Risk Management Through the Financial Lens
Traditionally, internal controls and risk in government have been synonymous with financial concepts such as materiality, accuracy of accounting data and financial statement misstatement. For more than a decade, it has been ingrained within federal, state and local government agencies that the office of the chief financial officer (OCFO), and typically only the OCFO, is responsible for assessing internal controls and risk management.
This financial focus has created a perception (and in some instances a reality) in government that non-OCFO personnel are exempt from playing a key role in the internal controls and associated risk management activities that help safeguard government programs. This perception is reinforced by federal laws and regulations. Both the Sarbanes-Oxley Act of 2002, which protected shareholders and the general public from accounting errors and fraudulent practices, and the 2004 revision to the Office of Management and Budget (OMB) Circular A-123, Management’s Responsibility for Internal Control, Appendix A, Internal Control over Financial Reporting, placed increased emphasis in financial controls over a more holistic enterprise risk management (ERM) approach in order to increase public confidence and transparency in financial management practices and safeguards. So, how can we move forward from this misconception?
Read the full article on Creating an Integrated Risk Management Approach
This article originally appeared in the Winter edition of the Journal of Government Financial Management produced by the Association of Government Accountants (AGA).