Statement of Assurance (SoA) Terms
(per DoDI 5010.40, Managers’ Internal Control (MIC) Program Procedures)
Assessable Unit
An organizational subdivision of a DoD Component that must comply with the MIC Program. Note that Components:
- Must segment into organizational assessable units
- All parts of the DoD Component must be covered
- Must maintain a current inventory of its assessable units
Control Deficiency
The design or operation of a control that does not allow the organization to prevent or detect misstatements on a timely basis or to accomplish the mission objectives.
Financial Statement Reporting Entity (FSRE)
An entity assigned by either the Office of Management and Budget (OMB) or the DoD to produce and provide to OUSD(Comptroller) stand alone, financial statements, both quarterly and annual.
Internal Controls
The organization, policies, and procedures that help program and financial managers achieve results and safeguard the integrity of their programs.
Internal Control Assessment
A documented evaluation on the effectiveness and adequacy of the system [of internal controls] to meet the mission objectives, implemented in a cost effective way.
Internal Control Assessment (Overall)
An assessment of the internal control effectiveness for the functions under the Federal Manager’ Financial Integrity Act (FMFIA). The overall process includes all programs, activities, and operational areas [i.e., the Internal Control Reporting Categories defined in DoDI 5010.40].
Internal Control Assessment (ICA) Internal Control Over Financial Reporting (ICOFR)
An assessment of the effectiveness of internal controls over financial reporting which closely follows the guidance in Appendix A of OMB Circular A-123 and MIC Program Annual Guidance provided by OUSD(Comptroller).
Material Weakness (Overall)
A reportable condition that is significant enough to report to the next higher level. It is management’s judgment as to whether a weakness is deemed material.
Material Weakness (ICOFR)
A reportable condition (or combination of reportable conditions) that results in more than a remote likelihood that a material misstatement of the financial statements, or the other significant financial reports, will not be prevented or detected. The determination is a management’s judgment as to whether a weakness is material.
Reasonable Assurance
An informed judgment by management as to the overall adequacy and effectiveness of internal controls based upon available information that the systems of internal controls are operating as intended.
There are three possible assurance statements:
- An unqualified statement of assurance is reasonable assurance with no material weaknesses reported. Each unqualified SoA shall provide a firm basis for that position, which the PSA or Principal Deputy (the Director or Deputy Director for DoD Field Activities) will summarize in the cover memorandum. Tab A contains a more extensive explanation of how the assessment helped justify the reporting entity’s assertion of an unqualified statement.
- A qualified statement of assurance is reasonable assurance with the exception of one or more material weakness(es) noted. The cover memorandum must cite the material weaknesses in internal management controls that preclude an unqualified statement. Tab B fully describes all weaknesses, the corrective actions being taken, and by whom, and the projected dates of correction for each action.
- A statement of no assurance is no reasonable assurance because no assessments were conducted or the noted material weaknesses are pervasive. The reporting entity shall provide an extensive rationale for this position.
Reportable Condition (Overall)
A control deficiency (or combination of deficiencies) that in management’s judgment, should be communicated because they represent significant weaknesses in the design or operation of internal controls that could adversely affect the organization’s ability to meet its internal control objectives.
Reportable Condition (ICOFR)
A control deficiency (or combination of deficiencies) that adversely affects the entity’s ability to initiate, authorize, record, process or report external financial data reliably according to generally accepted principles such that there is more than a remote likelihood that a misstatement of the entity’s financial statements, or other significant financial reports, is more than inconsequential will not be prevented or detected.
Risk
The possibility an event will adversely effect the achievement of internal control objectives and result in the loss of Government resources or cause an agency to fail to accomplish significant mission objectives through fraud, error, or mismanagement.
Systemic Weakness
A weakness that materially affects internal controls across organizational and program lines, and usually affects more than one DoD Component.
Note: A systemic weakness is determined by the PSA with functional responsibility for the area in question.