Internal Control Program, 36398-36401 [06-5646]

Agencies

• DEPARTMENT OF LABOR

[Federal Register Volume 71, Number 122 (Monday, June 26, 2006)]
[Notices]
[Pages 36398-36401]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-5646]



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Part II





Department of Labor





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Internal Control Program; Notice

Federal Register / Vol. 71, No. 122 / Monday, June 26, 2006 / 
Notices

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DEPARTMENT OF LABOR

[Secretary's Order 14-2006]


Internal Control Program

    1. Purpose. To delegate authority and assign responsibilities for 
the administrative and financial management of Department of Labor 
(DOL) programs, functions, and resources that ensure effective systems 
of internal control.
    2. Authorities and Directives Affected.
    A. Authorities. This Order is issued pursuant to Sections 2 and 4 
of the Federal Managers' Financial Integrity Act of 1982 (the FMFIA); 
OMB Circular A-123, Rev., ``Management's Responsibility for Internal 
Control'' (December 21, 2004); the Chief Financial Officers Act of 1990 
(the CFO Act); OMB Circular A-50, Rev., ``Audit Follow-up'' (September 
29, 1982); OMB Circular A-127, Rev., ``Financial Management Systems'' 
(December 1, 2004); the Federal Financial Management Improvement Act 
(the FFMIA); the Government Performance and Results Act of 1993 (the 
GPRA); the Reports Consolidation Act of 2000 (the RCA); Services 
Acquisition Reform Act of 2003; Chief Human Capital Officers Act of 
2002; Clinger-Cohen Act of 1996; 5 U.S.C. 301; 29 U.S.C. 551, et seq.; 
and Reorganization Plan No. 6 of 1950 (5 App. U.S.C.); Federal 
Information Security Management Act of 2002 (FISMA); OMB Circular A-
130, ``Management of Federal Information Resources''.
    B. Directives Affected. This Order supersedes and cancels 
Secretary's Order 2-89, ``Internal Control Program'' (January 17, 
1989).
    3. Policy. DOL agencies will maintain effective administrative, 
financial, and program performance reporting control systems for their 
programs, functions and resources to promote effectiveness and 
efficiency of operations and to prevent or minimize the occurrence of 
fraud, waste, abuse, and mismanagement. To this end, effective and 
efficient preventive measures, evaluation, documentation, and reporting 
will be used to provide both proactive and reactive means for 
administering Internal Control Systems within the Department.
    4. Background. Internal controls are tools to help managers achieve 
results and safeguard the integrity of their programs through 
organizational and procedural measures. The FMFIA requires heads of 
Federal agencies, including the Secretary, to establish systems of 
internal control. It further requires the Secretary to issue an annual 
statement to the President and the Congress, based on an evaluation 
conducted in accordance with OMB guidelines, which certifies whether 
the Department's system of internal accounting and administrative 
control complies with FMFIA and OMB Circular A-123.
    The GPRA, in conjunction with the RCA, requires Federal departments 
and agencies to develop and publish strategic and annual performance 
plans, to verify and validate the performance data reflected in annual 
performance budgets, to report to the President and to Congress on an 
annual basis on (a) the attainment of performance goals, and (b) the 
completeness and reliability of the data contained in DOL's annual 
Performance and Accountability Report required under the CFO Act.
    5. Objective. The objective of DOL's internal control program is to 
provide, on a continuing basis, a reasonable assurance that:
    A. Financial and other resources are safeguarded from unauthorized 
use or misappropriation;
    B. All transactions are executed in accordance with authorizations;
    C. All financial, non-financial, performance, statistical records, 
and related reports are reliable;
    D. Applicable laws, regulations and policies are followed; and
    E. Resources and programs are efficiently and effectively managed.
    6. Definitions.
    A. Documentation of Controls. The written policies and procedures, 
manuals, organization charts, memoranda, decision papers, assessment 
determinations, and related materials used to describe internal control 
methods and measures; communicate responsibilities and authorities for 
implementing such methods and measures; assess status or progress; and 
serve as a reference for review of existing internal controls and their 
functioning.
    B. Documentation of the Assessment Process. Recordation of the 
assessment team authority and members, communications with agency 
management and employees regarding the assessment; key decisions of the 
assessment team; the assessment methodology; the assessment of internal 
control; the testing of controls and related results; and identified 
deficiencies and suggestions for improvements.
    C. Financial Management System. The Financial Systems and the 
financial portions of Mixed Systems necessary to support financial 
management, including automated and manual processes, procedures, 
controls, data, hardware, software, and support personnel dedicated to 
the operation and maintenance of system functions.
    D. Financial System. An Information System, comprised of one or 
more applications, that is used for (a) collecting, processing, 
maintaining, transmitting, or reporting data about financial events; 
(b) supporting financial planning or budgeting activities; (c) 
accumulating and reporting costs information; or (d) supporting the 
preparation of financial statements.
    E. Fiscal Integrity. Financial policies, practices, and controls 
that ensure that all funds are spent and managed according to the 
goals, mission and objectives of the organization.
    F. Information System. The organized collection, processing, 
transmission, and dissemination of information in accordance with 
defined procedures, whether automated or manual.
    G. Internal Control Board (ICB). The DOL body responsible for 
monitoring and providing advice on the Department's internal controls 
as established in paragraph 7(I) below.
    H. Internal Control Principal (ICP). The official formally 
designated as responsible for identifying, documenting, testing, 
evaluating, monitoring, and reporting internal controls, as well as 
monitoring corrective actions, for a particular DOL system.
    I. Internal Control System. The plan of organization and all of the 
methods and measures adopted relative to the Department as a whole, or 
one or more of its component agencies, to document policies and 
procedures for safeguarding resources, ensure the accuracy and 
reliability of information, comply with applicable laws, regulations 
and policies, and promote operational economy and efficiency.
    J. Material Weakness. A specific instance of non-compliance with 
the FMFIA, which is of sufficient importance to be reported to the 
President and the Congress. A Material Weakness is one that would: 
Impair fulfillment of the agency mission; deprive the public of needed 
services; violate statutory or regulatory requirements; significantly 
weaken safeguards against waste, loss, unauthorized use or 
misappropriation of funds, property or other assets; or result in a 
conflict of interest. A Significant Deficiency found under FISMA must 
be reported as a Material Weakness under the FMFIA.
    K. Mixed System. An Information System that supports both financial 
and non-financial functions of the Federal Government or components 
thereof.

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    L. Non-Financial System. An Information System other than a 
Financial System or a Mixed System.
    M. Significant Deficiency. A weakness in the Department's overall 
information systems security or management control structure, or within 
one or more information systems, that significantly restricts the 
capability of the Department to carry out its mission or compromises 
the security of the Department's information, information systems, 
personnel, or other resources, operations, or assets where the risk is 
great enough that the Secretary and outside agencies must be notified 
and immediate or near-immediate corrective action must be taken.
    7. Delegation of Authority and Assignment of Responsibility.
    A. The Deputy Secretary shall:
    (1) Chair the ICB.
    (2) Ensure that all communications directed to the ICB are 
distributed to Members and, as appropriate, are provided to Associate 
Members.
    (3) Through the ICB, regularly and at least annually review and 
designate or re-designate, as appropriate, by published memorandum, the 
ICP of every Non-Financial System.
    (4) Periodically update by published memorandum the roster of ICB 
Associate Members.
    B. The Chief Financial Officer shall:
    (1) Exercise overall responsibility for the Department's compliance 
with FMFIA and for the Department's Fiscal Integrity.
    (2) Prepare the Secretary's annual FMFIA report to the President 
and the Congress from the individual reports submitted by DOL agency 
heads.
    (3) Provide DOL agencies with the guidance necessary for timely 
preparation of their quarterly and annual FMFIA and FFMIA compliance 
attestations, including the status of internal controls within the 
respective agency.
    (4) Ensure that appropriate internal controls are in place and 
operating effectively for financial management functions performed 
within and on behalf of the Department, including the quarterly 
financial management attestation process.
    (5) Provide assistance to agency heads in instituting sound, 
effective financial management internal control policies and procedures 
in their agencies, which include preventive as well as corrective 
measures.
    (6) Serve as a Member of the ICB.
    (7) Periodically advise the ICB on the status of financial 
management internal control activity within the Department.
    (8) Be responsible for regular evaluation of DOL financial 
management operations and coordinate with the appropriate agency heads 
to implement such controls, modifications and procedures as may be 
necessary for effective management and efficient functioning.
    (9) Serve as the ICP for Financial Systems and for those Mixed 
Systems that are significantly financial as designated by the Deputy 
Secretary.
    (10) For the functions listed in subparagraph 7(B)(4) above, be 
responsible for the identification, documentation, testing, evaluation, 
monitoring, and reporting of internal controls related to the financial 
systems and for those Mixed Systems that are significantly financial, 
and providing periodic briefings to the Members of the ICB, as listed 
in subparagraph 7(I)(1)(a), regarding the results of these activities.
    (11) Provide for Documentation of the Assessment Process in 
paragraph 7(B)(10) above.
    (12) Coordinate with the agency heads, ASAM, CIO, CAO, and CHCO 
where applicable to improve efficiency for all agency internal control 
reporting requirements.
    C. The Assistant Secretary for Administration and Management (ASAM) 
shall:
    (1) Ensure that appropriate internal controls are in place and 
operating effectively for performance management, property management, 
security and emergency management, and other business and 
administrative functions assigned to the ASAM performed within and on 
behalf of the Department.
    (2) Provide assistance to agency heads in instituting sound, 
effective internal control policies and procedures in their agencies 
for performance management, property management, security and emergency 
management, and other business and administrative functions assigned to 
the ASAM, including preventive as well as corrective measures.
    (3) Serve as a Member of the ICB.
    (4) Periodically advise the ICB on the status of internal control 
activity within the Department related to performance management, 
property management, security and emergency management, and other 
business and administrative functions assigned to the ASAM.
    (5) Be responsible for regular evaluation of DOL performance 
management, property management, security management, and other 
business and administrative functions assigned to the ASAM and 
coordinate with the appropriate agency heads to implement such 
controls, modifications, and procedures as may be necessary for 
effective management and efficient functioning.
    (6) As designated by the Deputy Secretary, serve as an ICP for 
certain Non-Financial Systems and for certain Mixed Systems that are 
significantly non-financial.
    (7) For the functions listed in subparagraph 7(C)(1) above, be 
responsible for the identification, documentation, testing, evaluation, 
monitoring, and reporting of internal controls related to the non-
financial portions of Mixed Systems and providing periodic attestations 
to the Members of the ICB, as listed in subparagraph 7(I)(1)(a), 
regarding the results of these activities.
    (8) Provide for Documentation of the Assessment Process in 
paragraph 7(C)(7) above.
    (9) Coordinate with the agency heads, CFO, CIO, CAO, and CHCO where 
applicable to improve efficiency for all agency internal control 
reporting requirements.
    D. The Chief Information Officer (CIO) shall:
    (1) Ensure that appropriate internal controls are in place and 
operating effectively for information resource management functions 
performed within and on behalf of the Department.
    (2) Provide assistance to agency heads in instituting sound, 
effective information resource management internal control policies and 
procedures in their agencies, which include preventive as well as 
corrective measures.
    (3) Serve as a member of the ICB.
    (4) Periodically advise the ICB on the status of information 
resource management internal control activity within the Department.
    (5) Be responsible for regular evaluation of DOL information 
resource management operations and coordinate with the appropriate 
agency heads to implement such controls, modifications and procedures 
as may be necessary for effective management and efficient functioning.
    (6) As designated by the Deputy Secretary, serve as an ICP for 
certain Non-Financial Systems and for certain Mixed Systems that are 
significantly non-financial.
    (7) For the functions listed in subparagraph 7(D)(1) above, be 
responsible for the identification, documentation, testing, evaluation, 
monitoring, and reporting of internal controls related to the non-
financial portions of Mixed Systems and providing periodic attestations 
to the Members of the ICB, as listed in subparagraph 7(I)(1)(a), 
regarding the results of these activities.

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    (8) Provide for Documentation of the Assessment Process in 
paragraph 7.D(7) above.
    (9) Coordinate with the agency heads, CFO, ASAM, CAO, and CHCO 
where applicable to improve efficiency for all agency internal control 
reporting requirements.
    E. The Chief Acquisition Officer (CAO) shall:
    (1) Ensure that appropriate internal controls are in place and 
operating effectively for acquisition, grants, and cooperative 
agreements management functions performed within and on behalf of the 
Department.
    (2) Provide assistance to agency heads in instituting sound, 
effective acquisition, grants, and cooperative agreements management 
internal control policies and procedures in their agencies, which 
include preventive as well as corrective measures.
    (3) Serve as a member of the ICB.
    (4) Periodically advise the ICB on the status of acquisition, 
grants, and cooperative agreements management internal control activity 
within the Department.
    (5) Be responsible for regular evaluation of DOL operations that 
relate to acquisition, grants, and cooperative agreements and 
coordinate with the appropriate agency heads to implement such 
controls, modifications and procedures as may be necessary for 
effective management and efficient functioning.
    (6) As designated by the Deputy Secretary, serve as an ICP for 
certain Non-Financial Systems and for certain Mixed Systems that are 
significantly non-financial.
    (7) For the functions listed in subparagraph 7(E)(1) above, be 
responsible for the identification, documentation, testing, evaluation, 
monitoring, and reporting of internal controls related to the non-
financial portions of Mixed Systems and providing periodic attestations 
to the Members of the ICB, as listed in subparagraph 7(I)(1)(a), 
regarding the results of these activities.
    (8) Provide for Documentation of the Assessment Process in 
paragraph 7(E)(7) above.
    (9) Coordinate with the agency heads, CFO, ASAM, CIO, and CHCO 
where applicable to improve efficiency for all agency internal control 
reporting requirements.
    F. The Chief Human Capital Officer (CHCO) shall:
    (1) Ensure that appropriate internal controls are in place and 
operating effectively for human capital management functions performed 
within and on behalf of the Department.
    (2) Provide assistance to agency heads in instituting sound, 
effective human capital management internal control policies and 
procedures in their agencies, which include preventive as well as 
corrective measures.
    (3) Serve as a member of the ICB.
    (4) Periodically advise the ICB on the status of human capital 
management internal control activity within the Department.
    (5) Be responsible for regular evaluation of DOL human capital 
operations and coordinate with the appropriate agency heads to 
implement such controls, modifications and procedures as may be 
necessary for effective management and efficient functioning.
    (6) As designated by the Deputy Secretary, serve as an ICP for 
certain Non-Financial Systems and for certain Mixed Systems that are 
significantly non-financial.
    (7) For the functions listed in subparagraph 7(F)(1) above, be 
responsible for the identification, documentation, testing, evaluation, 
monitoring, and reporting of internal controls related to the non-
financial portions of Mixed Systems and providing periodic attestations 
to the Members of the ICB, as listed in subparagraph 7(I)(1)(a), 
regarding the results of these activities.
    (8) Provide for Documentation of the Assessment Process in 
paragraph 7(F)(7) above.
    (9) Coordinate with the agency heads, CFO, ASAM, CIO, and CAO where 
applicable to improve efficiency for all agency internal control 
reporting requirements.
    G. DOL Agency Heads shall:
    (1) Ensure that appropriate internal controls are in place and 
operating effectively for their respective agencies.
    (2) Include in their agency's ongoing internal control program:
    (a) Regular risk assessments;
    (b) Reviews of high-risk components and activities;
    (c) Cooperation with the Government Accountability Office (GAO) and 
the DOL Office of the Inspector General (OIG) in the conduct of 
external reviews and audits of agency components, careful consideration 
of any findings and recommendations, and proper and timely follow-up on 
those recommendations;
    (d) Follow-through on corrective actions relative to internal 
control weaknesses in agency systems identified through agency or 
external reviews, assessments, or other evaluation efforts; and
    (e) Maintenance of Documentation and responsive reporting on agency 
internal control program activities.
    (3) Ensure that internal control responsibilities and results are 
included in performance standards and appraisals of appropriate agency 
managers.
    (4) Upon discovery, immediately report any significant Internal 
Control System breakdowns to the CFO and the ASAM, CIO, CAO or CHCO as 
relevant.
    (5) In conjunction with the ICB, institute internal agency 
procedures providing for the review of new program activities, proposed 
legislation and new or revised regulations, functions, or systems to 
ensure that adequate controls and safeguards are incorporated for 
increased efficiency and reduced risk.
    (6) Submit to the CFO quarterly and annual FMFIA and FFMIA 
compliance attestations for their respective agencies in accordance 
with guidance provided by the CFO, including the status of internal 
controls within their respective agencies.
    (7) Coordinate with the respective Internal Control Principal(s) 
where applicable to improve efficiency for all agency internal control 
reporting requirements.
    H. Internal Control Principals (ICP), for the systems for which 
that have been designated as such, shall:
    (1) Identify, document, test, evaluate, monitor, and report 
internal controls, as well as monitor corrective actions.
    (2) Periodically brief the ICB on the implementation of corrective 
actions related to Material Weaknesses, the execution of remediation 
plans, and the achievement of appropriate internal control deadlines.
    (3) Upon discovery, immediately report to the ICB all significant 
Internal Control System breakdowns.
    (4) In coordination with other ICPs, ICB Members, ICB Associate 
Members, and other officials, as appropriate, direct the performance of 
reviews of new and/or reorganized functions and systems in the 
Department and participate in, as appropriate, reviews of other new 
and/or reorganized functions and systems in the Department. These 
reviews are to ensure the incorporation of adequate safeguards in 
regulations and procedures for more efficient operations and reductions 
in risk.
    I. There is hereby established within the Department of Labor an 
Internal Control Board (ICB).
    (1) The ICB shall include:
    (a) The following Members:
    1. The Deputy Secretary, who shall serve as Chair of the ICB;
    2. The Chief Financial Officer;
    3. The Assistant Secretary for Administration and Management;

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    4. The Chief Information Officer, unless otherwise represented by 
another Member of the ICB;
    5. The Chief Acquisition Officer, unless otherwise represented by 
another Member of the ICB;
    6. The Chief Human Capital Officer, unless otherwise represented by 
another Member of the ICB; and
    7. The Solicitor of Labor, who shall serve as the Acting Chair of 
the ICB in the absence of the ICB Chair; and
    (b) Up to six agency heads who may be designated periodically by 
the ICB Chair as Associate Members.
    (2) The ICB shall have the following responsibilities:
    (a) Ensure DOL's ongoing commitment and leadership support to an 
appropriate system of internal control;
    (b) Monitor the progress of internal controls assessments 
throughout the Department that are conducted to achieve the objectives 
of reliable financial and non-financial reporting, effective and 
efficient operations, and compliance with applicable laws and 
regulations;
    (c) Advise the Secretary on the materiality of internal control 
weaknesses for purposes of the disclosures in the annual FMFIA report 
and the annual Performance and Accountability Report (PAR);
    (d) Monitor the implementation of corrective actions related to 
Material Weaknesses, the execution of remediation plans, and the 
achievement of appropriate internal control deadlines;
    (e) Request briefings, as appropriate, from agency heads and 
program officials regarding aspects of the internal control program 
including the implementation of corrective actions;
    (f) Advise agency heads when greater commitment, including 
application of more resources, is recommended in order to resolve and 
eliminate internal control weaknesses;
    (g) Promote the dissemination throughout the Department of best 
practices and lessons learned through the internal control assessment 
process; and
    (h) Meet quarterly, or at the direction of the Chairperson. 
Meetings shall be convened by the Chairperson with sufficient advance 
notice to promote full member preparation and participation.
    J. The Inspector General shall:
    (1) Serve as an advisor to the Department's ICB.
    (2) Monitor implementation of the FMFIA in DOL; ensure the quality 
and consistency of reviews; and provide technical assistance in agency 
evaluation and review processes.
    (3) Provide input to the design or redesign of activities and 
systems for increased control, effectiveness and efficiency for DOL 
management consideration.
    (4) Review the Secretary's FMFIA annual reports to ensure the 
inclusion and appropriate treatment of known significant findings. If 
the Inspector General does not concur with the Secretary's Annual 
report, a separate report may be submitted to the President and 
Congress by the OIG.
    K. The Solicitor of Labor is delegated authority and assigned 
responsibility for:
    (1) Providing legal advice and assistance to all officials of the 
Department relating to the authorities of this Order.
    (2) Serving as a Member of the ICB.
    (3) Serving as the Acting Chair of the ICB in the absence of the 
ICB Chair.
    8. Reservations of Authority.
    A. The submission of reports and recommendations to the President 
and Congress concerning the administration of statutory or 
administrative provisions is reserved to the Secretary.
    B. Except to the extent stated in this Order, this Secretary's 
Order does not affect the authorities and responsibilities of the 
Inspector General under the Inspector General Act of 1978, as amended, 
or Secretary's Order 04-2006 (February 21, 2006).
    C. This Order does not affect any authorities and responsibilities 
of the Chief Financial Officer under the Chief Financial Officers Act 
of 1990, any other Federal law or regulation, or any Office of 
Management and Budget, Government Accountability Office, or U.S. 
Department of the Treasury policies and publications governing the 
fiscal responsibilities of Federal departments and agencies.
    9. Effective Date. This Order is effective immediately.

    Dated: June 20, 2006.
Elaine L. Chao,
Secretary of Labor.
[FR Doc. 06-5646 Filed 6-23-06; 8:45 am]
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