Internal Control Reporting Requirements

Encl. (4) to COMDTINST 5700.10

INTERNAL CONTROL REPORTING REQUIREMENTS

A. Annual Assurance Statements. The assurance statements and information related to Section 2,

Section 4, and internal control over financial reporting should be provided in a single FMFIA report

section of the annual PAR labeled "Management Assurances." The section should include the annual

assurance statements, summary of material weaknesses and non-conformances, and summary of

corrective action plans. Management's assurance statement relating to internal control over financial

reporting and any related material weaknesses and corrective actions shall be separately identified.

B. Reporting Pursuant to Section 2. 31 U.S.C. 3512(d) (2) (commonly referred to as

Section 2 of the FMFIA) requires that annually the head of each executive agency submit to the

President and the Congress (i) a statement on whether there is reasonable assurance that the agency's

controls are achieving their intended objectives; and (ii) a report on material weaknesses in the agency's

controls.

Statement of Assurance. The statement of assurance represents the agency head's informed

judgment as to the overall adequacy and effectiveness of internal control within the agency. The

statement must take one of the following forms:

o Unqualified statement of assurance (no material weaknesses reported);

o Qualified statement of assurance, considering the exceptions explicitly noted (one or more

material weaknesses reported); or

o Statement of no assurance (no processes in place or pervasive material weaknesses).

In deciding on the type of assurance to provide, the agency head should consider information from the

sources described in Section III of OMB Circular A-123, with input from senior program and

administrative officials and the IG. The agency head must describe the analytical basis for the type of

assurance being provided, and the extent to which agency activities were assessed. Management is

precluded from concluding that the agency's internal control is effective (unqualified statement of

assurance) if there are one or more material weaknesses. The statement of assurance must be signed by

the agency head.

Statement of Assurance for Internal Control over Financial Reporting.

Management is required to provide a separate assurance over the effectiveness of the internal controls

over financial reporting. This assurance is a subset of the overall Statement of Assurance and is based on

the results of management's assessment conducted in accordance with the requirements in Appendix A

of OMB Circular A-123.

Reporting Pursuant to Section 4. 31 U.S.C. 3512(d) (2) (B) (commonly referred to as Section 4 of

the FMFIA) requires an annual statement on whether the agency's financial management systems

conform to government-wide requirements. These financial systems requirements are mandated by the

FFMIA and OMB Circular No. A-127, Financial Management Systems, section 7. If the agency's

systems do not substantially conform to financial systems requirements, the statement must list the

nonconformance and discuss the agency's plans for bringing its systems into substantial compliance.

Financial management systems include both financial and financially related (or mixed) systems.