The Office of Management and Budget actually canceled a financial management circular earlier this month.

Circular A-127 no longer governs agency financial management systems. Instead, OMB rolled a small set of these old requirements into the new Appendix D of Circular A- 123 back in September.

OMB said Appendix D went into effect Oct. 1 and therefore rescinded all previously issued versions of Circular A-127 from Dec. 19, 1984; July 23, 1993; June 10, 1999; Dec. 1, 2004; and Jan. 9, 2009.

Norman Dong, the acting controller at OMB, said the goal of the rescission of A- 127 and the new Appendix D is to improve the quality, utility and the reliability of federal financial information.

“If you look specifically at what we rolled out in Appendix D and compare it to what we had in Circular A-127, you will see some sharp differences. A-127 was very perspective on what agencies could buy, how they bought it and it actually conflicted with other guidance within OMB on shared services,” he said in an exclusive interview with Federal News Radio. “This new guidance replaces a check- the-box compliance approach where there were over 500 specific technical requirements with more of an outcome-based approach focusing on financial management, business and information needs.”

The new guidance features only 70 requirements that OMB hopes will drive agencies toward outcomes such as reporting timely financial data or eliminating waste, fraud and abuse.

“The nature of the requirements is shifting. We are moving away from the highly specific, narrow technical requirements that really aren’t appropriate for governmentwide guidance,” he said. “We are focusing more broadly on financial management objectives and outcomes.”

Less prescriptive requirements

Dong said one good example of the change is A-127 required a GUI interface and error message customization where it defined exactly what the pop-up should say.

“In terms of governmentwide policy and guidance, I don’t think we want to get into that level of detail and prescription, but instead focus on the broader outcomes whether it’s timely, accurate and reliable financial information or preventing waste, fraud or abuse,” he said. “Those are the things we should keep our eye on.”

Dong said Appendix D now focuses on ways agencies can gauge how well they are in meeting the requirements of the Federal Financial Management Improvement Act (FFMIA), such as the number of and nature of material weaknesses and audit opinion from the inspector general or third party analysis. Formerly A-127, and now Appendix D, help agencies implement FFMIA.

Another major change with Appendix D is the focus on shared services. OMB has strongly encouraged agencies to move to federal shared service providers for financial management when appropriate, but some of the requirements under A-123 made it more difficult.

“Appendix D removes unnecessary financial system requirements that drive complexity and cost, and it focuses on requirements that emphasize the government’s business and information needs,” Dong said. “It comes back to the whole principle of focusing less on the how, and focusing more on the what, and focusing more on the objectives and outcomes we are trying to achieve in financial management. If you look at the shared services model in the financial management community, it very much is focused on what needs to be achieved as opposed to how we do business.”

Dong said one example of this change in approach to financial management happened when a service provider and customer agency initially had discussions about hosting the system and identified more than 700 gaps between how the customer and provider were doing business. But, he said, when they shifted the conversation away from how they were doing business and focused on what needs to be achieved, the number of differences dropped dramatically.

Time has come for an update

OMB eventually will fold Appendix D into the rewrite of Circular A-123, governing the internal controls of agency financial management.

Dong said the goal is to rationalize and harmonize OMB’s guidance on federal financial management. He said it’s important to make sure the requirements are reasonable and rationale.

“It’s very similar to the work we are doing with grant circulars, where you have eight circulars and have accumulated requirements over time,” Dong said.

OMB announced in February it would lead an effort to do the first major grants policy rewrite in years.

Dong said OMB will release the A-123 update in the coming months. He said OMB is conferring with agencies on a number of different aspects of the rewrite, including the improper payments requirements.

In addition to the A-123 update, OMB released a new bulletin on Oct. 21, giving agencies an updated set of minimum standards for their financial audits.

OMB made 26 changes to the 67-page document around areas such as reporting, written representation from management and the scope of the audit.

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