1. Make OMB Circular A-123 a succinct document that defines policy for management controls. Rewrite OMB Circular A-123, Internal Control Systems, to be a succinct document that defines the policy for establishing and reviewing management controls. (2) OMB should rewrite--not revise--its Circular A-123 and should incorporate the following concepts: --- Emphasize that management controls are more than financially based. --- Emphasize reliance on line managers to incorporate management controls into their regular operating practices and strategic plans. --- Emphasize managers' accountability for results. Are the management controls appropriate and adequate? Do they help attain the desired results of programs? Are customer needs being met? Are resources and assets being used most efficiently? --- Encourage the use of a cross-functional (program and staff) management council at all executive branch agencies. Include in its responsibilities the review of management controls in terms of operating practices as a whole and in the context of strategic and quality management. These management councils should have a membership that represents both line and staff management and should include access to an information technology specialist(s).(13) --- Promote a role for auditors (IGs, GAO, FMFIA staffs) that is secondary to but supportive of the line managers. Auditors should review the agencies' processes for reviewing and implementing management controls. --- Promote FMFIA as primarily a management tool to be used within agencies--for identifying management control concerns and initiating corrective actions--and not solely as an external reporting process. --- Encourage agencies to include management information systems experts in the development of management control systems. --- Promote the use of the FMFIA review process as an early warning tool(14) to identify problems or "management control improvement areas" long before they create wasteful practices. This new A-123 will set the direction for management controls and their review and allow agencies to develop the flexibility to develop their own system for management controls. Given the existence of GAO's "Standards for Internal Controls in the Federal Government," the OMB circular should be policy oriented. FMFIA--recast as a tool for line managers to ensure that adequate and reasonable management controls are in place--should deemphasize the role of outside auditors. OMB should convey to agencies that the FMFIA annual report is not an end in itself--it is a tool to identify management concerns and bring them to the attention of high-level management.
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