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Sarbanes-Oxley (SOX). Agenda. What is Sarbanes-Oxley? What does SOX mean for the Postal Service? Communications and Training Timeline Financial Support & Control Activities. Paul Sarbanes. Michael Oxley. What is Sarbanes-Oxley?.

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agenda
Agenda
  • What is Sarbanes-Oxley?
  • What does SOX mean for the Postal Service?
  • Communications and Training
  • Timeline
  • Financial Support & Control Activities
what is sarbanes oxley

Paul Sarbanes

Michael Oxley

What is Sarbanes-Oxley?
  • The Sarbanes-Oxley (SOX) Act of 2002 was enacted as a result of a series of large corporate financial scandals.
  • It is administered by the SEC.
  • It is intended to:
    • Improve confidence in financial reporting through increased corporate governance.
    • Reduce fraudulent practices and accounting inconsistencies.
what does sox mean for the postal service
What does SOX mean for the Postal Service?

As a result of the Postal Accountability and Enhancement Act of 2006:

  • We must begin quarterly certifications

in February 2008.

  • We must comply with Section 404 of

SOX by 2010.

  • Management must:
    • State its responsibility for establishing and maintaining an adequate internal control structure for financial reporting.
    • Make an assertion on the effectiveness of the internal control structure with regard to financial reporting.
    • Provide annual certifications for fiscal year 2010 and beyond.
what sox is and is not about
SOX is about:

Good business practices

Accountability and ownership

Effective execution of controls

Timely, accurate and authorized

SOX is not about:

Waiting time in line at a post office

Carriers still on the street at 1900

Productivity targets in mail processing

What SOX is and is not about…
sox speak
SOX “Speak”
  • Process – One or more business activities, normally end-to-end from transaction origination to recording a financial activity.

Examples:

      • Payroll Process
      • 1412 Process
      • Retail Floor Stock Process
      • Credit Card Purchasing Process
      • Employee Hiring Process
sox speak1
SOX “Speak”
  • Controls – Procedures performed within processes that add a level of assurance that the process objective is being achieved.

For instance:

      • Authorizations of transactions
      • Authorizations of activities
      • Physical control over assets
steps necessary for compliance
Documentation

Define processes and systems that impact financial reporting

Identify key controls

Identify risks

Testing

Test key controls for effectiveness

Remediate failures and retest

Steps Necessary for Compliance
steps necessary for compliance1
Steps Necessary for Compliance
  • Reporting
    • Management Certification
      • Management certifies effectiveness of internal controls
    • External Auditor Validation
      • External Auditor tests key controls
      • External Auditor certifies effectiveness of internal controls
our objectives
Our Objectives
  • Through the implementation of SOX:
    • Provide consistent documentation of our processes and systems.
    • Increase accountability and ownership of controls.
  • Receive external auditor certification quarterly and annually, as required, for FY 2010 and beyond.
our mission
Our Mission

Strengthen our business practices to thrivein a competitive environment

our vision
Our Vision

Strategic Transformation beyond compliance

Value

Transform

“Leverage Compliance for Better Performance”

Improve

“Optimize and Sustain”

Maturity Continuum

Comply

“Penalty Avoidance”

Cost

Stakeholder Value

benefits
Benefits
  • Reinforces public trust in our financial reporting
  • Standardization and streamlining of processes and systems
  • Increased accountability and ownership of controls
  • Consistent documentation of processes and systems
sox impact on the field

Financial Accountability Examples Present Today

  • Limit access to the unit cash reserve
  • Close credits
  • Remit all funds from retail operations
  • Secure cash/stamp drawers
  • Monitor or reconcile master trust account balances
  • Properly follow close out procedures
  • Properly prepare bank deposits
  • Verify disbursement transactions are supported
  • Ensure Voyager transactions are supported with receipts
  • Ensure SmartPay (IMPAC) transactions are supported with receipts

Financial Accountability Examples with SOX

  • Limit access to the unit cash reserve
  • Close credits
  • Remit all funds from retail operations
  • Secure cash/stamp drawers
  • Monitor or reconcile master trust account balances
  • Properly follow close out procedures
  • Properly prepare bank deposits
  • Verify disbursement transactions are supported
  • Ensure Voyager transactions are supported with receipts
  • Ensure SmartPay (IMPAC) transactions are supported with receipts
SOX Impact on the Field
how does sox affect you
How Does SOX Affect You?
  • Youmust employ existing financial controls according to present policies and procedures
  • Ensure your actions are timely,accurate, and authorized
  • Where signatures are required – be sure to sign it!
  • Promote good business practices – reinforce accountability
communications training
Communications & Training
  • Website – http://SOX
    • Who-what-where-when-why-how
    • FAQ’s, Acronyms, Glossary of Terms
  • Email – SOX@usps.gov
  • Communications in partnership with the new law and transformation strategy
  • Training:
    • Method: On-line & instructor led
    • Topics: General awareness and audience specific
    • Venues: Classroom, meetings, conventions
timeline
Timeline

December

2006

February

2007

FY 07

FY 08

FY 09

FY 10

Countdown to Compliance

to Complian

ce

Countdown

December 2006 – PAEA passed

February 2007 – SOX Program Management Office created

FY 07 – Organization and Implementation Guide in place

FY 08 – Processes and control documentation completed

FY 09 – Control testing and remediation completed

FY 10 – Compliance and monitoring

slide19

Financial Control and Support

NAPUS National Convention

September 10 – 11, 2007

financial control support
Financial Control & Support
  • Financial Control & Support
    • Key group for interaction with

the Field on SOX

      • 480 Managers and Analysts in 80 districts
    • Proactive Approach
      • Perform Finance Reviews
      • Offer Support and Guidance
      • Assist in the remediation

of control failures

financial control support1
Financial Control & Support
  • Established in early FY 2007 to:
    • Monitor, evaluate, and review financial and revenue systems
    • Focus on weaknesses identified through control testing
    • Improve integrity of financial and revenue reporting
financial control support2
Financial Control & Support
  • Established in early FY 2007 to:
    • Test key financial activities in support of SOX compliance
      • Conduct field testing
        • We will use a statistical sampling approach for testing our financial controls
        • Remediate control weaknesses
      • Typically for SOX compliance, the pass rate of 95% is required for a given control
financial control support3
Financial Control & Support
  • Established in early FY 2007 to:
    • Focus on control failures identified by Ernst & Young (our external auditors).
    • Use cause analysis to address control weaknesses
    • Support Accounting Service Centers and retail units
      • Conduct training on financial systems
      • Support financial system implementation
communication to the field
Communication to the Field
  • Area VPs, District Managers and PMs
    • Report systematic control failures
    • Progress toward SOX compliance
    • Communication will be ongoing
key financial activities
Key Financial Activities
  • A set of controls/procedures
  • Provide assurance to financial statement assertions
  • Sustain a strong internal control environment
  • Ensure alignment with policy and procedures
  • Reviewed by FCS during SOX/key financial activities
key financial controls
Key Financial Controls

The absence of any one/or combination of key financial activities would result in a high probability that financial statements will contain

material misstatements!

key financial activities at post offices
Key Financial Activities at Post Offices

Liquid Assets Are Physically Controlled

  • Limit access to the unit cash reserve
  • Close inactive credits
  • Secure stamp/cash drawers
  • Properly follow close-out procedures
  • Properly prepare bank deposits
key financial activities at post offices1
Key Financial Activities at Post Offices

Liquid Assets Are Physically Controlled

Failure Point

7

key controls at post offices
Key Controls at Post Offices

Retail Sales & Cash Are Reconciled Daily

  • Adequately separate duties
  • Restrict access to information resources
  • Monitor and reconcile master trust account balances
  • Monitor and promptly clear employee items
  • Monitor and reconcile financial differences
  • Remit all funds from retail operations
key financial activities at post offices2
Key Financial Activities at Post Offices

Retail Sales & Cash Are Reconciled Daily

FailurePoint

7

key controls at post offices1
Key Controls at Post Offices

Field Payables are Properly Approved

  • Verify that disbursement transactions are supported
  • Ensure SMARTPAY (IMPAC) transactions are supported with receipts
  • Update Voyager master PIN list
  • Secure Voyager master PIN list
  • Support Voyager transactions with receipts
  • Reconcile monthly Voyager purchases
key financial activities at post offices3
Key Financial Activities at Post Offices

Field Payables are Properly Approved

FailurePoint

7

key controls at post offices2
Key Controls at Post Offices

Time Records are Approved before Submission to Payroll

  • Support payroll transactions
  • Complete PS Forms 1723 to support higher level authorization
key financial activities at post offices4
Key Financial Activities at Post Offices

Time Records are Approved before Submission to Payroll

FailurePoint

7

what do postmasters have to do
What do Postmasters have to do?
  • Nothing new
  • Renew efforts to ensure that policy and procedures are being followed at your postal retail unit
  • Continue to be aware of changes to policy and procedures
sarbanes oxley
Sarbanes-Oxley

QUESTIONS?

Contact us via email at sox@usps.gov