Laws, Standards and Regulations Association of Government Accountants Virginia Commonwealth

1. Laws, Standards and Regulations Association of Government Accountants Virginia Commonwealth Professional Development Training Williamsburg, VA December 6, 2018

2. Disclaimers • 1) 50 minutes is inadequate to cover any one law, regulation, or professional standard in reasonable detail.  The goal is to provide a high-level review of foundational government financial management principals. • 2) The views expressed are those of the presenters and do not reflect an official position of their agency or organization.

3. Background / Framing • Government financial managers spend much of their career focused in one or a few areas of government financial management where they may become knowledgeable about the requirements associated with their given profession.  • Whether audit, a business process area, program admin, a specific function (policy, systems, etc.) 

4. Learning Objectives • After this presentation, you should have learned: • The hierarchy of laws and regulations in the three branches and levels of government. • Foundational principals of the laws, regulations and standards presented. • How these concepts are part of a framework that contribute to a better, more efficient and transparent government.

5. Hierarchy of U.S. Laws and Regs • The U.S. Constitution • Laws enacted by Congress • Regulations (Rules by Executive Agencies) • State Constitutions • State laws • State regulations • Local government Constitution (Charter) • Local laws (ordinance) • Local government regulations

6. Red Light, Yellow Light, Green Light – Go? • Anti-Deficiency Act (ADA) – 1870/1884, 1982 (Red Book) • Budget and Accounting Act (BAA) – 1921 (Yellow Book) • Federal Managers Financial Integrity Act (FMFIA) – 1982 (Green Book)

7. GAO Red Book and OMB Circular A-11 • Anti-Deficiency Act prohibits federal employees from: • Making or authorizing an expenditure from, or creating or authorizing an obligation under, any appropriation or fund in excess of the amount available in the appropriation or fund unless authorized by law. • Involving the government in any obligation to pay money before funds have been appropriated for that purpose, unless otherwise allowed by law. • Accepting voluntary services for the United States, or employing personal services not authorized by law, except in cases of emergency involving the safety of human life or the protection of property. • Making obligations or expenditures in excess of an apportionment or reapportionment, or in excess of the amount permitted by agency regulations.

8. GAO Red Book and OMB Circular A-11 • Remember: Purpose, Time, and Amount • Purpose – Purpose statute (31 U.S.C. § 1301) requires appropriated funds only be used for specific purposes and programs set forth by Congress in the Appropriation Act. • Red Book provides a 3-part test for purpose. • Time - Bona fide need (31 U.S.C. § 1502) – Appropriations made for a specific period of time are to only be used for expenses incurred during that period of time. • Amount of Appropriations • Congress generally takes two approaches in describing amounts under an appropriation; • Definite appropriation • Indefinite appropriation • Restrictive provisions

9. GAO Red Book and OMB Circular A-11 • OMB Circular No. A-11 Preparation, Submission and Execution of the Budget provides requirements for agencies to ensure agencies manage risk of ADA. • A-11, Appendix H provides requirements for agencies administrative funds control. • A-11 and A-123 collectively require agencies to manage the risk of ADA violations. Federal employees who violate the Antideficiency Act are subject to two types of sanctions, administrative and criminal. • Administrative • Letter of reprimand or censure for the official personnel record of the officer or employee; • Unsatisfactory performance rating; • Transfer to another position; • Suspension from duty without pay; and/or • Removal from office. • Criminal • The law provides that any officer or employee of the United States who knowingly and willfully violates the prohibitions shall be fines not more than $5,000, imprisoned for not more than two years, or both.

10. GAO Yellow Book and OMB Circular No. A-50 • The Budget and Accounting Act of 1921 established both the U.S. General Accounting Office (GAO) and the Office of Management and Budget (OMB). • GAO issues the General Accepted Government Auditing Standards (GAGAS) - the Yellow Book. • Provides the framework for conducting high-quality government audits with competence, integrity, objectivity, and independence. • OMB issued OMB Circular No. A-50 Audit Follow-up. • Provides executive agencies policies and procedures for dealing with OIG, GAO and other audit reports.

11. GAO Yellow Book and OMB Circular No. A-50 • The Yellow Book provides the standards for government audits, and audits of organizations receiving government funds. • General audit standards • Fieldwork standards (performance audits) • Reporting standards

12. GAO Yellow Book and OMB Circular No. A-50 • OMB issues OMB Circular No. A-50 Audit Follow-up. • Provides executive agencies policies and procedures for dealing with OIG, GAO and other audit reports. • Last updated in 1982. Stands the test of time. • Require prompt resolution and corrective actions on audit recommendations. Resolution shall be made within a maximum of six months after issuance of a final report or, in the case of audits performed by non-Federal auditors, six months after receipt of the report by the Federal Government. Corrective action should proceed as rapidly as possible.

13. GAO Green Book and OMB Circular No. A-123 • The Federal Managers Financial Integrity Act (FMFIA) requires the Government Accountability Office (GAO) to prescribe standards of internal control, more commonly known as the Green Book. These standards provide the internal control framework and criteria Federal managers should use in designing, implementing, and operating an effective system of internal control. • The FMFIA also requires the Office of Management and Budget (OMB), in consultation with GAO, to establish guidelines for the evaluation by agencies of their systems of internal control to determine FMFIA compliance. • OMB issues guidelines for Internal Control in OMB Circular No. A-123 Management’s Responsibility for Enterprise Risk Management and Internal Control to improve accountability in Federal programs and operations.

14. GAO Green Book and OMB Circular No. A-123 • Five Components • Seventeen Principals • Underlying Attributes

15. GAO Green Book and OMB Circular No. A-123 Green Book Components of Internal Control and Principles Components Principles • A-123 Implements Green Book Components and Principles • Entity Level Controls (ELCs) are controls that have a pervasive effect on an entity’s internal control system and pertain to multiple components. • Requires agencies to provide reasonable assurances over 5 components and 17 principles of internal controls in the annual assurance statement.

16. Wrap-up / Summary • Red Book, Yellow Book, and Green Book are critical components of a larger framework that provide for a transparent and accountable Federal Government focused on mission success. • Strict laws and regulations govern the proper use of resources. Refined and evolving standards provide for exceptional government oversight, and effective design, establishment, and maintenance of internal controls. • Result: objectives achieved.

17. Wrap-up / Summary

18. Questions? Please Contact Lal Harter, LHarter@tfcci.net Dan Kaneshiro, Daniel_S_Kaneshiro@omb.eop.gov