1. OMB Circular A-123 Lessons Learned OMB Circular A-123 Lessons Learned FEDERAL ADVISORY Sean Hoffman Partner KPMG LLP

2. ©2007 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S.A. 2 Historical Look at Controls vs. Performance Improvement Performance Focused Performance Biased Control Focused Control Biased Control Biased Performance and Control Optimized Business Improvement Risk Management Late 1990’s 2007 and Beyond… Y2K PMA & Scorecard A-123 / SOX

3. ©2007 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S.A. 3 A Familiar Journey Comply Integrate and Automate Transform Process Improvement Risk Mitigation “Check the box” Reduce the cost of compliance Get some value

4. ©2007 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S.A. 4 Integrate A-123 with Other Efforts Avoid Stovepipes. Make A-123 – umbrella over your entire “Controls Program” A-123

5. ©2007 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S.A. 5 Understanding Total Cost of Control 1.Internal costs within the agency 2.Upfront costs to scope and launch project 3.Outside A-123 contractor 4.Ongoing testing & monitoring costs 5.IG interaction 6.Correcting deficiencies A-123 “Visible” Initial Compliance, Ongoing Assessment and Monitoring Source: KPMG LLP (U.S.), 2004

6. ©2007 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S.A. 6 Understanding the Nature of Controls Automated Manual Detective Preventive Agency X Control Portfolio In basic terms, a control is an activity that validates information and creates a context for action. The control itself is manual or automated, detective or preventive. 10,000+ Controls 1,000+ Processes 200+ Systems Typical Agency Source: KPMG LLP (U.S.), 2004

7. ©2007 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S.A. 7 Source: KPMG LLP (U.S.), 2004 Understanding Total Cost of Control Largely “Hidden” Business Performance 1.Performance of the controls 2.Management review 3.Error correction

8. ©2007 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S.A. 8 S-O “Visible” Initial Compliance, Ongoing Assessment and Monitoring Source: KPMG LLP (U.S.), 2004 Understanding Total Cost of Control Total Cost of Control Largely “Hidden” Business Performance

9. ©2007 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S.A. 9 Automated Manual Detective Preventive Evolving Controls Agency XXX – Summary Analysis of Control Evolving the Controls Portfolio Evolving the portfolio of manual/detective controls toward an automated, preventive state is central to reducing costs and increasing the business value of controls over time. Source: KPMG LLP (U.S.), 2004

10. ©2007 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S.A. 10 Contact Information Sean Hoffman, Partner KPMG LLP 202.533-5564 shoffman@kpmg.com KPMG LLP, the audit, tax and advisory firm (www.us.kpmg.com), is the U.S. member firm of KPMG International. KPMG International's member firms have 113,000 professionals, including 6,800 partners, in 148 countries.www.us.kpmg.com) All information provided is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. The views and opinions are those of the author and do not necessarily represent the views and opinions of KPMG LLP.