Office of Federal Financial Management Office of Management and Budget OMB Update Northern Virginia AGA - Spring Training March 24, 2015 Office of Federal Financial Management Office of Management and Budget

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

ERM and Internal Controls

Streamlining Assurance Statements

Additional Considerations Service Organizations Internal Controls in Disaster Situations Fraud Internal Controls over Financial Assistance (i.e., Grants)

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

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

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

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

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 ?

Internal Control Standards 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 Program A Program B Program C Program D Program E Control Environment 3 2 4 1 Risk Assessment Control Activities Information and Communication Monitoring 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

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

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)

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.

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

Better Data, Better Decisions, Better Government 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

360 Spending Transparency

DATA Act in Context of Spending Life Cycle Appropriation Apportionment Allotment (Allocation) Commitment Obligation Payment Receipts/ Financing 360 Spending Life Cycle DATA Act FFATA (USAspending.gov) Award

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

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

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

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

The New Uniform Guidance ♫ Are You Ready for This ? The New Uniform Guidance 2 CFR 200

Guidance Reform History Nov. 2009: Executive Order: Reduce Improper Payments Feb 2011: Presidential Memo: Reduce Administrative Burden Feb 2012: Advance Notice of Proposed Guidance (public comments) Feb 2013: Notice of Proposed Guidance (public comments) Dec 2013: Final Uniform Guidance † April 2013

Guidance Reform History December 2013: Uniform Guidance Published January-April 2014: Training Webcasts, Publish 2014 Single Audit Compliance Supplement June 2014: Agencies Submit Draft Rules to OMB, Continued Outreach on Implementation 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 Received Awards A-102 & A-89 A-87 A-133 &A-50 Subawards to universities A-110 A-21 Subawards to nonprofits A-122 Then: INSERT YOUR STATE OR AGENCY HERE 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