# Presentation: 676653

## DHS OIG’s Perspective on A-123 Implementation

- David Zavada, Assistant Inspector General for Audits,
- Department of Homeland Security
- Federal Financial Management Conference
- March 10, 2006

## Agenda

- Role of the IG
- Leveraging
- Compliance Issues
- DHS Financial Accountability Act

## Role of the OIG 

- Play a positive role in improving agency management
- Independent review/analysis/audit
- Hold management accountable for effective management and achieving results

## IG Role in A-123 Implementation

- Positive Role - -
- OIG/auditors have expertise in internal control
- Active participation in the SAT
- Good communication/avoid surprises
- Maintain Independence - -
- A-123 is directed to management
- Accountability Role - -
- Ensuring the intended rigor of the process

## Active Participant in the SAT:  Input at Key Points

- Planning is the most critical stage
- Is the assessment planned in a way to reach management’s goal and support assurance?
- Critical decision points for management:
- Scope
- Key processes/controls
- Materiality and risk assessment
- Testing plan
- Assurance statement/concluding
- Management should be seeking input in these areas

## Leveraging/Realizing Efficiencies

- Leveraging works both ways
- Audit work papers by management
- Management’s documentation/testing/corrective actions by auditor
- Audit risk
- Testing plan
- SAS 70 Reviews and timing
- Over time.....efficiencies should result

## Compliance Issues

- High Standard in Appendix A
- Documentation and testing to support assertion
- IG’s important part of overall accountability structure to ensure compliance
- Significant effort intended- - Level of compliance will evolve/bar will raise

## Compliance in 2006

- OMB Draft Technical Guidance (Qs and As)
- Scope limitations (planning issues/late starts)
- Transparency in reporting
- Plan for addressing limitation
- OMB approval of plan

## Draft OMB Guidance

- How is compliance determined where scope is limited?
- Updated plan to address limitation (date negotiated with OMB)
- Address how issues addressed in next fiscal year
- Progress on corrective actions
- Determination of compliance with intent of Appendix A
- IG/auditor reliance on OMB authoritative guidance

## Potential Non-compliance Determinations

- Lack of transparency in reporting
- Level of work to support assertions
- All scope limitations deficiencies not addressed in the OMB approved plan

## Mitigating Non-Compliance Issues

- Poor Communication adds risk
- Where key management decisions not shared with IG and/or IG has not communicated concerns

## Compliance in FY 2007 and Beyond

- Envision a much higher bar by OMB
- Approval/extension of plans to comply???
- Will further compliance guidance be needed?  (i.e. FFMIA)

## DHS Internal Control Status

- Statutory requirements
- Disclaimer of opinion
- Ten material internal control weaknesses
- Many pervasive weaknesses
- No assurance provided by management in 2005
- Corrective action plan in process

## OMB Draft Technical Guidance

- How should agencies with previously reported material internal control weaknesses plan their assessment?
- “...interim focus should be on executing corrective actions in areas where controls are ineffective and then seeking significant financial reporting areas where assurance can be provided.”
- management must determine where “sufficient corrective actions have been completed...” to include in scope of the assessment

## Summary

- _Important role for IG’s to play_ - - ensuring A-123 implemented/DHSFAA requirements implemented as intended
- _Opportunity to leverage_ work with financial audit
- _Compliance_ - - the bar will be raised over time/look to OMB
- Where significant weaknesses exist - - focus must be on corrective actions first