Financial Systems Capability Requirements for Federal Agencies – Internal Controls

All federal financial management systems shall include a sub-system of internal controls that ensure that resource use is consistent with laws, regulations, and policies.  This shall also ensure that resources are safeguarded against waste, loss, and misuse; and reliable data are obtained, maintained, and disclosed quarterly and annually. (Office of Management and Budget, Circular 127 par. 7).  This is a strong regulatory sub-system requirement from the OMB.  The OMB’s fundamental mission is to assist the President of the United States in overseeing the preparation of the federal budget and to supervise its administration in the Executive Branch agencies. 

This researcher operates on a daily basis a federal government financial management system called Hyperion Financial Management System, version 9.   This is a comprehensive, Web-based financial system that delivers global collection reporting and analysis in a single, highly scalable financial management solution.  (Hyperion User Guide).  This financial system also utilizes today's most advanced technology to process and report financial data in real time.  The primary benefits of this main system include: first, accelerates reporting cycles, second, improves confidence and compliance, third, performs strategic analysis, and finally, easily integrates into other systems and sub-systems. (Hyperion Enterprise User Guide).  What are the sub-systems and the complexities within the Hyperion Financial Management System?

First, the Budget Reporting Sub-system.  The OMB requires that all Hyperion Financial Management System across the twenty four CFO agencies within the federal government shall have a system called ‘Budget Reporting’ that should enable federal agencies to prepare, execute and report on the agency’s budget in accordance with established requirements.  Each and every federal agency has an annual budget appropriated by Congress to be used for the operation and management of the agency.  Each agency is required to report the execution of these budgeted dollars in their quarterly and annual financial statements.

Second, Computer Security Sub-system.  All the twenty federal CFO agencies are required to plan and incorporate a security control sub-system into their core financial system in accordance with the Federal Computer Security Act of 1987 because of the proprietary financial information in the core system.  It is very difficult and complex to incorporate this sub-system because, hackers and unauthorized users always find ways and means to have access to this proprietary financial information.  Incorporating this sub-system into the core system in order to restrict access to unauthorized users has been difficult. (OMB Circular 127, par. 7h).

Third, Internal Control Sub-system.  Internal control sub-system is another complex and difficult sub-system within the core system.  This control mechanism is applied to all system inputs, processing, and out puts.  This is an internal management control sub-system structure that should be incorporated or integrated to prevent abuse, and misuse of public funds by employees.

Finally, financial management reporting and performance measures sub-systems are other important sub-systems that must be integrated into the core system in order to make it a whole.  All federal financial systems must have a sub-system to measure program performance, financial performance, as well as financial statement presentations on a quarterly and annual basis.  As stewards of public assets and heritage resources, all federal agencies must make their quarterly and annual financial statements public; and these are the sub-systems that management uses to meet this reporting requirement.

In conclusion, a system is simply defined as an integration of elements that are designed to achieve a set goal.  A system has a different meaning to every person in different career field; however, irrespective of one’s career field, a system should be designed to achieve an objective.  These systems and sub-systems are interrelated in multiple ways to make the main system whole.  No system will function successfully without a sub-system.  The sub-systems play an integral role in processing and integrating the final output for decision making.  Various sub-systems have been evaluated within the core financial system of federal agencies.  These sub-systems include: the budget reporting sub-system, the computer security sub-system and the internal control sub-system.

References

OMB Circular 127 (1993).  Financial Management Systems.