Sarbanes-Oxley descends on feds
- By David Perera
- Dec 12, 2004
Federal officials need to better account for government money, according to Office of Management and Budget officials, who plan to release new financial management regulations before 2005.
Stricter financial control standards will be printed in OMB Circular A-123, a revised version of which is in the final stages of internal clearance, said Linda Springer, OMB controller. The circular governs implementation of the Federal Managers' Financial Integrity Act, which requires agency chiefs to issue annual assurances that internal financial controls are functioning properly.
Compliance with the circular's requirements will be mandatory starting in fiscal 2006. They will govern "everything that generates entries into your financial statement," Springer said.
Among the changes that OMB Director Joshua Bolten may approve is a new, separate year-end assurance of federal controls, said Elliot Lewis, assistant inspector general at the Labor Department.
As a result, documentation and testing of financial integrity standards inside agencies would become more rigorous, said Jim Taylor, the Commerce Department's assistant chief financial officer. Agency managers will determine how intensely to apply the new internal standards, he added. "It's a management report; it's not an audit," he said.
Springer said federal agencies would be subject to independent audits if officials show a pattern of weak internal financial controls and cannot "fix any problems they have to our satisfaction."
Most agencies will be able to meet the fiscal 2006 compliance deadline for setting up better control processes, Taylor said. "Do I think it's easy? No," he added.
The revised circular will create additional costs for agencies. "Just the additional management requirements of the assertion and the strengthening and the documentation and all that goes with it is going to [be an extra] cost," Springer said.
The need for stronger policies on federal financial reporting became apparent after a joint committee of officials from OMB, the CFO Council and the President's Council on Integrity and Efficiency evaluated private-sector reporting requirements created by the Sarbanes-Oxley Act of 2002. The circular revisions were discussed in the context of Sarbanes-Oxley, which applies to corporate officers, "and if it's good for them, shouldn't we parallel on the federal side?" Lewis asked.
Committee members also looked extensively at the Government Accountability Office's financial control framework, "Standards for Internal Control in the Federal Government," Taylor said. The two documents are supposed to match, but they are not in sync, he said.
With the revised circular, agency officials will be better able to eliminate improper payments, Springer said. "If you have better control over what you're doing, financially, that should allow you to catch and eliminate the improper payments."
The new guidelines should also help federal officials with strategic planning, Springer said. Better financial reporting will improve understanding of agency costs. "That should lead to having better information and better-informed decisions," she added.