul><ul><li>FMFIA Program Reviews – quarterly. </li></ul></ul><ul><ul><li>OMB 123, Appendix A – quarterly. </li></ul></ul><ul><ul><li>Annual Financial Audit (KPMG) – monthly. </li></ul></ul>
  61. 61. Annual KPMG Audit Process Draft Notice of Finding (NFR) Comment & Concurrence Period KPMG Auditor Final NFR Draft Mgmt. Letter Comment Period Final Mgmt. Letter Corrective Action Plan (CAP) Implement Corrective Actions Monthly Updates to CFO NOAA A-123 Auditor KPMG Auditor Review June - Nov Nov - Dec Jan - June
  62. 62. Key Points <ul><li>Corrective Action Plan (CAP) must be developed for findings. </li></ul><ul><ul><li>FMFIA Program Reviews – quarterly monitoring </li></ul></ul><ul><ul><li>Annual audit (management letter) – monthly </li></ul></ul><ul><li>KPMG does not have to accept a non-concurrence response. </li></ul><ul><li>The time to request changes to a finding is when it is presented; too late after the issuance of the final report or management letter. </li></ul>
  63. 63. How can I learn more? <ul><li>OMB Circular A-123 </li></ul><ul><ul><li>http://www.whitehouse.gov/omb/financial/offm_circulars.html </li></ul></ul><ul><li>Implementation Guide for OMB Circular A-123 Appendix A </li></ul><ul><ul><li>http://www.cfoc.gov/documents/Implementation_Guide_for_OMB_Circular_A-123.pdf </li></ul></ul>
  64. 64. How can I learn more? <ul><li>OMB Circular A-136 </li></ul><ul><ul><li>http://www.whitehouse.gov/omb/circulars/a136/a136_revised_2006.pdf </li></ul></ul><ul><li>GAO: Standards for Internal Control in the Federal Government http://www.gao.gov/special.pubs/ai00021p.pdf </li></ul>
  65. 65. Questions?

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