4 FAM 040
Financial MANAGEMENT CONTROLS
(CT:FIN-446; 06-07-2018)
(Office of Origin: CGFS/DCFO/MC)
4 FAM 041 GENERAL STATEMENT
(CT:FIN-446; 06-07-2018)
a. Management controls are a means of managing risk
associated with Federal programs and operations. The Department is required to
incorporate management controls in all of its programs and functions. 4 FAM 040
provides general guidance pertaining to financial management. 2 FAM 020
explains the responsibilities associated with the evaluation and improvement
process of the Departments system of management controls. However, policies
on management controls are not limited to these two subchapters. Management
controls dealing with a specific program or functional area (i.e., payroll,
information systems, security) are located in that particular part of the FAM
or FAH.
b. As required by 31 U.S.C. 3512, the head of each
executive agency must establish and maintain systems of accounting and
management controls that provide:
(1) Complete disclosure of the financial results of
the agencys activities;
(2) Reliable and timely financial information the
agency needs for management purposes;
(3) Effective control over, and accountability for,
assets for which the agency is responsible, including internal audit (both the
bureau/entity reviews and OIG audits);
(4) Reliable accounting results that will be the basis
for preparing and supporting the budget requests of the agency; controlling the
execution of the agency budget; and providing financial information that the
President requires; and
(5) Suitable integration of the accounting system with
the central accounting and reporting responsibilities of the Secretary of the
Treasury.
c. The accounting system must incorporate a
comprehensive system of management controls characterized by:
(1) Organizational plans that provide appropriate
separation of functional responsibilities;
(2) Authorization and recording procedures adequate to
provide reasonable control over assets, liabilities, revenues, and expenses;
(3) Sound practices incorporated within the
performance of duties and functions of organizational components; and
(4) Assignment of responsibilities to personnel
commensurate with their qualifications.
d. The Federal Managers Financial Integrity Act
(FMFIA) of 1982, Public Law 97-255, codified at 31 U.S.C. 3512 and implemented
by OMB Circular A-123, amended, requires that internal accounting and
administrative controls of each executive agency must be established in
accordance with standards prescribed by the Comptroller General and must
provide reasonable assurances that:
(1) Obligations and costs are in compliance with
applicable law;
(2) Funds, property, financial information, and other
assets are safeguarded against waste, loss, unauthorized use, and
misappropriation; and
(3) Revenues and expenditures applicable to agency
operations are properly recorded and accounted for to permit the preparation of
accounts and reliable financial and statistical reports and to maintain
accountability over the assets.
The standards prescribed by the Comptroller General
under this paragraph also include standards to ensure the prompt resolution of
all audit findings (see GAO report number GAO/AIMD 00-21.3.1, Standards for
Internal Control in the Federal Government).
e. The Federal Financial Management Improvement Act
(FFMIA) of 1996, Public Law 104-208, requires that agencies develop and
maintain financial management systems that substantially comply with Federal
accounting standards, Federal financial management system requirements, and the
standard general ledger.
f. The Improper Payments Elimination and Recovery Act
(IPERA) of 2010, Public Law 111-204, which amended the Improper Payments
Information Act of 2002 (31 U.S.C. 3321 note),
requires that agencies periodically review all programs and activities that the
agency head administers and identify all program and activities that may be
susceptible to significant improper payments, and have a cost-effective
recapture audit program to identify and collect overpayments and other improper
payments.
g. OMB Circular A-123, as amended, Management's
Responsibility for Internal Control, promulgates a U.S. Government-wide
internal control policy and a system of agency responsibilities and
requirements. Its purpose is to address instances of fraud, waste, and abuse
of Government resources and mismanagement of Government programs resulting from
deficiencies in internal controls or deficiencies in compliance with internal
controls. The circular provides guidance to Federal managers on improving the
accountability and effectiveness of Federal programs and operations by
establishing, assessing, correcting, and reporting on management controls. The
circular has specific appendices that address controls over financial reporting
(Appendix A); the U.S. Government charge card program (Appendix B); and
payments made under IPERA (Appendix C). The circular requires each agency head
to report annually on management control through management assurance
statements (overall FMFIA assurance). In addition to, and as a component of
the overall FMFIA assurance statement, the agency head must provide an
assurance statement on the effectiveness of internal control over financial reporting.
4 FAM 042 SEPARATION OF DUTIES
(CT:FIN-395; 10-08-2008)
The system of management controls must incorporate an
appropriate separation of duties between authorizing, processing, recording,
and reviewing transactions; and maintaining the accounting records and
receipts, as well as using and disposing of resources. No individual should
control all key aspects of a transaction or event. Particular emphasis should
be made as follows:
(1) Employees collecting receipts or having custody of
cash or negotiable securities must not be assigned to duties of maintenance or
reconciliation of related accounting records;
(2) Employees having procurement authority, custody of
property, property disposal, or collection of disposal funds responsibilities
must not be responsible for maintaining or adjusting related accounting
records; and
(3) Personnel certifying or scheduling vouchers for
payment must not be assigned procurement, receipt, custodial duties, disposal,
or collection of disposal funds over property or services. (See also 4 FAH-3
H-061.2.)
4 FAM 043 PERSONAL RESPONSIBILITY
(CT:FIN-395; 10-08-2008)
a. Each employee has a personal responsibility for the
proper use and reporting of that individuals own time. Employees are also
responsible for the custody and appropriate disposition or use of property or
other assets entrusted to their care, and, in some cases, for the
administrative review of such custody, disposition, or use by others.
Employees at all levels are expected to be familiar with management control
objectives and techniques associated with their assigned duties.
b. Managers are responsible for the establishment,
maintenance, continuing evaluation, and monitoring of management controls.
Managers are also responsible for ensuring that skill needs are continually
assessed and that the Department is able to obtain a workforce that has the
required skill set that matches those necessary to achieve the Departments
goals.
4 FAM 044 ACCOUNTING CONTROLS
(CT:FIN-395; 10-08-2008)
A system of general ledger and subsidiary accounts must be
maintained for assets, liabilities, investments of the U.S. Government, revenues, and costs. Accounts must be reconciled and differences
investigated according to the following schedule:
(1) Produce general ledger trial balances at least at
the end of each monthly accounting period. Both internal and external reports
will be based on the accounting period;
(2) Reconcile subsidiary ledger cost accounts with the
general ledger control accounts at the close of each accounting period;
(3) Reconcile subsidiary ledgers for property and
current asset inventories to general ledger controls at least at the end of
each fiscal year, and at intervals when physical inventories are taken. Also,
reconcile subsidiary ledgers for assets, other than property, current asset
inventories, and liabilities to general ledger controls at the end of each
accounting period;
(4) Review documents supporting unliquidated
obligations with financial management and accounting system on a monthly basis
(including the end of each fiscal year). Critically review obligation balances
at the end of each fiscal year to ensure they are still valid and can be
supported by documentary evidence as specified in 31 U.S.C. 1501 (34 Comp. Gen
820). Specific responsibility must be assigned at the operating level to
prepare adequate working papers and records in a form suitable for audit (GAO
Policy and Procedures Manual for Guidance of Federal Agencies, Title 7, Chapter
3, Section 3.8); and
(5) Other financial records maintained by management,
if considered as subsidiary to the accounting records, must be reviewed and
reconciled at least quarterly.
4 FAM 045 ADMINISTRATIVE REVIEW
(CT:FIN-395; 10-08-2008)
The system of management controls must include administrative
review of disbursement transactions sufficient to ensure compliance with laws
and regulations governing certification of vouchers and disbursing of U.S. Government funds. Transactions and other significant events should be authorized and
executed only by persons acting within their scope of authority. Vouchers must
be reviewed consistent with Department requirements (see 4 FAH-3 H-400).
4 FAM 046 SAFEGUARDING OF rESOURCES
(CT:FIN-402; 06-17-2009)
All funds, cash, collections, financial information,
property, and other resources for which the Department is responsible will be
appropriately safeguarded to prevent misuse, misappropriation, unwarranted
waste, deterioration, or destruction. No assets are to be disposed of; leave
the possession of the Department; or be reduced in value without proper
authorization. Access to U.S. Government resources must be restricted to
authorized persons. Accountability must be assigned and maintained, and
periodic reviews should occur to account for all resources.
4 FAM 047 Office of management control
internal reviews
(CT:FIN-418; 02-19-2013)
The Office of Management Control (CGFS/DCFO/MC)
administers the requirements of the Federal Managers' Financial Integrity Act
(FMFIA) for the Department. These requirements include providing annual FMFIA
guidance materials to the bureaus and posts; compiling the results of the
statement of assurance from the Assistant Secretaries and chiefs of mission;
and making recommendations to the Management Control Steering Committee
concerning both the Secretary's overall statement of assurance and assurance
over assessing internal controls over financial reporting as it will be
presented in the annual report. Procedures necessary to comply with Circular
A-123, Appendix A (internal controls over financial reporting) and Appendix C
(improper payments) are also performed by CGFS/DCFO/MC. Additionally,
CGFS/DCFO/MC performs audit follow-up for OIG open recommendations. (See 1 FAM 614.14 for further description.)
4 FAM 048 office of inspector general
audits and inspections
(CT:FIN-418; 02-19-2013)
The Office of Inspector General (OIG) is responsible for
independent audits and inspections of agency programs and operations, which
include financial management. OIGs mission is to protect the integrity of the
U.S. Government; improve program efficiency and effectiveness; and prevent
and detect fraud, waste, and abuse in Federal agencies. The OIGs independent
audits and inspections are an integral part of the Departments management controls.
The IG Act requires agency managers to follow up on audit recommendations.
Agency managers should use the findings and recommendations made in these
independent audit reports to correct problems resulting from inadequate or
poorly designed controls and to build appropriate controls into new programs
(see 1 FAM 050).
4 FAM 049 UNASSIGNED