enfos erci webinar 20150224
TRANSCRIPT
data that saves our world
ENFOS Webinarwith Environmental Risk Communications, Inc.
Three Critical Financial Controls for Reserve Management
February 24 and 25 , 2015
Contains ENFOS confidential and proprietary information. 2
About Us
ERCI builds tools, training and reports for duty holders to recognize,
measure and display their environmental and asset retirement obligations.
ENFOS is a cloud software platform that expertly manages
all of the complexities of remediation and
decommissioning - from the financial to the technical.
Contains ENFOS confidential and proprietary information. 3
Opportunity Statement Financial Controls Overview Work Breakdown Structure Control Work Commitment Control Spend Control Questions and Answers
Agenda
Contains ENFOS confidential and proprietary information. 4
Speaker Background – Roger Well, C.P.G.
Currently leading customer deployments on over 100,000 projects and $10B in forecasts and transactions through the ENFOS enterprise platform
26 years of environmental remediation and decommissioning experience in various technical and managerial roles
Author of recent white papers: The Case for the Enterprise Environmental Liability
Management System Operational Risk Management for Environmental
Remediation Operational Excellence for Environmental
Remediation Programs M.B.A., Keller Chicago M.S., University of Toledo (Hydrogeology) B.A., Monmouth College (Geology)
Roger WellExecutive Vice President & [email protected], IL
Contains ENFOS confidential and proprietary information. 5
Speaker Background – John Rosengard
21 years at ERCI; founder/creator of Defender software suite
14 US corporate remediation teams (>60 CPA audits)3300 unique liabilities200 decision analysis projects
4 US port authority remediation teams (>10 CPA audits)
Counterparty/non-performance risk tracking system
MBA, Northwestern
BS, Georgetown
John RosengardPresident & CEO, [email protected], CA
Contains ENFOS confidential and proprietary information. 6
Write the Caption Contest
Contains ENFOS confidential and proprietary information. 7
Opportunity Statement
Contains ENFOS confidential and proprietary information. 8
What Every Executive Wants
High Visibility (aka “No Surprises”)
Strategic Alignment with Corporate Value Drivers
Improved Effectiveness and Efficiency of Operations
Data-Driven Decision Making and Narrative
1234
Contains ENFOS confidential and proprietary information. 9
Convergence of Practices & Competencies
Contains ENFOS confidential and proprietary information. 10
The Charge of Internal and External Auditors
Enforce generally-accepted accounting principles• Relevant• Faithful Representation (fair value)
Encourage good capital stewardship• Measure similar liabilities in similar ways• Confirm spending matches liability burn-down• Anticipate repeats of lessons learned
Contains ENFOS confidential and proprietary information. 11
Matching Spending to Liability Burn-down
Remeasure liability periodically at “fair value”• Remedy implemented• Regulator/community accepted remedy• Counterparty default risk resolved/paid
Remember: remaining liability ≠ uncommitted funds
Q1 Q2 Q3 Q4$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
Liability Commitment Spending
Contains ENFOS confidential and proprietary information. 12
Financial Controls Overview
Contains ENFOS confidential and proprietary information. 13
Business Objectives(Governance, Control, Certification, Risk Management)
Operational System(front-end)
ERP System(back-end)
Inte
rnal
Co
ntro
ls
Auto
mat
ed
Cont
rols
Repo
rting
Co
ntro
ls
Secu
rity
Cont
rols
Man
ual &
Pro
cedu
ral
Cont
rols
Efficient and Sustainable Operations
Technology People
A Business Model for Control Systems
Contains ENFOS confidential and proprietary information. 14
Integrated Business Process Management Enables Financial Controls
Forecasting & Budgeting
Vendor Proposals Purchases Invoices &
Recovery
Commitments can’t Exceed Plan Balance
Spend can’t Exceed
Commitments
LEVEL 1 – “Phase”
LEVEL 2 (optional) – “Activity”
LEVEL 3 (optional) – “Element”
LEVEL 4 (optional) – “Component”
WORK BREAKDOWN STRUCTURECommon thread across all processes
Finance Workflow Summary
1
2 3
Contains ENFOS confidential and proprietary information. 15
Work Breakdown Structure Control
Contains ENFOS confidential and proprietary information. 16
The “Harmonized” WBS Explained
Definition: A WBS that is uniformly applied across all financial activities from forecasting through spending on every project in the portfolio
But not necessarily applied to all WBS levels in all financial activities (to be clarified)
Do not confuse the company-wide WBS to project-level work tasks contained in a contractor scope-of-work
The more granular the detail, the more financial control (there may be a point of diminishing return)
The operational system contains the detail, the ERP system may not
Contains ENFOS confidential and proprietary information. 17
The “Harmonized” WBS Example
WBS LevelForecasts &
BudgetsProposals & Purchases Invoices Example
Phase X X X Remedial Implementation
Activity X X X Groundwater Remediation
Element X X Engineering Design
Component X Direct Labor
When the work is invoiced, the lowest level of details are known and should be tracked uniformly across the portfolio
When forecasts are made, because of the uncertainty, lower levels of detail may be useful for cost buildup but not for financial control purposes
Harmonized WBS provides the highest visibility and the baseline data required for additional financial controls during project execution stages
Contains ENFOS confidential and proprietary information. 18
Work Commitment Control
Contains ENFOS confidential and proprietary information. 19
Definition: Monitoring and controlling the expenditure commitment against a budget and balance
A harmonized WBS is essential if the control is to be made in any detail below the overall total budget/balance
Four key financial variables used for the control:
1. Current Balance (e.g., of the Reserve or Budget) 2. Open Commitments3. Available to Commit4. New Commitment Request Amount (i.e., the Proposal)
All four variable amounts change through time as work progresses – many moving parts
The Commitment Control Explained
Contains ENFOS confidential and proprietary information. 20
Commitment Control Example
Phase ActivityCurrent Year
PlanCY
Expenditure CY BalanceOpen
CommitmentsAvailable to
Commit
Site Characterization
Project Management $1,000 $1,000 $0 $0 $0
Subsurface Investigation $5,000 $5,000 $0 $0 $0
Monitoring & Sampling $6,500 $3,000 $3,500 $1,500 $2,000
Reporting $5,000 $2,000 $3,000 $3,000 $0
Interim Corrective MeasuresGW Plume Control $12,000 $2,000 $10,000 $5,000 $5,000
Water Disposal $5,000 $2,500 $2,500 $2,500 $0
Remedial Options Appraisal
Hydrogeological Assessment $10,000 $4,000 $6,000 $6,000 $0
Alternatives Evaluation $4,000 $0 $4,000 $0 $4,000
Engineering Study $25,000 $10,000 $15,000 $15,000 $0
Construct & Startup
GW Remedial System Install $350,000 $0 $350,000 $0 $350,000
OM&M Plan $1,000 $0 $10,000 $0 $10,000
H&S Plan $5,000 $0 $5,000 $0 $5,000
System Startup $18,000 $0 $18,000 $0 $18,000
TOTALS $456,500 $29,500 $427,000 $33,000 $394,000
Configuration Options: 1. Current Year by WBS2. Current Year by Plan Total3. Lifecycle by WBS4. Lifecycle by Plan Total
Commitment Controls
Control Monitoring
Hard Stop/Control
Contains ENFOS confidential and proprietary information. 21
Spend Control
Contains ENFOS confidential and proprietary information. 22
The Spend Control Explained
Definition: Monitoring and controlling expenditures against a work commitment for an entire project or a subproject
A harmonized WBS is essential if the control is to be made in any detail below the overall total budget and work commitment scope of work detail
Three key financial variables used for the control:1. Commitment Open Amount2. Available to Spend3. Expenditure Amount being Processed
May be linked to Earned Value Management
Contains ENFOS confidential and proprietary information. 23
Spend Control Example
Phase ActivityOpen
Commitments
Purchase Order 1 Balance
Purchase Order 2 Balance
Invoice 1 (PO1)
Invoice 2(PO2)
Site CharacterizationMonitoring & Sampling $1,500 $1,500 N/A $1,500 N/A
Reporting $3,000 $3,000 N/A $2,000 N/A
Interim Corrective MeasuresGW Plume Control $5,000 $5,000 N/A $6,000 N/A
Water Disposal $2,500 N/A $2,500 N/A $1,500
Remedial Options AppraisalHydrogeological Assessment $6,000 $4,000 $2,000 $4,000 $2,000
Engineering Study $15,000 $5,000 $10,000 $5,000 $12,000
TOTALS $33,000 $18,500 $14,500 $18,500 $15,500
Configuration Options: 1. PO Total2. PO and Change Order Individually3. By WBS Level4. Rate Sheet Item Quantity Level
Validated
Rejected
Spend Controls
Contains ENFOS confidential and proprietary information. 24
In Summary: Putting it Back Together
Forecasting & Budgeting
Vendor Proposals Purchases Invoices &
Recovery
Commitments can’t Exceed Plan Balance
Spend can’t Exceed
Commitments
LEVEL 1 – “Phase”
LEVEL 2 (optional) – “Activity”
LEVEL 3 (optional) – “Element”
LEVEL 4 (optional) – “Component”
WORK BREAKDOWN STRUCTURECommon thread across all processes
Finance Workflow Summary
1
2 3
Contains ENFOS confidential and proprietary information. 25
Thank You for Attending
For follow-up, please contact:
Lacey Orr(630) 689-0220 x17
Contains ENFOS confidential and proprietary information. 26
Questions and Answers