OMB Circular A-123

1. OMB Circular A-123 Danny Werfel Office of Federal Financial Management Office of Management and Budget March 21, 2007

2. Improving Financial Performance Results Expands Routine Data Use Uses Financial Information to Drive Results in Key Areas FFMIA Compliant Clean Audit Opinion No repeat auditor Weaknesses Meets Reporting Deadlines Compliance No Repeat FMFIA Section 2 Weaknesses No Material Non-Compliances No Chronic or Significant ADA Violations No Repeat FMFIA Section 4 Weaknesses What the Initiative Does: Ensures managers have accurate and timely financial information for decision making.

3. Improving Financial Performance How We Support the Initiative: PMA REFORM AGENDA CORE ACTIVITIES

4. Framework for Improving Financial Performance

5. PMA RESULTS

6. Strengthening Internal Controls

7. STRATEGIC GOAL: - Improve effectiveness of internal control over financial reporting. FY 2011 TARGET(S):- Achieve full compliance with A-123, Appendix A by all CFO Act agencies. - Eliminate 50% of all current government-wide material weaknesses (MWs). - Implement full integration of the assessment process with other internal control reviews (e.g., FISMA, IPIA, etc.) INTERIM OBJECTIVES: - Utilize A-123 assessment results to improve MW corrective action plans. - Obtain consensus between management, the Office of Inspector General, and OMB on MW corrective action plans. - Enhance internal control based on lessons learned and best practices. FY 2007 PRIORITY ACTIONS: - Facilitate forum on lessons learned from FY 2006 implementation of A-123. - Update OMB guidance, as necessary, based on lessons learned. - Receive update corrective action plans from agencies that reflect lessons learned from FY 2006 implementation of A-123. RECENT ACCOMPLISHMENT(S): - Completed first year of A-123 implementation in all 24 CFO agencies. - Implemented a full scope A-123 assessment (testing all key processes) in 16 of the 24 CFO Act agencies. - Implemented a multi-year phased-in assessment (testing a portion of the key processes) and provided plans for testing the remaining processes within three years in 8 of the 24 CFO Act agencies. INTERNAL CONTROLS

8. FY 2006 Auditor Material Weaknesses by Category

9. FY 2006 Auditor Material Weaknesses by Category

10. FMFIA Issues Identified by Agency Heads as of FY 2005 and FY 2006

11. FMFIA Issues Identified by Agency Heads as of FY 2006

12. FY 2006 Status of the Implementation of A-123, Appendix A • All 24 CFO Act agencies completed first year of A-123 implementation. • Sixteen of the 24 CFO Act agencies implemented a full scope A-123 assessments (testing all key processes). • Eight of the 24 CFO Act agencies implemented a multi-year phased-in assessment (testing a portion of the key processes) and provided plans for testing the remaining processes within three years. • Government-wide internal control material (FMFIA) weaknesses increased by 12% from 2005.

13. Continuing Challenges • Better integration with program offices - Appendix A requirements still viewed as only a CFO effort • Better integration with other internal control reviews and audit remediation to reduce duplication of effort • Better assimilation into culture of organization to make the assessment more routine

14. Lessons Learned in FY 2006 • Effective implementation requires senior management involvement – setting the priority, devoting resources, cooperation within the organization • Documentation required under Appendix A is also beneficial for educating new staff and new auditors on the organization • Review of documentation revealed multiple policies and procedures for similar transactions and are leading to standardization of those policies