Standards for Internal Control in the Federal Government

Beginning with the Accounting and Auditing Act of 1950, agency heads have been required to establish and maintain effective internal control. Over the years, GAO had issued numerous publications to assist agencies in establishing and maintaining effective internal control. In 1982, the Federal Managers' Financial Integrity Act required agencies to evaluate their systems of internal control on a periodic basis using guidance issued by the Office of Management and Budget (OMB Circular A-123, ``Management Accountability and Control,'' revised June 21, 1995) and to report on whether their systems conform to the internal control standards. The Act also amended the Accounting and Auditing Act of 1950 requiring GAO to promulgate internal control standards. In 1983, GAO drew on its previously issued guidance and experts throughout government, the private sector, and the academic communities to develop and issue the required ``Standards for Internal Controls in the Federal Government.'' Although, those standards remain conceptually sound and are used throughout the federal government, several factors indicated a need to revise and update the standards. The revision and update was performed primarily in response to (1) the effect of rapid advances in information technology management upon internal control, (2) a greater recognition of the role of human capital management as an important factor in internal control, and (3) the need to implement updates of the standards used in the private sector where useful in the federal government environment. The new standards also reflect the increased emphasis upon internal control inherent in important legislation such as the Chief Financial Officers Act of 1990, the Government Performance and Results Act of 1993, and the Federal Financial Management Improvement Act of 1996. These standards provide the overall framework for federal agencies to establish and maintain internal control and to identify and address major performance and management challenges and areas at greatest risk for fraud, waste, abuse, and mismanagement. They will be useful to both program and financial managers in all federal departments and agencies in meeting their missions and objectives and in achieving financial accountability. The format of the new standards and the concepts expressed by them are consistent with those contained in the document ``Internal Control- Integrated Framework'' published in 1992 by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The COSO document is widely accepted for use in the private sector. The GAO document defines internal control as an integral component of an organization's management that provides reasonable assurance that the following objectives are being achieved: (a) Effectiveness and efficiency of operations, (b) reliability of financial reporting, and (c) compliance with applicable laws and regulations. There are five broad standards that define the minimum level of quality acceptable for internal control in government and provide a basis against which agency internal control can be evaluated. These five standards cover the areas of (1) Control Environment, (2) Risk Assessment, (3) Control Activities, (4) Information and Communications, and (5) Monitoring. We encourage wide distribution and application of the new standards for internal control throughout the federal government. Jeffrey C. Steinhoff, Acting Assistant Comptroller General for Accounting and Information Management. [FR Doc. 99-30354 Filed 11-19-99; 8:45 am] BILLING CODE 1610-02-U