1. FINANCIAL MANAGEMENT SCHOOL
Internal
Control
Program
SHOW SLIDE 1: MANAGEMENT INTERNAL CONTROL PROGRAM
SECTION I. : Management Internal Control Program
ADMINISTRATIVE DATA
All Courses Including This Lesson
Course Number Version Course Title
01 Planning Programming Budget & Execution Course (PPBE)
Task(s) Task Number Individual
Taught (*) or
Academic Hours
The academic hours required to teach this lesson are as follows:
Resident
Hours/Methods
Academic Hours/Method
0.1 hrs Introduction/Conference Discussion
1.8 hrs Conference Discussion
0.1 hrs Summary
2.0 hrs Total Time
Test Lesson Number
Testing (to include test review)
Hours -0 hrs
Lesson Number -
Prerequisite Lesson(s)
Lesson Number
Lesson Title
Determine the Principles of the Management Control Program
Security Level: Unclassified
Requirements: There are no clearance or access requirements for the lesson.
Foreign Disclosure Restrictions
FD5. This product/publication has been reviewed by the product developers in coordination with the Fort Jackson Soldier Support Institute foreign disclosure authority. This product is releasable to students from all requesting foreign countries without restrictions.
Instructor Requirements
Must meet physical qualifications IAW AR
Materials Required
Instructor Materials:
Lesson plan slides and Management Internal Control Program Summary Sheet
Student Materials:
Management Internal Control Program Summary Sheet
Classroom, Training Area, and Range Requirements
General Purpose Classroom - 25 Seats
Instructional Guidance
Note: Before presenting this lesson, instructors must thoroughly prepare by studying this lesson and identified reference material.
Also, provide the students with situational awareness of the Operational Environment (OE) variables and actors.
Proponent Lesson Plan Approvals
Name Rank Position Date
Harris, Norman CTR Writer/Developer xx-xxx-xxxx
Bonig, Reid GS-12 Chief - FMITD xx-xxx-xxxx
Davis, Bobby LTC FM-DOT xx-xxx-xxxx
Zellars, Eric COL Commandant xx-xxx-xxxx
NOTE: Incorporate the political, military, economic, social, information, infrastructure, and physical environment and time (PMESII&PT) into each lesson and classroom work as appropriate. Instructor will illustrate them with appropriate examples from the Current Operating Environment (COE) as it pertains to the lesson.
Motivator: As a resource manager, it is important to know where and how your organization fits into Planning, Programming, Budgeting and Execution process.
Why are we talking about this? 1) To protect resources (example of resources - Money, people, information) 2) At installation the DRM is responsible for the Management Control Program.
Anybody ever conducted an inspection in the Army? If so - then you have been involved in the Management Control Program.
Could be a CIP, inspect training, verified travel vouchers - I’m sure everyone of us has done some type of Management control in our career. - Everything has a MGT CTRL involved with it.
In the U.S. was in SouthWest Asia doing Humanitarian Assistance missions, inspecting for chemical weapons producing plants, and also enforcing the “no-fly zone”.
11/14/2018
FINANCIAL MANAGEMENT SCHOOL

2. Terminal Learning Objective
Action:
Condition:
Standard:
Determine the Principles of the Management Control Program.
Given a summary sheet containing AR 11-2, and slides.
With 80% accuracy:
Establish the principles of the management control program; validate regulatory and legislative background information; and determine responsibilities within DA and implementation.
SHOW SLIDE 2: STATE TERMINAL LEARNING OBJECTIVE
Safety Requirements:  Everyone is responsible for safety. A thorough risk assessment must be completed prior to every mission or operation.
Risk Assessment Level: Low
Environmental Considerations: NOTE: It is the responsibility of all Soldiers and DA civilians to protect the environment from damage.
Environmental protection is not just the law but the right thing to do. It is a continual process and starts with deliberate planning. Always be alert to ways to protect our environment during training and missions. In doing so you will contribute to the sustainment of our training resources while protecting people and the environment from harmful effects.
Evaluation: Students will take a comprehensive test at the end of Week 1. Students must score 80% or higher and International officers must score 70% or higher.
MGT CTRL Programs are designed so that our resources are not wasted or misused.
11/14/2018
FINANCIAL MANAGEMENT SCHOOL

3. Management Controls in
Today’s Army
“We can’t afford to have any resources wasted or lost because effective controls aren’t in place or being followed, or because our stewardship fails to engender trust in Congress or the American people.”
Joe R. Reeder, Former Under Secretary of the Army
“We must improve our stewardship, how we safeguard our physical assets, how we control sensitive items, how we account for and report our financial assets-and we must invest our time and energy to do it now.”
General Gordon R. Sullivan, former Chief of Staff
SHOW SLIDE 3: Management Controls in Today’s Army
Quotes from some former leaders
Bottom line - Senior leaders think Management Controls are important.
We have a video for you to watch on MGT CTRLS - 20 minutes
LTC Dixon talked about Managers’ Internal Control Program.
Here is one - Covers all the areas that need to be looked at and inspected at the minimum of every 5 years.
Its published at DA (specifically ASA FM&C).
There are various sections - one section is healthcare - ASA FM&C doesn’t know anything about healthcare so they get a functional expert to make the checklist.
11/14/2018
FINANCIAL MANAGEMENT SCHOOL

4. FINANCIAL MANAGEMENT SCHOOL
Reasonable Assurance
A satisfactory level of confidence given the consideration of costs, benefits, and risk.
Some sensitive resources for which the costs of control cannot be an issue.
For most resources, the Army cannot afford or attain 100% assurance.
The determination of reasonable assurance is a day to day judgment.
SHOW SLIDE 5: Reasonable Assurance
Definition of reasonable assurance.
This is what the program is built on - cannot be 100% sure of anything because we can’t afford to monitor everything - but you can monitor enough so that you have reasonable assurance that you are not wasting resources.
Ex - Check every car coming through the gate - stop get out turn engine off, open trunk etc.. - very resource consuming - manpower, time
or do you check every 5th car, and don’t allow people to park within 50 meters of a building - less resources but you could have reasonable assurance that your preventing some form of criminal activity occurring.
Another example - is look around in the room - computers, projectors - What Management Controls are in place to make sure stuff doesn’t walk? We have someone sign for the stuff holding someone responsible / have property accountability.
What else could we do - lock the doors when empty, have a key control, do the daily checklist when we leave each day.
Does any of it guarantee that nothing will be come up missing? No - could put guards on the doors when its locked - maybe wasting resources - all you need / want is reasonable assurance.
FBI - just had a bunch of laptops come up missing - why? No property accountability - no HR
When FBI agents left - supposedly they just left with their laptops.
100%
EFFECTIVENESS
OF CONTROLS
11/14/2018
FINANCIAL MANAGEMENT SCHOOL

5. FINANCIAL MANAGEMENT SCHOOL
Management Controls
in the Army
The army is required to:
Establish effective management controls.
Evaluate them periodically.
Submit a broad annual assessment.
Report, track, and correct material weaknesses.
SHOW SLIDE 6: Management Controls in the Army
LTC Dixon covered all these topics in the video.
Establish - By functional proponent
Evaluate - Why do you think they evaluate them periodically? Are they working - are they still relevant.
Submit - Done at every level. Every year - need to submit an annual statement from each 06 level command and take to DRM - need to state your weaknesses, what doing to fix it or reduce the threat.
Division CDR will do the same, Installation CDR will do the same - up to DA level.
Some of issues that may be addressed could be - property accountability in MP - if constantly having tools disappear / safety procedures could be addressed - such as having to place a cage around a tire when inflating a tire.
Report - Also you look at: problems that you had last inspection and if you corrected them - or if they still are a problem (IE - Arms Room). Need to fix issues found wrong (material weaknesses)
Control Objective: A level of control that will provide reasonable assurance and confidence that resources (people, buildings, money, and supplies) are effectively and efficiently managed
11/14/2018
FINANCIAL MANAGEMENT SCHOOL

6. FINANCIAL MANAGEMENT SCHOOL
Management Control
Categories
Administrative controls:
Ensure adherence to laws, regulations, and policies.
Accounting controls:
Safeguards financial and other assets from unauthorized use.
Ensures reports and records are reliable and accurate.
SHOW SLIDE 7: Management Control Categories
There are 2 management control categories - they either
1) make sure we are following laws or
2) Ensure we are safeguarding our financial assets
Administrative Controls. Apply to those actions leading to authorization of transactions and events based on established policies (e.g., Standard Operating Procedures (SOPs) and Desk Top Procedures).
Accounting Controls. Relate to safeguarding of assets and financial reports.
Management control is the responsibility of management. Management control is not a separate management function, it is an internal part of any system developed (e.g., development and implementation of Standard Operating Procedures (SOPs).
Management control makes full accountability of resources possible. Management control is a series of checks and balances. To summarize, management control is a combination of management objectives and techniques for the manager to use to ensure he/she is utilizing the available resources to the maximum extent possible.
11/14/2018
FINANCIAL MANAGEMENT SCHOOL

7. FINANCIAL MANAGEMENT SCHOOL
Laws & Directives
Accounting and Auditing Act of 1950
Federal Manager's Financial Integrity Act of 1982
OMB Circular A-123
AR 11-2, Managers’ Internal Control Program
Comptroller General Standards for Internal Control
SHOW SLIDE 8: Laws & Directives
Note: Go to OMB Circular A-123 type in: roll over “THE ADMINISTRATION” tab, under “EXECUTION OFFICES” click on Office of Management and Budget, scroll down and click on “Circulars”, under “Information for Agencies”, and then scroll down to OMB Circular A-123.
The following publications can be found in blackboard:
Army Regulation 11–2
DoDI Managers’ Internal Control Program
GAO Standards for Internal Control in the Federal Government
Federal Managers Financial Integrity Act of 1982
Accounting and Auditing Act of 1950
11/14/2018
FINANCIAL MANAGEMENT SCHOOL

8. Federal Managers Financial Integrity
Act (FMFIA)
Amends the Accounting and Auditing Act:
The Comptroller General will prescribe Management Control Standards.
Audit Findings will be promptly resolved.
OMB will establish management control review guidelines.
Agency heads will prepare annual management control compliance statement.
Agency heads will report on conformance of administrative and accounting control systems with Comptroller General principles, standards, and requirements.
SHOW SLIDE 9: Federal Managers Financial Integrity Act (FMFIA)
The Federal Managers Integrity Act of 1982.
- Known also as the "Integrity Act.” ACT means Congress was involved.
Congress thought the Fed Gov not doing things the right way so they said you must do this.
- Requires each agency’s management control system to be periodically reviewed and evaluated against standards developed by the Comptroller General.
- Requires the head of each executive agency to report annually on their systems status
Federal Managers Financial Integrity Act (FMFIA)
Amends the Accounting and Auditing Act:
The Comptroller General will prescribe Management Control Standards.
Audit Findings will be promptly resolved.
OMB will establish management control review guidelines.
Agency heads will prepare annual management control compliance statement.
Agency heads will report on conformance of administrative and accounting control systems with Comptroller General principles, standards, and requirements.
11/14/2018
FINANCIAL MANAGEMENT SCHOOL

9. Office of Management and Budget (OMB) Circular A-123
Implementing vehicle for integrity act.
Prescribes policies and standards for executive agencies in establishing, maintaining, and evaluating management controls.
SHOW SLIDE 10: OMB Circular A-123
Describes the way to implement FMFIA (Federal Managers Financial Integrity Act)
Office of Management and Budget (OMB) Circular A‑123.
- Because management control was not fully implemented into all government agencies, OMB issued Circular A This Circular protects government resources against waste, fraud, abuse, and mismanagement. The head of each federal government agency is required to develop, maintain, and provide reasonable assurance that adequate systems of management control are in place.
- Implements the Integrity Act into the Executive Branch
- AR 11‑2, Management Control - The Army's policy guidance to management control
- AR 11‑2 implements Public Law, OMB and DoD guidance for management control which is regulatory, not statutory guidance
What legislature or directive mandates that heads of federal agencies develop, maintain, and provide reasonable assurance that adequate systems of management controls are in place?
OMB Circular A-123.
What legislature or directive mandates that each agency’s management control system be periodically reviewed and evaluated against standards developed by the Comptroller General?
The Integrity Act.
11/14/2018
FINANCIAL MANAGEMENT SCHOOL

10. FINANCIAL MANAGEMENT SCHOOL
Comptroller General
Standards
Control Environment
Risk Assessment
Control Activities
Information & Communications
Monitoring
SHOW SLIDE 11: Comptroller General Standards
The Comptroller General Standards - the whole foundation of a MCP is based off of these 5 standards
- The Comptroller General is part of GAO - actually he heads it.
- Who does the GAO work for - yes Congress
- So in effect these standards come from Congress - and the Comptroller General publishes these standards
We will cover each one individually.
11/14/2018
FINANCIAL MANAGEMENT SCHOOL

11. FINANCIAL MANAGEMENT SCHOOL
Control Environment
Managers and employees are to maintain and demonstrate a positive and supportive attitude towards management control at all times.
SHOW SLIDE 12: Control Environment
Asks - Do we have an environment that supports good Management Controls?
Example of what shouldn’t happen - Your LTC or boss says - get this equipment - I don’t care how - don’t tell me how you did it - just do it!
Doesn’t set a good environment for management controls
Control environment also includes the training of the people in Management Controls
The control environment is the set of standards, processes, and structures that provide the basis for carrying out internal control across the organization. The board of directors (or its government equivalent) and senior management establish the tone at the top regarding the importance of internal control, including expected standards of conduct.
11/14/2018
FINANCIAL MANAGEMENT SCHOOL

12. FINANCIAL MANAGEMENT SCHOOL
Risk Assessment
Internal control should provide for an assessment of the risks the Army faces from both external and internal sources.
SHOW SLIDE 13: Risk Assessment
Can’t look at everything - How do we determine what is most important?
Look to see the area’s that we have the greatest potential for errors or problems.
What has the greatest chance of being a material weakness?
Risk is defined as the possibility that an event will occur and adversely affect the achievement of objectives. Risk assessment forms the basis for determining how risks will be managed.
11/14/2018
FINANCIAL MANAGEMENT SCHOOL

13. Control Activities (1 of 2)
Unique to each agency.
Examples include:
Top level reviews of actual performance.
Reviews by management at functional or activity level.
Management of human capital.
Controls over information processing.
Physical control over vulnerable assets.
Establishment and review of performance measures and indicators.
SHOW SLIDE 14: Control Activities (1 of 2)
Control activities are the actions established through policies and procedures that help ensure that management’s directives to mitigate risks to the achievement of objectives are carried out.
Specific ways to evaluate and assess
We do different reviews - we conduct review and analysis every year
11/14/2018
FINANCIAL MANAGEMENT SCHOOL

14. Control Activities (2 of 2)
Examples (cont.):
Segregation of duties.
Proper execution of transactions and events.
Accurate and timely recording of transactions and events.
Access restrictions to and accountability for resources and records.
Appropriate documentation of transactions and internal control.
General control and application control for information systems.
SHOW SLIDE 15: Control Activities (2 of 2)
Key one here is separation of duties.
How effective are our management controls if the same person that requests travel
- is also the guy that approves / authorizes it
- is the guy that fund certifies
- is the guy that disburses the funds
Not too effective - we are setting ourselves up for the potential of fraud occurring
11/14/2018
FINANCIAL MANAGEMENT SCHOOL

15. Information & Communications
Information must be recorded and communicated:
To those who need it
When and how they need it
Enables them to carry out their internal control and other responsibilities
SHOW SLIDE 16: Information & Communications
Communication is the continual, iterative process of providing, sharing, and obtaining necessary information. Internal communication is the means by which information is disseminated throughout the organization, flowing up, down, and across the entity.
Are we giving information to those who need it / when they need it - so that they can get their job done?
11/14/2018
FINANCIAL MANAGEMENT SCHOOL

16. FINANCIAL MANAGEMENT SCHOOL
Monitoring
Internal control monitoring should:
Assess the quality of performance over time.
Ensure that the findings of audits and other reviews are promptly resolved.
SHOW SLIDE 17: Monitoring
The most important of the Comptroller General Standards
Evaluations fall under here and the correction of them
You monitor your controls - How are we doing?
If broke - how are we fixing it?
How do we do it in a CIP - try to fix on the spot.
Know this - Key to monitoring:
1) Conducting Evaluations
2) Fixing what you find broke
11/14/2018
FINANCIAL MANAGEMENT SCHOOL

17. Responsibilities (1 of 2)
Secretary of the Army
ASA (FM&C)
DASA (FO)
Director of Management, Control, and Evaluation
HQDA Functional Proponents
Auditor General
SHOW SLIDE 18: Responsibilities (1 of 2)
DASA (FO) - Deputy Assistant Secretary of the Army for Financial Operations
11/14/2018
FINANCIAL MANAGEMENT SCHOOL

18. Responsibilities (2 of 2)
Inspector General
Senior Management Council
Reporting Organizations
Assessable Unit Managers
All Commanders/Managers
SHOW SLIDE 19: Responsibilities (2 of 2)
11/14/2018
FINANCIAL MANAGEMENT SCHOOL

19. HQDA Functional Proponents Managers’ Internal Control Program
Identify "KEY" management controls.
Develop/approve evaluation checklist/method & include in governing Army regulations.
Review/approve management control corrective action plans.
Report material weaknesses and corrective action plans to ASA (FM&C).
SHOW SLIDE 20: HQDA Functional Proponents
HQDA Functional Proponents - experts in their area
Identify key management controls for their area - you can’t look at every thing - so they decide what is the most important
They include these areas in their checklist for inspection - they distribute them so that you can see if your in compliance
Why review / approve management control corrective action plans? They are the subject matter experts - know if your plan to correct your material weakness will really work or be acceptable - basically your way to getting it fixed is getting approved.
They also advise the Secretary of the Army on which management control weakness should be reported in the Sec Army’s annual statement
- if they feel something is really a material weakness / important they advise that it should be included
What could he write as a material weakness at SEC ARMY level?
- Open access to gates / lack of anthrax vaccines / mail handling procedures on post
Managers’ Internal Control Program
Managers’ Internal Control Program (MICP), Army Regulation 11–2:
Instructor note: REF students to the following publications in Blackboard, and walk them through the research steps.
Army Information Technology, Army Regulation 25–1: Refer students to page “i” mentions Army internal control process” page 83 has the MICP Management Control Evaluation Checklist
Leaves and Passes, Army Regulation 600–8–10: Refer students to page “i” mentions Army management control process”. There is no specific appendix (sample of reg. without one, but MICP is mentioned on page 3)
Property Accountability Policies, Army Regulation 735–5 Refer students to page “i” mentions Army internal control process”, page 171 has the MICP appendix
11/14/2018
FINANCIAL MANAGEMENT SCHOOL

20. Management Control Implementation
Policy
Evaluation
Reporting
SHOW SLIDE 21: Management Control Implementation
3 key parts
-Policy
-Evaluation
-Reporting
11/14/2018
FINANCIAL MANAGEMENT SCHOOL

21. FINANCIAL MANAGEMENT SCHOOL
Policy
Reporting organizations will be segmented into assessable units, headed by senior managers.
Managers are responsible for applying Comptroller General Standards and conducting periodic evaluations of key mgmt controls
SHOW SLIDE 22: Policy
Policy - Reporting organizations will be segmented into assessable units, headed by senior managers. Managers are responsible for applying Comptroller General Standards and conducting periodic evaluations of key mgmt controls.
11/14/2018
FINANCIAL MANAGEMENT SCHOOL

22. FINANCIAL MANAGEMENT SCHOOL
Evaluation
Conducted at all levels
Five-year plan
Covers all functional areas
Identifies regulations, references, checklists
Uses existing evaluations (such as Command Supply Discipline Program)– avoids special evaluations
SHOW SLIDE 23: Evaluation
Most important of the 3 is Evaluation - it’s the way to ensure that systems are in place and that they are being followed
Evaluation - Mgmt control evaluation is a detailed look to see if controls are in place, being used as intended, and effective in achieving their purpose. Formal evaluations should be conducted at least once every five years. Certification demonstrates that the required evaluation has been conducted. Functional proponents may identify a mgmt control process to be used in evaluations, as an appendix to an AR or use an existing process which still needs to be an appendix.
11/14/2018
FINANCIAL MANAGEMENT SCHOOL

23. FINANCIAL MANAGEMENT SCHOOL
Reporting
Annual statement
Assessable unit managers/commanders
Provides overall assessment of management control and weaknesses
Forms basis for SecArmy’s annual statement
SHOW SLIDE 24: Reporting
Policy - Reporting organizations will be segmented into assessable units, headed by senior managers. Managers are responsible for applying Comptroller General Standards and conducting periodic evaluations of key mgmt controls.
Weaknesses are identified as either:
a. Material Weakness: significant deficiency or significant deficiencies that result in a reasonable possibility that a material misstatement will not be prevented or detected.
b. Significant Deficiency: a pervasive internal control weakness affecting two or more organizations disrupting or disabling good order of financial and nonfinancial operations rendering unacceptable risk levels with potential for fraud, waste, abuse, and mismanagement.
c. Control Deficiency: exists when the design, implementation, or operation of a control does not allow management or personnel, in the normal course of performing their assigned functions, to achieve control objectives and address related risks.
11/14/2018
FINANCIAL MANAGEMENT SCHOOL

24. Check On Learning
Q. What are the 3 key parts of Management Control Implementation?
Q. Is reasonable assurance in the MICP 100% attainable?
How many Management Control Standards are there?
True / False. The risk assessment MICP standard emphasizes the quality of performance over time.
Q. What MICP standard ensures corrective actions are implemented as needed?
Check on Learning
CHECK ON LEARNING 24

25. Terminal Learning Objective
Action:
Condition:
Standard:
Determine the Principles of the Management Control Program.
Given a summary sheet containing AR 11-2, and slides.
With 80% accuracy:
Establish the principles of the management control program; validate regulatory and legislative background information; and determine responsibilities within DA and implementation.
SHOW SLIDE 25: Terminal Learning Objective
Reasonable assurance - understand the overall philosophy of RA - cannot guarantee 100% effectiveness but we can have reasonable assurance that we are safeguarding our assets. - Understand this concept
Who is the Key at DA level? Functional proponents
- Subject matter experts
- Identify key areas
- Review and approve control plans
- Come up with checklists
Know that slide that talks about this
5 control standards - understand what monitoring is
- Monitoring is doing the inspections / evaluating the standards / fixing what you find broke
- both the evaluating and the correcting
11/14/2018
FINANCIAL MANAGEMENT SCHOOL