halliburton global tax project request presentation project phoenix – discovery phase july 2008
TRANSCRIPT
Halliburton Global Tax
Project Request Presentation
Project Phoenix – Discovery PhaseJuly 2008
page - 2
Agenda
Overall Objective 5 mins Relevant History – Where we are 5 mins Conclusions Reached 5 mins Where we want to go – Project Phoenix 15 mins
- Vision- Scope- Goals- Project Team- Deliverables- Proposed Timeline- Effort & Cost Estimate
page - 3
Current State
Existing data / process problems: Multiple maintenance points supported by manual intervention Outdated and unsupported applications requiring upgrade / replacement Inability to provide timely data required to meet closing schedule Duplicated and overlapping processes performed by segregated groups Extensive data cleansing activities required to produce accurate information
1
2
3
4
5
TaxWire
Provision Processes
Oracle - Hyperion HFM
Talisman
Domestic Deferred TaxesDatabase
Compliance Processes
IRS
SEC
TIS
1
1
1
1
1 1
1
1
2
2
3
4 5
4 5
page - 4
Future Vision
Oracle - Hyperion HFM Integrated Tax
System
Integrated Tax Processes
2/1/2008 3/1/2008 4/1/2008 5/1/2008 6/1/2008 7/1/2008 8/1/2008 9/1/2008 10/1/2008 11/1/2008 12/1/2008
Common Timeline
Tax Closing Entries
Integrated Tax People
PBCs
10Q / 10K Disclosures
Tax Returns
Audit Ready Workpapers
RTA
TBBS
Management Reports
page - 5
Relevant History and Where We Are
Tax Accounting Department experienced 100% turnover in personnel in 1999
Stealth I - completed in January 2000 as of 12/31/99; true-up related to book/tax basis differences with respect to reserve accounts which are typically reversed for tax purposes
Stealth II - completed in January 2001 as of 12/31/00; further trued-up the book/tax basis differences with respect to the reserve accounts as well as the book/tax basis differences in fixed assets and joint ventures/partnerships
Preparation of Tax Basis Balance Sheets and resulting true-up - completed at end of 2002 as of 12/31/01 for KBR, Landmark, Dresser and ESG business units by Jim Aughinbaugh, Project Director, and Horn Murdock Cole
TaxWire implementation Q1 2003 – used for the preparation of the 2002 Tax Return
The initial load to TIS for book/tax basis differences was intended to be based upon the tax basis balance sheet work and resulting true-up as of 12/31/01
page - 6
Relevant History and Where We Are Darrell Simmons and Edwina Lu prepared a true-up during 2004 as of 12/31/03 which
was loaded to TIS.
Significant deficiency Q2 2005
“Project Scrub” performed by Deloitte as of 12/31/04 for selected foreign companies and selected domestic temporary differences, fixed assets, intangible assets, partnerships, joint ventures, revenue recognition and reserves. Initiated in 2005 and completed in 2006. Price tag $2.1 MM
Ernst & Young developed RTP (return to provision) template as a separate TIS module and tested TIS technology enhancements related to system maintenance optimization during spring/summer 2006
Tax Reporting physically moved into the tax department in November 2006 - but consolidated under VP of Tax leadership Q4 2007
Late tax re-class Q2 2007
Implemented CorpTax ETS, Q2 2007, as the single compliance platform (domestic & international of US compliance)
page - 7
Relevant History and Where We Are Tax Reporting Remediation project (tactical only) conducted during Q3-Q4
2007 focused on improvements that could be quickly achieved and eliminated some manual tasks - see appendix for more details
Removed significant deficiency Q4 2007
In 2008, reached the conclusion that TIS and the underlying architecture is not a viable / sustainable solution (will not be supported going forward)
Business Objects v 5.1.3 is no longer supported and needs to be replaced
Spring 2008, tax involvement was requested in identifying enhancements to HFM
Spring/summer 2008, identified additional enhancements related to FIT, introduced concept of foreign income tax accounting power users and began preparation for power user training to be held the week of August 25th
Wrapping up A&E Project I – Tax Processes & Controls which assessed current state processes and controls related to Tax Reporting, US Tax, Int’l Tax and Tax Technology (to be completed in July, 2008)
page - 8
Conclusions Reached
Tried many approaches – but … - never fixed the underlying processes which create bad data- never implemented sustainable tax basis balance sheets to prove accuracy of
domestic deferred tax balances – will continue to require adjustments every few years
- never adequately addressed resource constraints / turnover- never addressed the commonality across functions- never considered the technology & information requirements of the entire tax
function (provision, compliance, planning, audit defense)
“Silos” of people, processes and technologies did not work- Two distinct groups with separate agendas, varied approaches and technology
solutions to getting to the same information – made business hard to conduct when the functions needed to work together seamlessly in order to manage risk and consume limited resources
page - 9
Where we want to go – Project Phoenix
Embrace Management’s Goals Of A “Best In Class” Tax Department:
- Controls Integrated Into Processes
- Strong CFO Support For Tax
- Trusted Business Partners
- Motivated Work Teams
- Tax Risk Management Focus
- Strong Linkage With Accounting
- Immaterial Return To Provision Adjustment
- No Significant Deficiencies
- Seamless Department – No “Silos”
- No P&L Surprises
- One day Tax Close
page - 10
Where we want to go – Project Phoenix
Implement “strategic fix” for both Tax Reporting and Tax Compliance – which includes data quality and flow analysis, process redesign, systems reassessment, and personnel alignment
- From source systems• HFM• SAP
- to downstream Tax Reporting and Tax Compliance tools • TaxWire• Data Collection Tool• FIT• Talisman• TIS• CORPTax• Business Objects• DI Tax
Best Practices conclude that Tax Reporting and Tax Compliance functions operate better with less risk when totally integrated – this is in alignment with CFO goals of integrating compliance and provision for 2008 & beyond
Vision is to create a new foundation of capabilities and capacity – 5 “S’s”- One that is flexible – sustainable – fundamentally changes the processes
page - 11
Tax Reporting and Tax Compliance want to operate with:
● the same data
● the same tools
● the same people
● the same timelines
● the same processes
Vision – 5 “S’s”
page - 12
Project Scope
Planning
Global Reporting
Audit Defense
US Federal Compliance
Not in Current Scope • Foreign Tax Compliance• State Tax Compliance
page - 13
Project Scope
- Monthly transaction analysis- Quarterly estimated payment process- US federal tax compliance- Foreign tax credit compliance- Data / Information management
• SAP, HFM, DCT, TaxWire, Talisman modules, TIS, CorpTax, DI Tax, FIT, Business Objects
- Global - Foreign - Domestic accrual- PBC preparation- FIN 48 compliance- ETR forecasting- 10Q / 10K disclosure- Return to accrual- Preparation of tax basis balance sheets- Self audit adjustments / amended returns- Audit results pushback into reporting and compliance
page - 14
Goals – Data
- Use dual purpose data in real time mode
- Fully leverage Talisman as the single source for common law legal entity, tax legal entity and company codes
• Eliminate duplication of entity maintenance across multiple tools (Talisman, TaxWire, TIS and CorpTax)
- Prepare common work-papers and supporting information – avoid dual sources or duplication of documentation efforts
- Eliminate manually supported data transfer processes
- Control data entry with validation
- Include a controlled workspace for further data transformation
- Reduce occurrences of data loading failures
- Eliminate manual data cleansing
- Reduce validation effort – incorporate review by exception and automated error handling techniques
page - 15
Goals – Tools
- Use dual purpose tools- Consolidate tools used for global, foreign and domestic accrual- Eliminate reliance on manually prepared spreadsheets to calculate and
support journal entries- Eliminate reliance on MS Access database for domestic deferred
reporting purposes- Eliminate manual rollforward of tax entries ± $5 million- Streamline account and rule maintenance and validation across multiple
tools• Eliminate duplication of account and rule maintenance across multiple tools
(TaxWire, TIS and CorpTax)
- Leverage effective dating techniques to provide real-time analysis of changes to hierarchy structure or other tax attributes
- Auto populate reconciliations and identify variances- Include robust reporting capabilities to see the information from various
dimensions
page - 16
Goals – People
- Provide more rewarding and motivating place to work
- Enable and develop resources to participate in both reporting and compliance activities
- Share skills, institutional knowledge and experience between Tax Reporting and Tax Compliance
- Increase ability to collaborate on tasks
- Emphasize analysis and decision support skills over data gathering and preparation skills
- Reduce training costs and ease transitions
page - 17
Goals – Timelines
- Integrate timelines to meet reporting and compliance deadlines
- Eliminate incidents of timing problems identified in the data loading processes which leads to higher rejection rates
- Reduce occurrences of crisis management
- Increase flexibility in the timelines – easier to adapt to business changes or new regulations
- Increase visibility of overall timelines and schedules so that entire department can monitor and plan
page - 18
Goals – Processes
- Use dual purpose automated processes in real time
- Embed risk based management into process redesigns
- Automate preparation of return to accrual reconciliations
- Automate preparation of tax basis balance sheets
- Produce audit ready results (internal and external)
- Design integrated process controls which automatically provide SOX compliance substantiation
- Automate monitoring and increase visibility of process status with alerts / notifications
page - 19
Project Team
Business Owners
Business Lead
Brent SavageVP of Tax
Executive Sponsor
Business Analysts
Technology Leads
Daniel GarciaProject Owner
Project Team – Project Phoenix
Elizabeth Sponsel(SCH)
Steering Committee – Project Phoenix
Gary Tyler - IT
Randall Miller
Sara Sykes
Robert WilsonDirector of Tax
Compliance & Audit
Mark PurnellDirector of Global
Services
Lyn BeatyInternal Audit
Kevin Shea – Talisman
Mohamed El Shenawy – Tax(SCH)
Hal IT tbd – Halliburton Tax
Technology Analysts
Tanya Weisinger – Tax
Hal IT tbd – Hal IT
Shelly Longhorn(SCH)
Anne Martin(SCH)
Competency Leaders
Carl Gibbs
Tracy Howell
Project Manager
Randy Phillips
Gary Sella
Darrell Simmons
Tax Subject Matter Experts
Accounting Subject Matter Experts
Dale French
Susan Wilrodt
Audit Subject Matter Expert
TBD
Marcia Trimble
Quality Assurance
Scribe
Karen Long(SCH)
TBD
page - 20
Deliverables
Business and technical requirements Design of how the solution would work
- Business model of the new processes, tools, controls, data flows, timelines and personnel alignment
- Technical design & specifications
Benefits analysis Cost estimate Timeline projection Draft project plan
page - 21
Project Phoenix – Discovery Phase Timeline
Start Finish Weeks
Phase ILaunch 7/14 8/12 4Business Requirements & Solution 7/25 9/8 6
Total 8 weeks elapsed
Phase IITechnology Requirements & Solution 9/8 10/8 4.5Software & Hardware Selection 10/8 12/8 8Execution Phase Plan 12/8 1/26 7Wrap Up & QA 1/26 1/29 .5
Total 20 weeks elapsed
page - 22
Effort & Cost Estimates
Hours Cost
HAL IT 2,400 $317,000
HAL Tax & Accounting 2,330 $233,000
SCH 1,700 $454,000
Total 6,400 $1,004,000
Best estimate based on current facts
page - 23
Appendices Index
Tax Reporting Remediation & Other Accomplishments Tax Reporting Remediation & Other - Original Plan of Attack & Prioritization FIT 2008 Proposed Changes Team Roles Pre-requisites
page - 24
Team Roles Executive Sponsor – is responsible for providing overall direction and support,
including such things as:- provide vision, objectives and scope decisions- provide funding and commit resources- plan for and measure success- hold the project team accountable to delivering promised value- eliminate or moderate risks to the project’s success
Steering Committee Members - assists the Executive Sponsor in reviewing and approving plans, deliverables, results and monitoring risks. As significant stakeholders the Steering Committee Members are responsible for:- communicating key A&E initiative and project messages to their group (SMEs
and non SMEs)- ensuring quality of SME contributions- ensuring timeliness / priority of SME commitments and- managing their group’s acceptance of project outcomes and future
performance
page - 25
Team Roles (cont.) Project Owner - is responsible for ensuring that the Executive Sponsor’s mission,
visions, objectives and goals are transformed into department-wide projects and that the Executive Sponsor’s intentions are translated into actions. The project owner is responsible for ensuring that the project is successful, properly managed and meets all business requirements, project controls, methodologies, processes and procedures.
Project Manager – is responsible for the planning, execution, and closing of the project. Key project management responsibilities include creating clear and attainable project objectives, building the project requirements, and managing the triple constraint for projects, which is cost, time, and scope.
Quality Assurance – is responsible for verifying and validating that all project deliverables (PM, requirements, design and execution plan) meet the PM, functional and technical standards established in the Acceptance Plan.
Business Owners have managerial responsibilities for the Tax Reporting and Tax Compliance functions, as such they are the ultimate beneficiaries of this project. This project must meet the needs of the Business Owners to be successful.
page - 26
Team Roles (cont.) Competency Leaders have developed expertise in their respective competencies,
as such are responsible for sharing that knowledge with the project team. Competency Leaders assist the Business Owners by ensuring that new processes, controls and tools meet the needs of their competency and will lead to a “Best in Class” Tax Department.
Subject Matter Experts (SMEs) - department managers responsible for targeted business processes, as such can provide first hand understanding of the business needs and issues that this project has to address.
Business Lead – is responsible for leading the business team (Business Owners, Competency Leaders, SMEs, Business Analysts and Scribe) and ensures the resulting business deliverables are produced on schedule and meet the established quality standards.
Business Analysts – are responsible for driving out business requirements and developing business solution designs
Technical Leads are responsible for leading the technical team and ensure the resulting technical deliverables are produced on schedule and meet the established quality standards
page - 27
Team Roles (cont.)
Technical Analysts - are responsible for driving out technical requirements and developing technical solution designs
Scribe – is the documentation specialist for the team and is responsible for ensuring that all deliverables produced meet the established quality standards.
page - 28
Pre-Requisites
Prior to holding requirement sessions, the team will educate themselves by reviewing the following materials:
- Review FIT 2008 Current Enhancements & Proposed changes- Review TaxWire / TIS / CorpTax diagrams as defined during A&E Project I- Review Tax Reporting quarter-end process as defined during A&E Project I;
pending Internal Audit review and signoff- Review critical spreadsheets - some improvements made during Q3
Remediation- Review SOX controls relying on critical spreadsheets- Pending Tax Reporting Improvement Opportunities, such as;
• Automate journal entries for foreign deferred tax reversals • Automate journal entries for revaluation of monthly FIT entries at the month-
end exchange rate