As a Legislative Branch agency, AOC is not subject to the requirements of FMFIA. AOC nonetheless considers internal control to be an integral part of the systems and processes it uses to manage its daily operations in support of its strategic goals and objectives. AOC holds its managers accountable for efficiently and effectively performing their duties in compliance with applicable laws and regulations and for maintaining the integrity of their activities through the use of internal control.


Within AOC, the AOC Chief Financial Officer (CFO) is responsible for the operation of the Internal Control Program. An Internal Control Manager assists the CFO design, implement, monitor and modify an organization-wide program that follows the principles of OMB Circular No. A-123, Management’s Responsibility for Internal Control. Key processes in the program include performing a preliminary risk assessment, addressing material weaknesses and significant deficiencies and implementing corrective actions. The program sets forth a customized Internal Control Program for managers to assist in monitoring and assessing controls within their specific areas of responsibility.


AOC’s organizational structure for internal control oversight includes two oversight committees. The Senior Management Council (SMC) is long-term oriented and forward-thinking about internal control, risk management and missed strategic opportunities. This body is primarily concerned with agency-level exposure to external risks arising from changes in legislation, security concerns and acts of nature.


At the same time, the Senior Advisory Team (SAT) assists the SMC in fulfilling AOC’s fiduciary responsibilities by overseeing the daily operations of internal controls. The SAT’s management plan addresses risk concerns that are assigned by the SMC and is also responsible for ensuring compliance with legal and regulatory matters that may have an operational or financial impact; providing advisory recommendations to the SMC to improve AOC’s business and financial processes; ensuring the integrity of AOC’s financial statements; and managing remediation plans to their conclusion.


In FY 2014, AOC leveraged prior year efforts and continued developing a comprehensive risk-based Internal Control Program across the organization. Key efforts included beginning the re-write of internal control policy, updating internal control documentation, creating a procedure implementation manual, and developing a training syllabus to frame a management training program.


Based on the results of its Internal Control Program, for FY 2014, AOC provides reasonable assurance that the current internal control designs effectively mitigate existing risks (see the Architect’s annual FMFIA Statement of Qualified Assurance on the following page).


Although AOC has made good progress, more work remains to be done. Efforts are underway to strengthen and expand the program to ensure controls are integrated and that standardized procedures for monitoring and testing are in place. Furthermore, AOC continues to study the benefits of pairing the Internal Control Program with a comprehensive risk management program. The risk management program will include an analysis of internal and external risks throughout the organization and will cover all activities and processes that contribute to fulfilling AOC’s mission, goals and objectives. This is a long-term effort and will be researched in tandem with the Internal Control Program to avoid redundancies.


A summary of the management assurances is provided in Section IV: Other Information. For additional information on the opportunities and challenges facing AOC in the internal control area, refer to “The AOC Inspector General’s Statement of Management Opportunities and Performances Challenges,” also located in Section IV of this report.


Summary of Material Weaknesses and Significant Deficiencies 


At the close of FY 2014, AOC had no material weakness and three significant deficiencies. The complete text of the independent auditors’ reports are included in Section III: Financial Information.


Material Weaknesses Summary A material weakness is defined as a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. In FY 2014, for the second consecutive year, AOC did not have any material weaknesses resulting from its annual audit.


Significant Deficiencies Summary


A significant deficiency is defined as a deficiency or combination of deficiencies, in internal control that is less severe than a material weakness yet important enough to merit attention by those charged with governance. This year, AOC had three significant deficiencies related to: ineffective control over accounting for the Fairchild Building lease renewal; untimely contract closeouts and liquidation of obligations; and improper recording of costs associated with leasehold improvements in the Thomas P. O’Neill, Jr. Federal Building. Management has identified steps to strengthen its processes and controls and address these audit issues.

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