OMB adds improper payments guidance to A-123

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The Office of Management and Budget has consolidated and incorporated previous and newly updated guidance on reducing improper payments into its Circular A-123 on internal controls for financial reporting.

The Office of Management and Budget has consolidated and incorporated previous and newly updated guidance on reducing improper payments into its Circular A-123 on internal controls for financial reporting.

Internal controls are processes to measure the effectiveness and efficiency of operations, liability in financial reporting and compliance with regulations.

OMB clarified and revised guidance related to the Improper Payments Information Act, which governs agencies' improper payments programs.

It is effective immediately for agencies to use and for the year-end fiscal 2006 Performance and Accountability Report, said OMB director Rob Portman in a memo released yesterday.

'In addition, OMB has been routinely working with agencies in clarifying this guidance to best reflect current policy and legislative intent,' he said.

Among the revisions, OMB clarifies the definition of improper payments, updates reporting requirements for certain low-risk programs and lists best practices for preventing, detecting and recovering improper payments.

The government considers payments improper if they are transacted without proper documentation, are sent to the wrong recipient, are made for the incorrect amount or used in an improper manner.

Circular A-123 is similar to management compliance requirements for private corporations under the Sarbanes-Oxley Act, passed in the wake of corporate fraud scandals at Enron and WorldCom.

Under Circular A-123, agencies must document and ensure the effectiveness of internal controls in a management assurance statement that was submitted to OMB in June. The management assurance statement, which will accompany each agency's year-end financial report, will detail major weaknesses and corrective actions to address them.

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