Reviews and Internal Controls
OMB A-123 reviews are an important complement to the financial statement audit. They provide federal managers with insight into financial reporting and operations that require improvement due to material weaknesses in design or ineffective internal control structure. This assessment provides agencies with the information necessary to identify and eliminate errors in financial reports. Empirical’s team of finance and accounting professionals has extensive experience conducting and executing accurate OMB A-123 reviews, enabling our team to provide recommendations and solutions to support our customers’ internal control and audit objectives, as well as avoid issues.
One of the biggest issues facing agencies is the lack of proper internal controls to measure performance accurately, leading to wasted funds and more time and costs spent on remediating material weaknesses. Our team has the knowledge of federal regulations to assist our clients in assessing and developing proper internal controls, including:
- Federal Management Financial Integrity Act (FMFIA)
- Office of Management and Budget (OMB) Circular A-123
- Management’s Responsibility for Internal Control and its associated Appendices
- OMB Circular A-136
- Government Accountability Office’s (GAO) Standards for Internal Control in the Federal Government
Improper payments continue to be a long-standing internal control issue. Many Federal agencies are unable to determine the full extent to which improper payments occur and reasonably assure that appropriate actions are taken to reduce them. Many agencies are unable to adequately account for intragovernmental activity and balances between federal entities. These challenges put a strain on budgets and resources, which are already stretched thin. Empirical can assess and re-engineer internal controls to identify issues that lead to improper payments, helping agencies reduce improper payments, fraud, waste, and abuse.
Empirical provides comprehensive services to reduce risks and avoid issues, including:
- Conduct internal control assessments in operations, financial management, and financial management systems, as well as compliance with applicable laws and regulations across all material programs to identify and classify any material weaknesses, reportable conditions / significant deficiencies, or control deficiencies
- Develop standard operating procedures and re-engineered processes to improve efficiencies and activity-level and entity-level internal controls
- Evaluate and identify the operational impacts of key controls and processes
- Determine the transaction impact on internal controls
- Develop corrective action plans to reduce the risk to programs, especially those that are susceptible to fraud, waste, abuse, and noncompliance
US Department of Agriculture (USDA), Natural Resources Conservation Service (NRCS), Office of the Chief Financial Officer (OCFO), Quality Assurance Division
Overview: Empirical has assisted the USDA NRCS OCFO Quality Assurance Division since 2016. Our team supported NRCS’s overall A-123 program, Improper Payment program, Farm Bill programs, critical business processes, and audited financial statements and audit findings.
Internal Controls: Empirical worked with NRCS’s Financial Reporting Assessment Team (FRAT) members to compile the documentation from NRCS’ financial systems as required under the current NRCS testing framework and completed annual Entity Level Control (ELC) Questionnaires used to identify critical risks associated with the policies, procedures, and processes.
Empirical worked with process owners to complete Risk Assessments for internal control components per the USDA A-123 program. The risk assessment incorporated previous findings or control gaps, changes in process or personnel, and inherent risk factors such as frequency and volume of transactions. Our team documented processes and critical controls for the NRCS A-123 tasks and worked with process owners to confirm the narratives, flowcharts, and Business Process Control (BPC) documentation to make sure they were complete and reflected current activities.
Improper Payments: Empirical executed root cause analysis and supported the development of correction action plans (CAPs) for NRCS programs. Empirical engaged NRCS personnel to understand the possible root causes and developed actionable and effective recommendations to resolve the underlying cause and mitigate future improper payments.
Results: Empirical continues to help NRCS to improve their internal control environment, reduce improper payment errors and meet compliance requirements.