OMB A-123 Compliance: Lessons Learned from BRAC

Is your agency on track to meet the June 30 milestone for reporting on internal financial controls, as required by the Office of Management and Budget Circular A-123 (OMB A-123)? Many of these financial control requirements may be met by adapting a methodology already used in the Department of Defense to comply with financial tracking provisions related to programs such as Base Realignment and Closure (BRAC).

OMB A-123 tasks federal managers with improving the accountability and effectiveness of Federal programs and operations through enhanced, documented management controls.

The circular requires establishment of policies and procedures regarding program results; use of resources to support agency missions; safeguards from waste, fraud, and mismanagement; and collection and maintenance of reliable and timely data for decision-making.

Federal agencies complying with OMB A-123 have until June 30 to submit a management assurance statement explaining their internal financial controls, and how those controls are documented to ensure their effectiveness. The management assurance statement will accompany each agency’s fiscal 2006 financial report.

The similarities between the OMB A-123 management assurance statement and BRAC financial tracking systems become more apparent when viewed from the perspective of real property asset management.

Real property asset management – which includes program tracking application development – has already been built into financial management policies and procedures used in the Department of Defense. Now a key initiative of the President’s Management Agenda for executive agencies, real property asset management follows a four-phase methodology to ensure best results:

• Capacity Analysis: Inventory available assets; determine accuracy of data; analyze capacity in terms of operational functionality
• Mission Value Analysis: Determine how attributes of inventory support overall mission execution
• Scenario Analysis: Apply "what-if" scenarios to aspects of capacity with true mission value; analysis of how scenarios affect capability to accomplish objectives
• Execution: Implement plan; conduct impact analysis; create audit trail of previous activity; track activity against new or changing requirements

Following this methodology, a custom database application developed for the U.S. Army dramatically improved that service’s financial performance in previous rounds of BRAC.

Databases developed for the Army enabled that branch of military service to report on fund distribution and account balances, checked against records of the Defense Finance and Accounting Center. This was particularly important for proper use of funds obligated for the Base Realignment and Closure (BRAC). For the BRAC program alone, the money set aside by military construction committees averaged between $100 and $400 million per year, totaling some $1 billion across five years of a single BRAC implementation.

The Army’s internal goal was to have approximately 95 percent of each year’s BRAC money obligated after the first year. With the assistance of their new financial tracking system, the service realized an obligation rate that soon exceeded 98 percent.

Whether complying with the financial reporting requirements of Executive Order 13327, or OMB Circular A-123, federal financial systems that address converging regulations and legislation must take into account the impact of real property. Without that understanding, it is unfortunately likely that an organizations’ financial management system may be vulnerable to waste, fraud or mismanagement

Fortunately, the work called for in new initiatives affecting civilian agencies has already been vetted to some extent by the military. With the proper application of a four-phase real property asset management methodology, comparable civilian financial reporting requirements can likewise be met with positive results.