A-123, Appendix A - Internal Controls Over Financial ... · A-123, Appendix A - Internal Controls...
30
A-123, Appendix A - Internal Controls Over Financial Statements and Reporting Presented to: AGA-Kansas City Chapter Professional Development Seminar April 17, 2013 Michael A. Fiene USDA-FSA Internal Control & Planning Office (ICPO)
Transcript of A-123, Appendix A - Internal Controls Over Financial ... · A-123, Appendix A - Internal Controls...
A-123, Appendix A - Internal Controls Over
Financial Statements and Reporting
Presented to:
AGA-Kansas City Chapter
Professional Development Seminar
April 17, 2013
Michael A. Fiene
USDA-FSA
Internal Control & Planning Office
(ICPO)
Agenda
•Background: OMB Circular A-123, Appendix A
•Background: Commodity Credit Corporation (CCC)
and Farm Service Agency (FSA)
•Assessing Risks and Optimizing Controls and Testing
•Reconciliations & Account Analysis: “Always a Key
Control”
•Monitoring
2
BACKGROUND:
A-123, APPENDIX A
3
OMB Circular A-123, Appendix A, Internal Control
Over Financial Reporting
Statement of Assurance for Internal Control over Financial
Reporting. Management is required to provide a separate
assurance over the effectiveness of the internal controls over
financial reporting. This assurance is a subset of the overall
Statement of Assurance and is based on the results of
management’s assessment conducted in accordance with the
requirements in Appendix A. Refer to Appendix A Section V.
Management’s Assurance Statement on Internal Control over
Financial Reporting for a further discussion.
4
SOX for the Federal Government
Life Cycle of the A-123, Appendix A Assessment
Conduct
Risk
Assessments
Assess
Entity
Level
Controls
Prepare
Project
Plans
Create/Update
Flowcharts,
Narratives,
Business
Process
Controls
Conduct
Testing and
Document
Results
Identify
Deficiencies
Prepare
Corrective
Action
Plans
Agency
Certification
Statement
Evaluate
Severity of
Control
Deficiencies:
• Business Process
Controls
• General
Computer Controls
5
ICPO Mission Statement
In accordance with OMB Circular A-123, Appendix A, we:
• support the FSA and CCC statements of assurance over
financial reporting by monitoring, testing and reporting on FSA’s
and CCC’s internal controls over financial reporting
•Promote and support effective and efficient financial statement
and financial related audits
•Assist in building, promoting and sustaining a comprehensive
and effective control environment over financial reporting.
6
BACKGROUND:
COMMODITY CREDIT CORP. (CCC)
&
FARM SERVICE AGENCY (FSA)
7
Background: CCC and FSA
CCC and FSA Mission Statement
•Stabilize, support and protect farm incomes and prices
•Conserve soil, air and water resources and protect and
improve wildlife habitats
•Maintain balanced and adequate supplies of agricultural
commodities and aiding in their orderly distribution
•Develop new domestic and foreign markets and marketing
facilities for agricultural commodities
8
Background: CCC and FSA
As of September 30, 2012
Item
CCC
(In Millions)
FSA
(In Millions)
Total Budget Authority $23,254 $7,605
Gross Outlays $19,075 $5,325
Loan Portfolio (Gross) $6,510 $8,089
Net Cost of Operations $9,725 $2,226
9
Background
Assessable Entities and Business Cycles
CORE G/L
Funds
Management
Funds
Control
Financial
Reporting
Commodity
Loans
Producer
Payments
Cr. Mngt.
Direct Loans
PL-480
Cr. Mngt.
Guar. Loans
GSM
Farm
Storage
Facility Loans
Commodity
Procurement
(WBSCM)
Tobacco
Transition
Payment Prog.
Revenue &
Receivables
Management
FMMI
G/L
CORE
G/L PLAS
(FLP) G/L
Funds Management
Funds Control
Financial Reporting
HR
Management
Reimbursable
Agreements
Producer
Payments Cr. Mngt.
Direct Loans
Cr. Mngt.
Guar. Loans
CCC (26 Funds) FSA (55 Funds)
10
Reimbursable
Agreements $403 M
$714 M
$4,470 M
$923 M $7,951M
$138 M
Total Loan Portfolio = $6,510 M
Total Loan Portfolio = $8,089 M
ASSESSING RISKS
&
OPTIMIZING CONTROLS
&
TESTING
11
Optimizing Controls and Testing Approach
•Optimizing Controls: Identifying and testing those
controls that address the risks most significant to our
financial reporting
•Risk assessment at the individual risk level (A-123)
•“Not all risks are created equal”
•“Doing less with less”
12
13
Low Risk
14
High Risk
Life Cycle of the A-123, Appendix A Assessment
Conduct
Risk
Assessments
Assess
Entity
Level
Controls
Prepare
Project
Plans
Create/Update
Flowcharts,
Narratives,
Business
Process
Controls
Conduct
Testing and
Document
Results
Identify
Deficiencies
Prepare
Corrective
Action
Plans
Agency
Certification
Statement
Evaluate
Severity of
Control
Deficiencies:
• Business Process
Controls
• General
Computer Controls
15
Assess
Risk
Again
16
Optimizing Controls and Testing Approach
(At the Risk Level)
•“Real Numbers” vs. “Signatures” & “Dates”
•Reconciling Fund Balance with Treasury (Book to Bank)
•Reconciliations –Internal (G/L to Detail Subsidiary)
•Reconciliations – External (G/L to External Parties)
•Automated Controls (Pervasive to all Transactions)
•Business Performance Reviews (Search for Unrecorded
Liabilities, Predictive Analysis, etc.)
•Period End Financial Reporting (Abnormal Balances, Account
Relationships, Variance Analysis, etc.)
17
Optimizing Controls and Testing Approach
“Real Numbers” vs. “Signatures” & “Dates”
Trial Balances (tied to Financial Statements)
18
ACCOUNT RECONCILIATIONS
& ANALYSIS
“ALWAYS A KEY CONTROL”
19
Account Reconciliations and Analysis
•Reconciliations affirm account balances and act to
monitor other controls and system processes
• All significant balance sheet accounts should be
reconciled
•Accelerate reconciliations to become preventative
controls
•Accumulate and review any significant non-posted
reconciling items
20
Account Reconciliations and Analysis
21
Description
#
of Items
General
Ledger
Amount
Detail
Subsidiary
Amount
Absolute
Value
Unadjusted Amount $x,xxx $x,xxx
Timing Differences ### $x,xxx $x,xxx
Differences/Items Requiring
Corrective Action ### $x,xxx $x,xxx $x,xxx
Adjusted Amount $x,xxx $x,xxx
Account Reconciliations and Analysis
•Account analysis affirm account balances and act to
monitor other controls and system processes
• Examples:
•Account Relationships (Bud = Prop)
•Abnormal Account Balances
•Variance Analysis
•Predictive Analysis
22
MONITORING
23
Monitoring
•A-123 Internal Control Standards (COSO):
•Control Environment
•Risk Assessment
•Control Activities
•Information and Communication
•Monitoring
24
Monitoring
•Ongoing Monitoring
Occurs when the routine operations of an
organization provides feedback to those
responsible for the effectiveness of the internal
control system
•Separate Evaluations
Designed to evaluate controls periodically and are
not ingrained in the routine operations of the
organization
25
Monitoring
26
0.00 0.00
200,000.00
400,000.00
600,000.00
800,000.00
1,000,000.00
1,200,000.00
1,400,000.00
1,600,000.00
6/30/2012 9/30/2012 12/31/2012 1/31/2013 (blank)
1350
FS4
FSFL
AGING OF UNKNOWN ITEMS AND PERMANENT ITEMS REQUIRING CORRECTIVE ACTION
(blank)
60+
30-60
1-29
Monitoring
27
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
Cash Reconciliation
Monitoring
28
Monitoring
29
“Monitoring promotes good control operation. When people who are
responsible for internal control know their work is subject to oversight
through monitoring, they are more likely to perform their duties properly
over time.”
COSO Guidance on Monitoring Internal Control Systems,
January, 2009
QUESTIONS?
30
Office: (816) 823-2833
Cell: (816) 719-4518
