OMB Update
Northern Virginia AGA - Spring Training
March 24, 2015
Office of Federal Financial Management
Office of Management and Budget
1
Internal Controls
•
1981/1982/1983 –
−
OMB Issued Circular No. A-123, Internal Control Systems and Internal Control Guidelines
−
Federal Managers Financial Integrity Act
•
1986 – OMB Required Management Control Plans to guide efforts
•
1995 – OMB updated A-123, Management Accountability and Control to reflect GPRA, CFO Act, IG Act
•
2004 – OMB updated A-123, Management’s Responsibility for Internal Control and added Appendix A, Internal
Control Over Financial Reporting
•
OMB’s vision for 2015 Update – transform and evolve existing internal control compliance frameworks so that it
creates a more value added, integrated, risk based, and less burdensome set of requirements for agencies. The
revised guidance will:
−
Clarify technical terminology to help program managers better understand and implement internal controls
−
Introduce ERM concepts as defined by the COSO framework
−
Replace “check the box” compliance approach with risk management-based approaches to support agency
missions
−
Streamline assurance statement reporting
−
Build on successful implementation of internal controls over financial reporting
−
Be put out for comment in Spring 2015 with an implementation date of 2016
2
ERM and Internal Controls
3
Streamlining Assurance Statements
Effectiveness of Internal Control over Financial Reporting (FMFIA § 2)
Statement of Assurance
Unqualified, qualified, or statement of no assurance
Beginning Balance
Material Weaknesses
New
Resolved
Consolidated
Reassessed
Ending
Balance
[Name of weakness]
[Name of weakness]
[Name of weakness]
Total Material Weaknesses
##
##
##
##
##
##
Effectiveness of Internal Control over Operations (FMFIA § 2)
Statement of Assurance
Unqualified, qualified, or statement of no assurance
Beginning Balance
Material Weaknesses
New
Resolved
Consolidated
Reassessed
Ending
Balance
[Name of weakness]
[Name of weakness]
[Name of weakness]
Total Material Weaknesses
##
##
##
##
##
##
Conformance with financial management system requirements (FMFIA § 4)
Systems conform, conform except for the below non-conformance(s), or do not conform to financial management
Statement of Assurance
system requirements
Beginning Balance
Non-Conformances
New
Resolved
Consolidated
Reassessed
Ending
Balance
[Name of non-conformance]
[Name of non-conformance]
[Name of non-conformance]
Total non-conformances
##
##
##
##
##
##
Compliance with Section 803(a) of the Federal Financial Management Improvement Act (FFMIA) 14
Agency
Auditor
1. System Requirements
No lack of substantial compliance noted, or Lack of substantial
compliance noted
No lack of substantial compliance noted, or Lack of
substantial compliance noted
2. Accounting Standards
No lack of substantial compliance noted, or Lack of substantial
compliance noted
No lack of substantial compliance noted, or Lack of
substantial compliance noted
3. USSGL at Transaction Level
No lack of substantial compliance noted, or Lack of substantial
compliance noted
No lack of substantial compliance noted, or Lack of
substantial compliance noted
4
Additional Considerations
• Service Organizations
• Internal Controls in Disaster Situations
• Fraud
• Internal Controls over Financial Assistance (i.e., Grants)
5
Improper Payments - Brief History
•
November 2002 – Improper Payments Information Act (IPIA)
− Created basic framework for identifying and reporting improper payments
•
November 2009 – Executive Order 13520
− Improved agency accountability
− Increased transparency
•
July 2010 – Improper Payments Elimination and Recovery Act (IPERA)
− Put into law specific thresholds for identifying high-risk programs
− Strengthened corrective action plans
− Expanded payment recapture audits
− Established annual OIG compliance reviews
•
January 2013 – Improper Payments Elimination & Recovery Improvement Act
(IPERIA)
− Codified EO 13520 requirements
− Improved agency estimation and recovery of improper payments
− Reinforced and accelerated the Administration’s “Do Not Pay” efforts
6
A-123 Appendix C Update
•
•
Vision: transform improper payment compliance framework to create a more unified,
comprehensive, and less burdensome set of requirements for agencies and OIGs
•
IPERIA required OMB to issue new guidance—we approached it as an opportunity to
overhaul Appendix C of OMB Circular A-123
Process: as we drafted the
new Appendix C, we had
to consider the following:
– The three statutes
and the Executive
Order
– Previous Appendix C
version (M-11-16)
– Input from agencies,
OIGs, GAO, and
OMB
7
New Appendix C Highlights
•
The updated guidance reconciles IPERIA requirements that are identical to
requirements from EO 13520
•
Consolidates and streamlines reporting requirements for agencies and OIGs
– Agencies can incorporate most of their reporting into AFR or PAR
– OIGs for agencies with high-priority programs are no longer required to issue
separate reports under EO 13520 and IPERA—one report will suffice
•
Provides a more detailed categorization of improper payments
•
Adds an internal control framework for addressing improper payments
•
Provides guidance to agencies—as required by IPERIA—to strengthen the
statistical validity of estimates and include payments to Federal employees in
the definition of improper payments, among other things
8
New Improper Payment Categories
•
•
•
Previously only three
categories; not very useful
New guidance establishes
new categories for
reporting improper
payments
Provides more granularity
on estimates, leading to:
– More effective
corrective actions at the
program level
– More focused strategies
for reducing improper
payments at the
government-wide level
– Better communication
about the nature of
improper payments
Type of Improper Payment
Reason for Improper Payment
Overpayments
Underpayments
Program Design or Structural Issue
1
Inability to Authenticate Eligibility
2
Death Data
3
Financial Data
4
5
Failure to Verify: Excluded Party Data
Administrative
or Process
Error Made by:
Prisoner Data
6
Other Eligibility Data (explain)
7
Federal Agency
8
State or Local Agency
9
Other Party (e.g., participating
lender, health care provider, or
any other organization
administering Federal dollars)
10
Medical Necessity
11
Insufficient Documentation to Determine
12
Other Reason (explain)
13
A
B
9
Corrective Actions
•
We are conducting an analysis to identify program-specific
corrective actions with the highest return-on-investment or potential
for substantially reducing improper payments
•
Questions we are interested in:
• Which current corrective actions are the most effective in reducing
improper payments in your programs?
• Could you list one or two things that your programs are not already
doing (but could realistically do) that would lead to a significant decrease
in improper payments?
• What, if any, are the barriers preventing your agency from taking these
actions, and what would it take to overcome those barriers?
• If you implemented these actions, by how much could the improper
payment rate go down for your programs?
• How has your agency advanced data analytics and improved technology
to prevent and reduce improper payments ?
10
Internal Control over Improper Payments
•
Agencies reporting improper payments will summarize the status of internal control
over improper payments in their AFR or PAR
•
Purpose is to provide a thoughtful analysis linking agency efforts in establishing
internal controls with reported improper payment rates
Internal Control Standards
Control Environment
Risk Assessment
Control Activities
Information and Communication
Monitoring
Program A
Program B
Program C
Program D
Program E
3
4
4
3
2
2
1
3
1
1
2
4
2
3
4
4
4
2
1
3
1
1
2
2
1
Legend:
4 = Sufficient controls are in place to prevent improper payments
3 = Controls are in place to prevent improper payments but there is room for improvement
2 = Minimal controls are in place to prevent improper payments
1 = Controls are not in place to prevent improper payments
11
DATA Act Main Update Overview
• OMB and Treasury are working in partnership to implement the DATA
Act
• Today’s presentation:
•
•
•
•
Context of Federal spending transparency
Overview of the DATA Act
Progress thus far
Next steps
12
Federal Spending Transparency History
• Federal Funding Accountability and Transparency
Act (FFATA)
• Recovery Act
• Government Accountability and Transparency
Board (GATB)
• Data Accountability and Transparency Act (DATA
Act)
13
DATA Act Summary
• Purpose: to establish government-wide financial data
standards and increase the availability, accuracy, and
usefulness of Federal spending information.
• Passed Congress on April 28. Signed into law on May 9,
2014 (P.L. 113-101).
• Amends the Federal Funding Accountability and
Transparency Act (FFATA) to require full disclosure of
Federal agency expenditures.
• It also requires the development of Government-wide data
standards, takes steps to simplify financial reporting, and
improves the quality of the spending data.
14
DATA Act Implementation
Approach
Data-centric
• Avoid massive system changes, focus on managing data
Incremental
• Release data as it becomes available
Reuse
• Maximize and leverage use of existing processes and investments
Collaborative
• Feedback drives improvements
Iterative/Agile
• Conduct many small scale pilots
15
Vision and Goals
Vision
Provide reliable, timely, secure, and consumable financial management data for the
purpose of promoting transparency, facilitating better decision making, and
improving operational efficiency.
Better Data, Better Decisions, Better Government
Goals
 Capture and make available financial management data to enable the data consumers to
follow the complete life cycle of Federal spending -- from appropriations to the
disbursements of grants, contracts, and administrative spending
 Standardized information exchanges – definitions and format – to enable timely access to
discoverable and reusable detail transaction level data
Accomplishments-to-date
 Assumed program responsibility over USAspending.gov
 Successfully piloted “Intelligent Data” prototype
 Conducted “Award ID linkage” feasibility study
16
360 Spending Transparency
How much did revenue did the government raise
and how much is the government borrowing?
Congress
Treasury
Appropriation
Receipts/
Financing
Treasury,
Agency Disbursement
What was the amount,
payment date, and who
was the recipient of the
payment?
How much money did Congress
authorize the government to
spend?
Budget
Formulation
Payment
Apportionment
Budget
Execution
Agency
Obligation
Award
What goods and services
did the government purchase, Commitment
for what reason, and from who?
What grants and loans did the
government make, for what
reason, and for who?
What programs, projects, and
activities did Congress fund?
OMB, Treasury,
and Agency
Warrant
Allotment
(Allocation)
How did the President, through the Executive
Branch, allocate and monitor the funding to ensure
that programs comply with spending limits and use
funds only for the purposes authorized by
Congress?
17
DATA Act in Context of Spending Life Cycle
Receipts/
Financing
Appropriation
Payment
Apportionment
Allotment
(Allocation)
Obligation
360 Spending Life Cycle
DATA Act
FFATA
(USAspending.gov)
Award
Commitment
18
Data Definition Standards
Importance
• Other elements of DATA Act are dependent on data standards
• Effects all stakeholders and downstream recipients of Federal funds
Goals
 Standardize data definitions – collaborate with Federal and non-Federal stakeholders to
define common data elements across communities
 Look at industry standards – during implementation, carefully examine common practices
and uses to maximize positive impact
 Consider implications – use collaboration tools and outreach processes to understand and
consider potential implications for stakeholders in their future reporting and compliance
based on standards
Accomplishments-to-date
 Compiled list of FFATA and DATA Act elements which must be defined according to DATA Act
 Established Interagency Advisory Committee (IAC) to coordinate cross-community
collaboration within Federal government
19
Challenges
• Requires ongoing high level support in multiple sectors to push
for transformational changes and innovative thinking
• Short implementation timeline – requires fast, early action and
reporting on results
• Limited resources – no additional funding for implementation
• Requires collaboration and active participation across federal
communities, including procurement, grants, financial
management, budget
• Diverse and broad set of stakeholders including, congress, state &
local governments, private industry, general public, transparency
advocacy groups, and international community
20
Stakeholder Engagement
• GitHub page: http://fedspendingtransparency.github.io/
• Town Hall last Fall – all presentations on GitHub
• Speaking engagements and trainings such as today’s discussion
• Collaboration with non-Federal partners
• Future webcasts about DATA Act implementation and/or DATA Act
section 5 pilot
21
Next Steps
• Finalize the plan to implement the DATA Act
• Consult with public and private stakeholders in establishing the data
standards
• Standardize the data element definitions
• Develop a blueprint of the data elements based on the standard definitions
• Continue pilot efforts on data exchange standards and publication options,
and on reducing reporting burden
• Upcoming Dates:
•
March 27, 2015: Webcast on DATA Act implementation
•
March 20 and 27, 2015: Updated information posted on GitHub
•
April 1, 2015: Webcast on Section 5 Pilot
•
May 2015: OMB and Treasury issue guidance on data definitions and exchange
•
May 2015: Section 5 pilot is launched
22
♫ Are You Ready for This ?
The New Uniform Guidance
2 CFR 200
Guidance Reform History
Feb 2012:
Advance
Notice of
Proposed
Guidance
(public
comments)
Nov. 2009:
Executive
Order:
Reduce
Improper
Payments
Feb 2011:
Presidential
Memo:
Reduce
Administrative
Burden
† April 2013
Feb 2013:
Notice of
Proposed
Guidance
(public
comments)
Dec 2013:
Final
Uniform
Guidance
Guidance Reform History
June 2014:
Agencies Submit
Draft Rules to
OMB, Continued
Outreach on
Implementation
December
2013:
Uniform
Guidance
Published
January-April
2014: Training
Webcasts, Publish
2014 Single Audit
Compliance
Supplement
December 2014:
Final Guidance
Effective, Baseline
Metrics Collected,
Case Studies of
Best Practices
Published
Fall 2014: Metrics,
Additional FAQs and
Webcast
Eliminating Duplicative and Conflicting
Guidance
Then:
Awards
Received
INSERT YOUR
STATE OR
AGENCY
HERE
• A-102 & A-89
• A-87
• A-133 &A-50
Subawards
to
universities
Subawards
to
nonprofits
• A-110
• A-21
• A-110
• A-122
Now: All OMB guidance streamlined in 2 CFR 200.
2 CFR 200 -Basic Layout
• 6 Subparts A through F
•
•
•
•
•
•
Subpart A, 200.XX – Acronyms & Definitions
Subpart B, 200.1XX – General
Subpart C, 200.2XX – Pre Award - Federal
Subpart D, 200.3XX – Post Award – Recipients
Subpart E, 200.4XX – Cost Principles
Subpart F, 200.5XX – Audit
• 11 Appendices - I through XI
Top Ten Impact Changes
• 200.1 through 99 Standard Definitions
• 200.205, Review of risk of applicants
• Must have framework for evaluating risks
• Should consider financial stability, performance
history, audit reports
• 200.314, Supplies (computing devices)
• 200.320, Procurement Standards
• 200.331, Requirements for pass-through entities
Top Ten Impact Changes
• 200.407, Prior Written Approval (22 items)
• 200.413, Direct Costs
• 200.414, Indirect Costs
• Must accept approved negotiated rates (some exceptions)
• 10% of MTDC de minimis IDC
• One time four-year extension of current approved rate (final and
pre-determined rates only)
• 200.430, Compensation – Personal Services
• 200.5XX, Single Audits
• Higher Threshold (200.501)
• Better Transparency (200.512)
• More Focus on Risk (200.518)
Agency Implementation
• Adopted by 28 Federal awarding agencies on
December 19, 2014
• Agency implementation regulations available in 2
CFR
• Effective for awards issued on or after December
26, 2014
Resources
• The COFAR website is available at:
https://cfo.gov/cofar/
• Includes:
• FAQs
• Webcasts
• Crosswalk to agency exceptions and additions
“I like the dreams of the future better than the history of the past…” T. Jefferson