DOE may pay bonuses based on A-123 compliance

Bonus pay of the Energy Department’s senior civil servants may soon be tied to how well the department implements new requirements for stricter internal financial controls.

The new regulations are in a revised version of Office of Management and Budget Circular A-123, which takes effect Oct. 1. The requirements for greater accountability in financial transactions coincide with some private-sector management rules created by the Sarbanes-Oxley Act of 2002.

“I would anticipate that [giving bonuses to] our senior executives will be linked” to implementation of the revised circular, said Susan Grant, DOE’s chief financial officer, while speaking today at an AFCEA International breakfast panel in Bethesda, Md.

To comply with new requirements, agencies must move ownership of internal controls away from strict CFO provenance, Grant said. Because business decisions determine financial transactions, agency financial managers should start documentation of internal spending controls with the transaction, she said.

“We’ve had internal controls," she said. "What’s the problem with them? They haven’t meant anything because we tried to put them in the financial community, as opposed to in the management community."

DOE is not in the market for A-123 software, Grant added. “We want internal controls that are natural byproducts of what we do, not internal controls that are added on,” she said. “I want them built in upfront to the business decisions that drive those financial transactions.”

OMB will closely monitor how well agencies execute the revised circular, said David Zavada, chief of OMB’s financial standards and grants branch. Agency performance will become a new factor in the quarterly President’s Management Score card during fiscal 2006 and part of the annual scrutiny of agencies’ financial statements, Zavada said.

Agencies should institute A-123 governing boards with broad representation from all parts of the organization affected by the internal control requirements, he added. “Certainty the [chief information officer] should be a member of that team.”

Agencies switching some of their administrative areas, such as financial or workforce management, to common service centers will have access to internal control data generated by audits of those third-party providers, he said.

Compliance is requiring agencies to initially shift resources from other projects but, in the long run, should also save money, panel members said.

About the Author

David Perera is a special contributor to Defense Systems.

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