What Comes Next
?"> At Parson Consulting, a Chicago consultancy that helps large enterprises grapple with SarbOx, Corporate Governance Director Anne Marchetti said she suspects that most government officials have largely ignored SarbOxs challenges since they didnt have to comply with SarbOx. Now, A-123 essentially means that they do. Marchetti said that Parson does not currently have any government agencies as clients, but she expects "there will be some sort of mad scramble" by government agencies in the coming months now that fiscal 2006 is upon the company. Jim Taylor, deputy chief financial officer of the U.S. Department of Commerce, in Washington, said he does not expect the chaos that some skeptics foresee. He noted that SarbOx caught many businesses unprepared because it was the first law to address internal controls. The public sector, meanwhile, has had regulatory processes and inspectors general poring over government ledgers for decades. (Circular A-123 was adopted in 1982 and has since been amended several times.)"Weve had a whole history of internal-controls oversight that the private sector has never experienced," Taylor said. "Its a totally different environment."The Office of Management and Budget, also in Washington, which is ultimately responsible for the nations bookkeeping, has also tried to make the chore easier for its agencies. Since it released the new A-123 standards last December, the OMB has worked with the U.S. Chief Financial Officers Council (representing more than two dozen government departments and agencies; Taylor is a member) to provide better guidance on what controls must be documented and to avoid the improvisation that marked so much of SarbOx compliance last year. Still, Taylor and his colleagues may face difficult times. Foremost, A-123 compliance will cost money that most agencies struggling with tight budgets cannot spare. Farrar, for example, said she expects to spend 2 to 3 percent of her total funding on compliance. That amount is in step with private-sector costs, but it will also come from cash that Taylor said her organization would have otherwise slotted to help AIDS victims. Public companies are spending much more than originally anticipated to comply with Section 404 of the Sarbanes-Oxley Act. Click here to read more. And will compliance projects include new IT tools that have cropped up in the last three years? Its possible, but few compliance experts seem to believe that will happen any time soon. Deloach said that rather than use A-123 as an opportunity to improve operations, most government managers will merely see it as a compliance obligation and stick with only minor improvements in IT environments they already use. Another crucial issue will be manpower. The expectation is that government agencies will tap outside auditors and consultants for help, as corporate America did last year. But many businesses are already competing for outside help today, and there is a limited number of consultants to go around. "Were going to have manpower issues. There already are manpower issues," warned Walter Gelnovatch, a former auditor with the Office of the Comptroller of the Currency and now managing partner of Berenfeld, Spritzer, Shechter & Sheer, an accounting firm in Miami. "Theres a real shortage of qualified people, and its a problem." Taylor said that the project "is going to require prioritization, and, in the current environment [that is, the Bush administrations desire to suppress domestic spending in the face of high budget deficits], its very unlikely there will be new funding for this sort of thing." Still, despite all the headaches that many government agencies are poised to experience, some auditors believe that the ultimate goal is worthwhile. "Were talking about the accountability of funds when there really had not been good accountability," Farrar said. "Even though Sarbanes has been a headache for a lot of companies, I think its one of the greatest things that ever happened." Matt Kelly is a freelance writer based in Somerville, Mass. He can be reached at firstname.lastname@example.org. Check out eWEEK.coms for the latest news, commentary and analysis on regulatory compliance.