Over the past several months, there has been a great deal of focus on the issue of internal control at Federal agencies. The PMA's Improved Financial Performance Initiative is no exception in including internal control requirements in its scope. The initiative's requirements are based on the Federal Manager's Financial Integrity Act (FMFIA) and Office of Management and Budget (OMB) Circular A-123, Management's Responsibility for Internal Control, which define management's responsibility for internal control and provide guidance for management to assess the effectiveness of internal control.

To ensure that the Federal Government is following the highest standards of financial integrity, OMB initiated a joint Chief Financial Officers Council (CFOC) and President's Council on Integrity and Efficiency (PCIE) committee to review the current internal control requirements. Included in this review was a comparison between requirements for public corporations under the Sarbanes-Oxley Act and those for Federal agencies. This process resulted in a recommendation to revise OMB Circular A-123, which was last updated in 1995.

The revised Circular will incorporate internal control standards developed by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) published in its Internal Control - Integrated Framework document and adopted by the Government Accountability Office (GAO) in Standards for Internal Control in the Federal Government (GAO Green Book).

OMB plans to finalize this revised circular in early November 2004 with issuance soon after. The joint committee will also be developing an implementation guide for conducting management's assessment of the effectiveness of internal control over financial reporting.

Looking ahead, Federal agencies will soon submit their Performance and Accountability Reports (PARs). The PARs, due on November 15, provide financial and performance information that enables the President, Congress, and the public to assess the performance of an organization relative to its mission and for Agency management to be accountable for its actions and resources.

The publication of this year's PARs is especially notable because this is the first year when all agencies are required to prepare and submit them to OMB no later than 45 days after the end of the FY. This new November 15 deadline represents nearly a 70% reduction in time since FY 2001, when the reporting date was March 1.

As we close out FY 2004, I am pleased to report that the Department of Labor joins five existing agencies who previously achieved the green standards of success for the Improved Financial Performance Initiative. The Department of Commerce also earned an upgrade in status this quarter to yellow. These advances are a tribute to many, and both departments should be congratulated.

FY 2005 will certainly be an eventful year for Federal financial management, and we look forward to providing updates to you on our efforts and progress.

Sincerely,

Linda M. Springer
Controller