In September 2014, the US Government Accountability Office (GAO) issued a revision of the Standards for Internal Control in the Federal Government (also known as the Green Book). The Green Book defines the standards and provides a framework for federal agencies to establish and maintain an effective internal control system. The GAO last revised the Green Book in 1999.
In 2014, the GAO revised the Green Book to leverage recent changes the Committee of Sponsoring Organizations of the Treadway Commission (COSO) made to its internal control framework. The revised Green Book retains the five components of internal control that were in the original COSO framework and adapts the seventeen principles that COSO added in 2013 to the government environment.
The revised Green Book defines internal control as “a process effected by an entity’s oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved.” The objectives and related risks are often broadly classified as operations, reporting, and compliance. An internal control system is a continuous built-in component of operations, effected by people, that provides reasonable assurance that an entity will achieve its objectives. While staff make the internal control system work, the management team is ultimately responsible for an effective internal control system as management defines the entity’s objectives, implements controls, and evaluates the internal control system.
The Green Book provides criteria for designing, implementing, and operating an effective internal control system and explains why the components and principles are integral to an entity’s internal control system. The Green Book clarifies internal control from day-to-day activities, helping clarify what processes management should consider part of an internal control system.
Even though the Green Book was written for the Federal Government, and is only required for the Federal Government, public sector specialists at Baker Tilly have found the framework to be a useful reference for state and local governments, quasi-government entities, and not-for-profit organizations when designing internal control systems.
For more information on this topic, or to learn how Baker Tilly state and local government specialists can help, contact our team.