Agenda Finance and Audit Committee Finance and Audit Co… · 14/08/2019 · Finance and Audit Committee Informational Session and Webinar May 30, 2019 | 1:00 - 3:00 p.m. Eastern

RELIABILITY | RESILIENCE | SECURITY

Agenda Finance and Audit Committee August 14, 2019 | 9:15-10:00 a.m. Eastern Hilton Quebec 1100 Boulevard René-Lévesque E Québec, QC G1R 4P3 Conference Room: Salle de Bal (1st Floor) Call to Order Introductions and Chair’s Remarks NERC Antitrust Compliance Guidelines Agenda

1. Minutes* – Approve a. July 18, 2019 Meeting b. May 30, 2019 Meeting c. May 8, 2019 Meeting

2. Third Quarter Calendar of FAC Responsibilities (Andy Sharp)

a. Second Quarter Statement of Activities* – Review and Recommend to Board of Trustees for Acceptance

i. NERC Summary of Results as of June 30, 2019

ii. Combined ERO Enterprise Summary of Results as of June 30, 2019

iii. Regional Entity Variance Reports as of June 30, 2019

b. NERC and Regional Entity Proposed 2020 Business Plans and Budgets and Associated Assessments* – Review and Recommend to Board of Trustees for Approval

i. NERC 2020 Business Plan and Budget

ii. Combined ERO Enterprise 2020 Business Plans and Budgets

iii. Regional Entity and WIRAB 2020 Business Plans and Budgets

iv. 2020 Assessment Schedule

3. Other Business 4. Adjournment

*Background materials included.

https://www.nerc.com/gov/bot/FINANCE/2020%20NERC%20Business%20Plan%20and%20Budget%20DL/NERC%202020%20Business%20Plan%20and%20Budget%20-%20Final.pdf

https://www.nerc.com/gov/bot/FINANCE/2020%20NERC%20Business%20Plan%20and%20Budget%20DL/Total%20ERO%20Enterprise%202020%20Budgets%20and%20Assessments%20Analysis.pdf

https://www.nerc.com/gov/bot/FINANCE/Pages/2020-Regional-Entity-Business-Plan-and-Budget.aspx

https://www.nerc.com/gov/bot/FINANCE/2020%20NERC%20Business%20Plan%20and%20Budget%20DL/2020%20Assessments.pdf


Antitrust Compliance Guidelines I. General It is NERC’s policy and practice to obey the antitrust laws and to avoid all conduct that unreasonably restrains competition. This policy requires the avoidance of any conduct that violates, or that might appear to violate, the antitrust laws. Among other things, the antitrust laws forbid any agreement between or among competitors regarding prices, availability of service, product design, terms of sale, division of markets, allocation of customers or any other activity that unreasonably restrains competition. It is the responsibility of every NERC participant and employee who may in any way affect NERC’s compliance with the antitrust laws to carry out this commitment. Antitrust laws are complex and subject to court interpretation that can vary over time and from one court to another. The purpose of these guidelines is to alert NERC participants and employees to potential antitrust problems and to set forth policies to be followed with respect to activities that may involve antitrust considerations. In some instances, the NERC policy contained in these guidelines is stricter than the applicable antitrust laws. Any NERC participant or employee who is uncertain about the legal ramifications of a particular course of conduct or who has doubts or concerns about whether NERC’s antitrust compliance policy is implicated in any situation should consult NERC’s General Counsel immediately. II. Prohibited Activities Participants in NERC activities (including those of its committees and subgroups) should refrain from the following when acting in their capacity as participants in NERC activities (e.g., at NERC meetings, conference calls and in informal discussions):

• Discussions involving pricing information, especially margin (profit) and internal cost information and participants’ expectations as to their future prices or internal costs.

• Discussions of a participant’s marketing strategies.

• Discussions regarding how customers and geographical areas are to be divided among competitors.

• Discussions concerning the exclusion of competitors from markets.

• Discussions concerning boycotting or group refusals to deal with competitors, vendors or suppliers.

• Any other matters that do not clearly fall within these guidelines should be reviewed with NERC’s General Counsel before being discussed.

NERC Antitrust Compliance Guidelines 2

III. Activities That Are Permitted From time to time decisions or actions of NERC (including those of its committees and subgroups) may have a negative impact on particular entities and thus in that sense adversely impact competition. Decisions and actions by NERC (including its committees and subgroups) should only be undertaken for the purpose of promoting and maintaining the reliability and adequacy of the bulk power system. If you do not have a legitimate purpose consistent with this objective for discussing a matter, please refrain from discussing the matter during NERC meetings and in other NERC-related communications. You should also ensure that NERC procedures, including those set forth in NERC’s Certificate of Incorporation, Bylaws, and Rules of Procedure are followed in conducting NERC business. In addition, all discussions in NERC meetings and other NERC-related communications should be within the scope of the mandate for or assignment to the particular NERC committee or subgroup, as well as within the scope of the published agenda for the meeting. No decisions should be made nor any actions taken in NERC activities for the purpose of giving an industry participant or group of participants a competitive advantage over other participants. In particular, decisions with respect to setting, revising, or assessing compliance with NERC reliability standards should not be influenced by anti-competitive motivations. Subject to the foregoing restrictions, participants in NERC activities may discuss:

• Reliability matters relating to the bulk power system, including operation and planning matters such as establishing or revising reliability standards, special operating procedures, operating transfer capabilities, and plans for new facilities.

• Matters relating to the impact of reliability standards for the bulk power system on electricity markets, and the impact of electricity market operations on the reliability of the bulk power system.

• Proposed filings or other communications with state or federal regulatory authorities or other governmental entities.

Matters relating to the internal governance, management and operation of NERC, such as nominations for vacant committee positions, budgeting and assessments, and employment matters; and procedural matters such as planning and scheduling meetings.

DRAFT Minutes Finance and Audit Committee Informational Session and Webinar July 18, 2019 | 1:00 - 3:00 p.m. Eastern Conference Call Call to Order and Chair’s Remarks Mr. Robert G. Clarke, Chair, called to order a duly noticed open meeting of the Finance and Audit Committee (the “Committee”) of the Board of Trustees (“Board”) of the North American Electric Reliability Corporation (“NERC” or the “Company”) on July 18, 2019, at 1:00 p.m. Eastern, and a quorum was declared present. The agenda is attached as Exhibit A. Present at the meeting were: Committee Members Board of Trustee Members Robert G. Clarke, Chair Kenneth W. DeFontes, Jr. David Goulding Suzanne Keenan Colleen Sidford Robin E. Manning Jan Schori Committee Members Not Present Janice B. Case Roy Thilly NERC Staff Tina Buzzard, Associate Director Mark G. Lauby, Senior Vice President and Chief Reliability Officer Sonia C. Mendonҫa, Vice President, Deputy General Counsel, and Director of Enforcement Andy Sharp, Interim Chief Financial Officer and Controller Regional Representatives Sue Clarke, Midwest Reliability Organization Jessica Hala, Northeast Power Coordinating Council, Inc. Carol Baskey, ReliabilityFirst George Krogstie, SERC Reliability Corporation Judy Foppiano, Texas Reliability Entity, Inc. Jillian Lessner, Western Electricity Coordinating Council Holly Taylor, Western Interconnection Regional Advisory Body

Minutes – Finance and Audit Committee Informational Session and Webinar – July 18, 2019 2

NERC Antitrust Compliance Guidelines Mr. Clarke directed the participants’ attention to the NERC Antitrust Compliance Guidelines included in the agenda, and indicated that all questions regarding antitrust compliance or related matters should be directed to the General Counsel. Chair’s Remarks Mr. Clarke welcomed attendees and thanked all for their work on the budget. He noted that NERC has posted management’s responses to comments received during the first posting period. Mr. Clarke highlighted specific comments and management’s response, and he reviewed several minor changes in the second draft of the budget. He also noted the ongoing work to address concerns raised by Canadian stakeholders and noted that further discussion will occur at the August meeting. Updated NERC 2020 Business Plan and Budget Mr. Sharp presented an overview of the second draft of the BP&B, referencing the materials in the advance agenda package. He noted that NERC addressed many of the comments received with representatives from the trade associations. Mr. Sharp described the changes in the second draft of the budget, including the conversion of two contractors to employees for a net cost savings and the addition of $500,000 for leasehold improvements in the Atlanta office to be funded out of reserves. He then summarized the budget, including assessment increases, key assumptions, and future year projections. Lastly, Mr. Sharp outlined the remainder of the schedule. Mr. DeFontes suggested that future budget presentations include actual dollar changes in budget amounts, in addition to the percentage change. Regional Entities’ 2020 Draft Business Plans and Budgets Each of the Regional Entity and WIRAB representatives provided an overview of their draft 2020 business plans and budgets, referencing materials included in the advance agenda package. 2020 ERO Enterprise Combined Budgets and Assessments Overview Mr. Sharp reviewed the combined ERO Enterprise budgets and assessments, referencing the detailed information included in the advance agenda package, including the overall budget by program area and 2020 preliminary assessments by region. Closing Remarks Adjournment There being no further business, and upon motion duly made and seconded, the meeting was adjourned. Submitted by,

Sonia C. Mendonҫa Acting Corporate Secretary

DRAFT Minutes Finance and Audit Committee Informational Session and Webinar May 30, 2019 | 1:00 - 3:00 p.m. Eastern Conference Call Call to Order and Chair’s Remarks Mr. Robert G. Clarke, Chair, called to order a duly noticed open meeting of the Finance and Audit Committee (the “Committee”) of the Board of Trustees (“Board”) of the North American Electric Reliability Corporation (“NERC” or the “Company”) on May 30, 2019, at 1:00 p.m. Eastern, and a quorum was declared present. The agenda is attached as Exhibit A. Present at the meeting were: Committee Members Board of Trustee Members Robert G. Clarke, Chair Kenneth W. DeFontes, Jr. David Goulding George S. Hawkins Colleen Sidford Suzanne Keenan James B. Robb, President and Chief Executive Officer Jan Schori Committee Members Not Present Janice B. Case Roy Thilly NERC Staff Charles A. Berardesco, Senior Vice President, General Counsel, and Corporate Secretary Tina Buzzard, Associate Director Mark G. Lauby, Senior Vice President and Chief Reliability Officer Janet Sena, Senior Vice President and Director of Policy and External Affairs Andy Sharp, Interim Chief Financial Officer Regional Representatives Sue Clarke, Midwest Reliability Organization Jessica Hala, Northeast Power Coordinating Council, Inc. Carol Baskey, ReliabilityFirst George Krogstie, SERC Reliability Corporation Judy Foppiano, Texas Reliability Entity, Inc.

Minutes – Finance and Audit Committee Informational Session and Webinar – May 30, 2019 2

Jillian Lessner, Western Electricity Coordinating Council Holly Taylor, Western Interconnection Regional Advisory Body NERC Antitrust Compliance Guidelines Mr. Clarke directed the participants’ attention to the NERC Antitrust Compliance Guidelines included in the agenda, and indicated that all questions regarding antitrust compliance or related matters should be directed to Mr. Berardesco. Chair’s Remarks Mr. Clarke welcomed attendees and reviewed the upcoming schedule. He noted how important it is that NERC receive comments on the first draft of the BP&B and reminded attendees that comments are due by June 28, 2019. 2020 NERC Business Plan and Budget Overview Mr. Sharp thanked the NERC executive team and Regional Entity staff for their work on the draft BP&B. He then presented the draft BP&B, referencing the materials in the advance agenda package. Mr. Sharp reviewed areas of focus and projected increases in expenses and assessments for the NERC budget, particularly for E-ISAC operations. He also reviewed the schedule leading up to the review of the final BP&B by the Board in August. Mr. DeFontes asked a question regarding NERC’s strategy behind the increase in reserves. Mr. Sharp indicated he would follow up with additional information. Regional Entities’ 2020 Draft Business Plans and Budgets Each of the Regional Entity and WIRAB representatives provided an overview of their draft 2020 business plans and budgets, referencing materials included in the advance agenda package. 2020 Combined ERO Enterprise Budgets and Assessments Overview Mr. Sharp reviewed the combined ERO Enterprise budgets and assessments, referencing the detail information included in the advance agenda package, including the overall projected change in assessments and combined expenditures by program area and strategic goal. Adjournment There being no further business, and upon motion duly made and seconded, the meeting was adjourned. Submitted by,

Charles A. Berardesco Corporate Secretary

DRAFT Minutes Finance and Audit Committee Meeting May 8, 2019 | 9:45 – 10:45 a.m. Central Ritz-Carlton, St. Louis 100 Carondelet Plaza St. Louis, MO 63105 Introduction and Chair’s Remarks Roy Thilly, Acting Committee Chair, called to order a duly noticed open meeting of the Finance and Audit Committee (the “Committee”) of the Board of Trustees (“Board”) of the North American Electric Reliability Corporation (“NERC” or the “Company”) on May 8, 2019, at 9:00 a.m. Central, and a quorum was declared present. The agenda is attached as Exhibit A. Present at the meeting were: Committee Members Board of Trustee Members Janice B. Case Kenneth W. DeFontes, Jr. David Goulding Frederick W. Gorbet Colleen Sidford George S. Hawkins Roy Thilly, Acting Committee Chair Suzanne Keenan Robin E. Manning James B. Robb, President and Chief Executive Officer Jan Schori

Committee Members Not Present Robert G. Clarke, Chair

NERC Staff Charles A. Berardesco, Senior Vice President, General Counsel, and Corporate Secretary Tina Buzzard, Associate Director Scott Jones, Senior Vice President, Chief Financial and Administrative Officer, and Corporate Treasurer Mark G. Lauby, Senior Vice President and Chief Reliability Officer Janet Sena, Senior Vice President and Director of Policy and External Affairs Andy Sharp, Controller NERC Antitrust Compliance Guidelines Mr. Thilly explained that he would serve as Acting Committee Chair, as Mr. Clarke could not be present. He directed the participants’ attention to the NERC Antitrust Compliance Guidelines included in the agenda, and indicated that all questions regarding antitrust compliance or related matters should be directed to Mr. Berardesco.

Minutes – Finance and Audit Committee Meeting – May 8, 2019 2

Minutes Upon motion duly made and seconded, the minutes from the February 6, 2019 meeting were approved as presented to the Committee. Report on April 24 and May 7, 2019 Closed Sessions Mr. Thilly reported that the Committee met in closed session on April 24, 2019 with the Corporate Governance and Human Relations Committee to discuss personnel assumptions for the preliminary 2020 budget. He also reported that the Committee met in closed session on May 7, 2019 with NERC’s auditors to review audit matters. Second Quarter Calendar of FAC Responsibilities Mr. Thilly reported that the Committee reviewed the 2018 Audited Financial Statements in the May 7, 2019 closed session. Upon motion duly made and seconded, the Committee recommended the 2018 Audited Financial Statements for acceptance by the Board. Mr. Sharp presented the First Quarter Unaudited Statement of Activities and variance reports for NERC and for the ERO Enterprise, referencing the materials included in the advance agenda package. He noted that NERC is on budget for funding, with total expenditures slightly under budget due to timing of expenditures. Mr. Sharp noted that NERC is projected to be near budget for funding, total expenditures, and operating reserves at year-end. He also summarized the status of working capital and operating reserves. Mr. Sharp stated that the ERO Enterprise was under budget through the first quarter, primarily due to lower personnel expenses and timing differences between actual costs incurred and budgeted costs expected during the year. He noted that the ERO Enterprise is projected to be over budget at year-end, due to costs associated with the FRCC transition. Mr. Sharp summarized the aggregate working capital and operating reserves. After discussion, and upon motion duly made and seconded, the Committee recommended the First Quarter Unaudited Statement of Activities for acceptance by the Board. Mr. Thilly asked for clarification on funding issues related to the FRCC transition. Mr. Jones explained that some of the FRCC assessment funds for the third and fourth quarters of 2019 will instead be directed to SERC to cover increased responsibilities, and that any cash remaining at FRCC will be used to fund wind-down operations. 2020 Business Plan and Budget (BP&B) Mr. Jones provided an overview of the preliminary 2020 BP&B, referencing the materials in the advance agenda package. He explained that NERC is considering changes in its BP&B process that may result in the discontinuation of the operating plan document, with NERC providing additional detail in support of NERC’s long-term strategy in the BP&B itself. Mr. Jones highlighted that the proposed NERC budget reflects growth in E-ISAC costs, with a slight decline in non-E-ISAC costs. He reviewed the ERO Enterprise proposed budgets and assessments. Mr. Jones then reviewed the schedule for BP&B posting, comments, and approval.

Minutes – Finance and Audit Committee Meeting – May 8, 2019 3

Ms. Keenan congratulated NERC on achieving a diverse slate of candidates for open E-ISAC positions and inquired as to whether the budget is sufficient to attract and retain talent in light of broader market pressures for technical talent. Mr. Jones clarified that NERC assumed higher personnel cost increases in the preliminary 2020 BP&B, and NERC is trying to be as flexible as it can be on costs for individual positions. Mr. Lawrence added that the E-ISAC is also building its capabilities through employee training and engagement. Mr. Thilly asked for clarification on the relationship between budget increases and assessment increases. Mr. Jones explained that assessment increases do not always correspond to budget increases due to year-over-year fluctuations in funding from other sources. He observed that, for many entities, year-over-year changes to the entity’s Net Energy for Load may have a larger impact on the assessment changes than budget increases. Mr. Thilly concluded the discussion by encouraging stakeholders to submit comments on the proposed 2020 BP&B and to be as specific as possible with any concerns. Adjournment There being no further business, and upon motion duly made and seconded, the meeting was adjourned. Submitted by,

Charles A. Berardesco Corporate Secretary


Summary of Unaudited Results For the Month Ending June 30, 2019

Table of Contents

1. Executive Summary Page

a. Projected Year-End Results 2

b. Year-to-Date Actual Results 3

2. Detailed Operating Results

a. Variances by Revenue and Expense Category 4

b. Variances by Department 6

3. Supplemental Schedules

a. Schedule 1 – Year-End Projected Reserves 7

b. Schedule 2 – IT Projects 8

c. Schedule 3 – E-ISAC & CRISP Summary of Activity 11

Summary of Results as of June 30, 2019 2

Executive Summary

Projected Year-End Results ($ millions)

Funding

• Revenues

Expected to be slightly over budget at year-end primarily due to higher than budgeted investment income, and will be partially offset by lower third-party revenues for the CRISP program.

Expenditures

• Expenses (excluding depreciation)

Personnel expenses are expected to be over budget mainly because of transition costs and search fees.

Contracts and consultants expenses are projected to be over budget primarily due to FRCC transition work, SOCCED database system upgrades, and E-ISAC support costs (which are offset by lower spending in other E-ISAC categories).

• Fixed Asset Additions

Projected to be below budget in order to offset other increased costs. Operating Reserve Increase (Decrease)

• Projected reserve decrease from operating activity is $1.3M versus a budgeted decrease of $0.9M.

OverFUNDING Projected Budget (Under)

Revenues 78.8$ 78.5$ 0.3$ Funding from Reserves Assessment Stabilization Reserve 0.6$ 0.6$ -

TOTAL FUNDING 79.4$ 79.1$ 0.3$

EXPENDITURESExpenses (excluding Depreciation) 76.9$ 75.2$ 1.7$ Fixed Asset Additions 3.8 4.8 (1.0)

TOTAL EXPENDITURES 80.7$ 80.0$ 0.7$

RESERVE INCREASE (DECREASE) (1.3)$ (0.9)$ (0.4)$


Year-to-Date Actual Results ($ millions)

Funding

• Revenues

Slightly over budget mainly due to higher investment income. Expenditures

• Expenses (excluding depreciation)

Contracts and Consultants expenses are under budget primarily because of the expected timing of expenditures versus budget.


Under budget largely due to the expected timing of expenditures versus budget and lower spending to offset increased costs in other areas.

Operating Reserve Increase (Decrease)

• Reserve increase from operating activity is higher than budget by $2.4 million mainly because of the expected timing of expenditures versus budget.

OverFUNDING Actual Budget (Under)

Revenues 39.5$ 39.3$ 0.2$ Funding from Reserves Assessment Stabilization Reserve 0.6 0.6 -

TOTAL FUNDING 40.1$ 39.9$ 0.2$

EXPENDITURESExpenses (excluding Depreciation) 36.9$ 38.4$ (1.5)$ Fixed Asset Additions 1.7 2.4 (0.7)

TOTAL EXPENDITURES 38.6$ 40.8$ (2.2)$

RESERVE INCREASE (DECREASE) 1.5$ (0.9)$ 2.4$


Detailed Operating Results

Variances by Revenue and Expense Category

Total NERC (including CRISP)

Following is a brief summary of variances by category:

• Personnel Expense

Expected to be over budget primarily due to transition costs and search fees.

• Meeting, Travel, and Conference Call Expense

Currently and projected to be over budget due to higher attendance at workshops and conferences, which is partially offset by increased revenues for these events.

• Contracts and Consultants Expense

Under budget due to lower costs from the CRISP program contractor and expected timing of expenditures versus budget. Expected to be over budget at year-end because of unbudgeted costs for SPP RE transition work, SOCCED database system upgrades, and E-ISAC support costs. Also, amounts for Internal Audit projects that were originally budgeted in the Finance and Accounting department will be charged to the Legal and Regulatory department, which nets to an $86k over budget amount between those departments.

YTD Actual YTD Budget YTD

Over (Under) %

Over (Under) Annual

Projection Annual Budget

AnnualOver (Under)

%Over (Under)

TOTAL FUNDING 40,099,143$ 39,872,674$ 226,468$ 0.6% 79,387,028$ 79,130,349$ 256,679$ 0.3%

EXPENDITURESPersonnel 22,578,141$ 22,627,743$ (49,602)$ (0.2%) 44,389,285$ 43,952,190$ 437,095$ 1.0%Meetings, Travel, and Conference Calls 2,034,956 1,771,450 263,506 14.9% 3,747,062 3,380,400 366,662 10.8%Contracts and Consultants 5,788,775 7,597,584 (1,808,809) (23.8%) 15,579,153 15,043,318 535,835 3.6%Rent and Facilities 1,647,411 1,637,529 9,882 0.6% 3,305,058 3,335,058 (30,000) (0.9%)Office Costs, Professional, and Misc.* 4,756,352 4,641,523 114,830 2.5% 9,696,877 9,346,517 350,360 3.7%Other Non-Operating Expenses 63,270 113,018 (49,748) (44.0%) 139,971 214,171 (74,200) (34.6%)Fixed Asset Additions* 1,738,837 2,389,000 (650,163) (27.2%) 3,847,990 4,778,000 (930,010) (19.5%)

TOTAL EXPENDITURES 38,607,741$ 40,777,847$ (2,170,106)$ (5.3%) 80,705,396$ 80,049,655$ 655,742$ 0.8%

RESERVE INCREASE (DECREASE) 1,491,401$ (905,172)$ 2,396,574$ (264.8%) (1,318,368)$ (919,306)$ (399,063)$ 43.4%

FTEs 201.8 205.9 (4.1) (2.0%) 202.0 204.9 (2.9) (1.4%)

* Excludes depreciation expense


• Office Costs

Projected to be over budget at year-end primarily due to software costs that were budgeted in fixed assets but that will be charged to office costs due to the type of license acquired.


Under budget year-to-date largely because of the expected timing of expenditures versus budget, and projected to be under budget mainly due to lower spending to offset increased costs in other areas.

CONTRACTS and CONSULTANTS YTD Actual YTD Budget YTD

Over (Under) Annual

Projection AnnualBudget

Annual Over (Under)

Reliability Standards -$ 25,000$ (25,000)$ 50,000$ 50,000$ (0)$ Compliance Assurance - 25,000 (25,000) 50,000 50,000 (0) Compliance Analysis, Registration and Certification - - - - - - Compliance Enforcement 35,131 80,500 (45,369) 161,000 161,000 (0) Reliability Assessment and System Analysis 124,050 312,500 (188,450) 485,000 625,000 (140,000) Situation Awareness 926,693 878,920 47,773 1,329,740 1,280,990 48,750 Event Analysis - - - - - - Performance Analysis 236,446 326,783 (90,336) 775,243 653,565 121,678 E-ISAC 558,245 910,250 (352,005) 2,259,475 1,820,500 438,975 Training, Education, and Personnel Certification 301,518 248,500 53,018 632,000 497,000 135,000 General and Administrative and Executive 94,304 80,000 14,304 220,000 220,000 - Legal and Regulatory - - - 385,900 - 385,900 Policy and External Affairs 13,260 10,000 3,260 24,000 20,000 4,000 Information Technology 725,995 1,021,382 (295,386) 1,969,295 2,042,763 (73,468) Human Resources and Administration 277,875 212,500 65,375 605,000 690,000 (85,000) Finance and Accounting 60,077 237,500 (177,423) 175,000 475,000 (300,000)

TOTAL (excluding CRISP) 3,353,595$ 4,368,834$ (1,015,239)$ 9,121,653$ 8,585,818$ 535,835$ CRISP 2,435,180 3,228,750 (793,570) 6,457,500 6,457,500 -

TOTAL (including CRISP) 5,788,775$ 7,597,584$ (1,808,809)$ 15,579,153$ 15,043,318$ 535,835$


Variances by Department

In late 2018, NERC management went through an organizational assessment involving various program areas and re-characterized several employees across multiple departments. In most cases, these employees kept the same responsibilities and functional oversight, but were assigned new departments and/or consolidated with other similar roles to align certain technical functions. The changes had no effect on the total FTEs, and the net cost impact of these movements was immaterial. The following program areas were impacted by this review:

• Reliability Standards

• Compliance Assurance

• Compliance Analysis, Registration and Certification

• Reliability Assessment and System Analysis

• Event Analysis

• Performance Analysis

Following is a brief summary of variances by department:

• E-ISAC - Under budget year-to-date largely because of the expected timing of expenditures and hiring of FTEs versus the budget.

• Legal and Regulatory - Projected to be over budget at year-end primarily due to transition costs and search fees, as well as Internal Audit expenditures that were budgeted in the Finance and Accounting department that will be charged to the Legal and Regulatory department.

• CRISP - Under budget year-to-date largely because of the expected timing of expenditures versus the budget from the program contractor.

DIRECT EXPENSES and NET FIXED ASSETS YTD Actual YTD Budget YTD

Over (Under) Annual Projection AnnualBudget

Annual Over (Under)

Reliability Standards 1,718,880$ 1,747,839$ (28,959)$ 3,839,827$ 3,419,581$ 420,245$ Compliance Assurance 3,272,783 2,623,916 648,866 6,378,546 5,178,505 1,200,041 Compliance Analysis, Registration and Certification 1,212,596 1,470,032 (257,437) 1,856,407 2,881,804 (1,025,397) Compliance Enforcement 1,851,487 1,963,488 (112,001) 3,672,568 3,861,690 (189,122) Reliability Assessment and System Analysis 1,789,349 2,358,580 (569,231) 3,646,746 4,606,107 (959,361) Situation Awareness 1,638,846 1,754,698 (115,853) 3,028,102 3,012,404 15,698 Event Analysis 1,427,052 1,441,638 (14,586) 2,583,676 2,771,658 (187,982) Performance Analysis 1,609,272 1,462,330 146,941 3,411,621 2,873,967 537,654 E-ISAC 4,486,432 5,386,945 (900,513) 10,733,378 10,649,090 84,288 Training, Education, and Personnel Certification 774,899 678,556 96,343 1,599,892 1,367,755 232,137 General and Administrative and Executive 4,229,069 4,120,074 108,996 8,101,933 8,144,200 (42,267) Legal and Regulatory 1,969,760 1,989,315 (19,555) 4,796,130 3,878,791 917,339 Policy and External Affairs 1,210,817 1,285,423 (74,606) 2,534,800 2,510,721 24,079 Information Technology 5,675,631 5,908,315 (232,684) 11,681,408 11,696,532 (15,125) Human Resources 1,191,708 1,163,893 27,815 2,268,316 2,562,371 (294,056) Finance and Accounting 1,601,280 1,277,795 323,485 2,698,138 2,553,747 144,390 TOTAL (excluding CRISP) 35,659,860$ 36,632,838$ (972,978)$ 72,831,487$ 71,968,925$ 862,562$ CRISP 2,947,881 4,145,009 (1,197,127) 7,873,909 8,080,729 (206,820) TOTAL EXPENSES and NET FIXED ASSETS 38,607,741$ 40,777,847$ (2,170,106)$ 80,705,396$ 80,049,655$ 655,741$


Supplemental Schedules

Schedule 1 – Year-End Projected Reserves

Beginning Budgeted Budgeted Other Net Financing Ending

Reserve Account Balance (1) Funding Uses Funding (Uses) (2) Activity (3) Balance

Operating Contingency 5,644,359$ 550,000$ (1,067,980)$ (678,640)$ 694,646$ 5,142,385$

Future Obligations 2,535,333 - (480,457) 64,843 - 2,119,719

Assessment Stabilization 2,071,000 - (550,000) - - 1,521,000

System Operator 592,110 148,674 - (270,423) - 470,361

CRISP 500,000 - - - - 500,000 Total Reserves 11,342,801$ 698,674$ (2,098,437)$ (884,219)$ 694,646$ 9,753,464$

NOTES:

(2) The column Other Funding (Uses) primarily reflects the net impact of normal operations. For example, under normal circumstances, if NERC was tracking well under budget in actual expenditures, this would reflect additional funds into the reserve account. It also reflects the increase or decrease in working capital during the period.

(3) Net financing activity in 2019 reflects principal debt repayments for borrowings originating in 2016. NERC did not make budgeted borrowings for 2017 and 2018 in light of a favorable working capital position, and is projected to borrow 50% of its 2019 budgeted financing in 2019.

(1) Some 2019 beginning balances have been adjusted from the 12/31/2018 variance report balances as the result of a reconciliation to the final audited balance sheet.


Schedule 2 – IT Projects

Expected

Project Actual Expected Over (Under)

Projects in Progress Budget (1) Spend Spend Budget

CMEP Technology Project (2017-2020) 5,403,000$ 2,760,107$ 5,403,000$ -$

Entity Registration - CORES (2018-2020) 1,400,000 1,221,418 1,373,797 (26,203)

SAFNR V3 221,500 - 188,000 (33,500)

Document Management - Records Center Reconfiguration 190,500 92,700 190,500 -

Multifactor Authentication 27,660 7,173 27,660 -

FRCC Dissolution 128,497 121,713 152,303 23,806

Standards 300,000 61,863 300,000 -

E-ISAC - Customer Relationship Managmenet (CRM) 237,800 133,770 293,300 55,500

Footprints Upgrade 84,753 - 84,753 -

NOTES:

(1) The Project Budget noted above usually corresponds to the approved business case for each project and funds for each project are drawn from the available budget. In some projects, business cases may not be prepared, particularly when a project is smaller and/or may be in response to a FERC order. * Some of these projects span multiple years, so the amounts above do not represent a single budget year expenditure.

* The amounts noted above do not include internal labor or license/maintenance/support costs and reflect only external (consultant) costs of the projects.


Schedule 2 (continued) – IT Projects CMEP Technology Project (Started May 2017 / Planned Completion Dec 2020) This project will provide registered entities, Regional Entities, and NERC the ability manage the compliance and enforcement processes and data in a single ERO Enterprise system. Today, those processes and related data are managed across three separate systems that have to be synchronized (webCDMS, CITS, and CRATS). Entity Registration - CORES (Started Dec 2017 / Planned Completion Dec 2019) NERC is undertaking an effort to both standardize and modernize the Entity Registration process. The discovery phase of the Centralized Organization Registration Entity System (CORES) project includes the capture of Region-specific needs, variations, and exceptions in the registration process. CORES will be a centralized entity registration process, which will require the retirement of registration in CDMS, CITS, and CRATS. The Joint Registration Organization (JRO) portion of the project will be combined with the CORES production release in 2019. SAFNR V3 (Started May 2019 / Planned Completion Nov 2019) One of the primary functions of the ERO Enterprise is to maintain situational awareness of Bulk Power System conditions and provide accurate and timely information regarding threats that may adversely impact reliability. This project will replace the existing Situation Awareness for FERC, NERC, and the Regional Entities system (SAFNR V2) system with a new version to reduce reliability risk, provide new capabilities, reduce corporate risk, and increase productivity. Document Management – Records Center Reconfiguration (Started May 2019 / Planned Completion Dec 2019) The Record Center is in alignment with the original intent and business case for Document Management. One of the key items for addressing information management across all program areas, was to have the ability to address document retention. The Record Center will be configured in accordance with the NERC Records Retention and Destruction policy, allowing records to be managed and retained in accordance with policy. Multifactor Authentication (Started Jan 2019 / Planned Completion Jul 2019) The purpose of this project is to implement the DUO Multi Factor Authorization solution to enhance the overall security of the NERC ERO suite of applications and to meet existing requirements for applications currently under development, primarily CORES and CMEP/Align projects. Multi-factor authorization provides functionality requiring multiple means of user authentication (Mobile PIN code, etc.) in addition to traditional user authentication methods like user name and password.


Schedule 2 (continued) – IT Projects FRCC Dissolution (Started Jan 2019 / Planned Completion Jun 2019) With FRCC dissolving, NERC assessed the changes required to applications that contained FRCC data and the reassignment/classification of such information. The inventory requires the mapping utility, functionality, migration, and support efforts by both Region and entity. Activities include facilitated discussions with IT and business owners of impacted applications to capture and document high-level, as well as more detailed, requirements necessary to support the transition of registered entities from FRCC to SERC. Standards (Started Jan 2019 / Planned Completion Oct 2019) In support of the CMEP Technology Project, this project involves the movement all of the Standards data from the old source system to the new one. E-ISAC – Customer Relationship Management (CRM) (Started Jul 2019 / Planned Completion Oct 2019) The purpose of this project is to select and implement a Customer Relationship Management (CRM) tool to assist the E-ISAC team in growing its North American electricity owner/operator base from the current roughly 1,000 members to a progressively greater share of the roughly 5,000 total. The team will be able to do so through improved outreach, marketing, and overall engagement and tracking processes expected from use of the new tool. The plan is also to integrate with the E-ISAC Portal. Footprints Upgrade (Started Mar 2019 / Planned Completion Aug 2019) The purpose of this project is to replace the current Footprints helpdesk application used to support both NERC and the ERO applications with the latest version.


Schedule 3 – E-ISAC and CRISP Summary of Activity

YTD Annual Annual ProjectedFUNDING Actual Projection Budget Over (Under)

Assessments 9,813,949$ 19,627,897$ 19,627,897$ -$ Other Funding 4,008,492 7,746,805 7,767,730 (20,925)

TOTAL FUNDING 13,822,440$ 27,374,702$ 27,395,627$ (20,925)$

EXPENDITURESPersonnel Expense 3,692,983$ 7,664,050$ 8,180,123$ (516,073)$ Meeting Expense 241,331 662,142 418,000 244,142 Operating Expenses (excluding Depreciation) 3,465,223 9,961,095 9,431,696 529,399 Fixed Assets (excluding Depreciation and Fixed Asset Allocation) 34,776 320,000 700,000 (380,000) Total Direct Costs (excluding Depreciation and Allocations) 7,434,313$ 18,607,287$ 18,729,819$ (122,532)$ Indirect Expense Allocation 4,162,502 8,482,370 9,004,572 (522,202) Fixed Asset Allocation (200,822) (320,265) (338,764) 18,499 TOTAL EXPENDITURES (excluding Depreciation, including Allocations) 11,395,992$ 26,769,391$ 27,395,627$ (626,235)$

RESERVE INCREASE (DECREASE) 2,426,448$ 605,311$ -$ 605,311$

TOTAL E-ISAC (including CRISP)


Schedule 3 (continued) – E-ISAC and CRISP Summary of Activity


Assessments 763,194$ 1,526,388$ 1,526,388$ -$ Other Funding 3,815,750 7,437,873 7,517,319 (79,446)

TOTAL FUNDING 4,578,944$ 8,964,261$ 9,043,707$ (79,446)$

EXPENDITURESPersonnel Expense 351,179$ 707,711$ 965,793$ (258,082)$ Meeting Expense 32,445 49,262 48,000 1,262 Operating Expenses (excluding Depreciation) 2,564,257 6,966,936 6,966,936 - Fixed Assets (excluding Depreciation and Fixed Asset Allocation) - 150,000 100,000 50,000 Total Direct Costs (excluding Depreciation and Allocations) 2,947,881$ 7,873,909$ 8,080,729$ (206,820)$ Indirect Expense Allocation 414,338 979,904 1,000,605 (20,702) Fixed Asset Allocation (19,990) (36,998) (37,628) 630 TOTAL EXPENDITURES (excluding Depreciation, including Allocations) 3,342,229$ 8,816,815$ 9,043,707$ (226,892)$



Assessments 9,050,755$ 18,101,509$ 18,101,509$ -$ Other Funding 192,742 308,932 250,411 58,521

TOTAL FUNDING 9,243,496$ 18,410,441$ 18,351,920$ 58,521$

EXPENDITURESPersonnel Expense 3,341,804$ 6,956,339$ 7,214,330$ (257,991)$ Meeting Expense 208,886 612,880 370,000 242,880 Operating Expenses (excluding Depreciation) 900,967 2,994,159 2,464,760 529,399 Fixed Assets (excluding Depreciation and Fixed Asset Allocation) 34,776 170,000 600,000 (430,000) Total Direct Costs (excluding Depreciation and Allocations) 4,486,432$ 10,733,378$ 10,649,090$ 84,288$ Indirect Expense Allocation 3,748,164 7,502,466 8,003,966 (501,500) Fixed Asset Allocation (180,832) (283,268) (301,136) 17,869 TOTAL EXPENDITURES (excluding Depreciation, including Allocations) 8,053,763$ 17,952,577$ 18,351,920$ (399,343)$


E-ISAC (excluding CRISP)

CRISP


Agenda Item 2.a.ii Finance and Audit Committee Meeting August 14, 2019

ERO Enterprise (NERC and Regional Entities) Combined Summary of Unaudited Results June 30, 2019 The ERO Enterprise was under budget $3.1M (3.1%) for combined expense and fixed asset (capital) spending. The budget variances ranged from 13.0% under budget to 41.6% over budget. The year-end projection for the ERO Enterprise is to be over budget by 1.0%.

• NERC was under budget $2.2M (5.3%) primarily due to timing of expenditures for contracts and consultants and fixed assets. The company expects to be slightly over budget at year-end.

• FRCC was over budget $1.4M (46.1%) and projects to be under budget $1.6M (23.2%) at year-end due to changing operations associated with the dissolution of FRCC Regional Entity (RE) functions. FRCC transferred its RE activities to SERC effective July 1, 2019, and will complete the wind down of its RE business on August 31, 2019. A FERC-approved special assessment of $630k has been charged to Load-Serving Entities in the FRCC RE footprint to assist in funding the wind down costs of the RE.

• MRO was under budget $1.0M (13.0%), which is attributable primarily to lower spending in personnel and travel costs, and timing of contracts and consultants expenses. The company expects to be under budget $1.2M (7.6%) at year-end primarily due to under budget personnel costs as MRO continues to become fully staffed.

• NPCC was under budget $352k (4.6%) mainly as a result of lower personnel costs and timing of meeting and contractor expenses. The company expects to be under budget $188k (1.2%) at year-end.

• RF was under budget $475k (4.0%), largely due to lower personnel costs and timing of contracts and consultants, computer, and leasehold improvement expenses. The company expects to be under budget $327k (1.4%) at year-end.

Entity $ % $ %

NERC 38,607,741$ 40,777,847$ (2,170,106)$ (5.3%) 80,705,396$ 80,049,655$ 655,741$ 0.8%FRCC 4,816,108 3,401,414 1,414,694 41.6% 5,139,340 6,695,786 (1,556,446) (23.2%)MRO 6,853,745 7,875,517 (1,021,772) (13.0%) 14,773,126 15,980,356 (1,207,230) (7.6%)NPCC 7,303,311 7,655,063 (351,752) (4.6%) 15,615,914 15,803,889 (187,975) (1.2%)

RF 11,269,660 11,744,579 (474,919) (4.0%) 22,321,620 22,648,458 (326,838) (1.4%)SERC 9,216,005 8,798,216 417,789 4.7% 23,276,025 18,144,948 5,131,077 28.3%

Texas RE 5,988,406 6,512,106 (523,700) (8.0%) 13,002,845 13,069,595 (66,750) (0.5%)WECC 12,805,455 13,233,246 (427,791) (3.2%) 26,480,478 26,950,566 (470,088) (1.7%)

96,860,431$ 99,997,988$ (3,137,557)$ (3.1%) 201,314,744$ 199,343,253$ 1,971,491$ 1.0%

Total Budget (Total Expenses plus the Increase (Decrease) in Fixed Assets) Over (Under) 2019 YTD

Actual 2019 YTD

Budget Over (Under) 2019 Year-End

Projected 2019 Year-End

Budgeted

Summary of Unaudited June 30, 2019 Results – ERO Enterprise (NERC and Regional Entities Combined) 2

• SERC was over budget $418k (4.7%) primarily because of expenses associated with the FRCC transition. The company is projecting to be over budget $5.1M (28.3%) due to the impact of the transition, which is expected to be offset in revenues by a distribution of FRCC Q3 and Q4 assessments, as well as penalty funds.

• Texas RE was under budget $524k (8.0%) largely as a result of lower personnel, meeting, contracts and consultants, and office costs. The company’s year-end projection is close to budget.

• WECC was under budget $428k (3.2%) predominately due to lower personnel, contracts and consultants, and travel costs, and timing of leasehold improvements. The company expects to be under budget $470k (1.7%) at year-end.

Variances by Expense and Fixed Asset Categories Personnel Expenses For the ERO Enterprise, personnel expenses, consisting of salaries, payroll taxes, benefits, and retirement costs, were collectively over budget $64k (0.1%), ranging from 8.2% under budget to 62.6% over budget. All entities in the ERO Enterprise were under budget in FTEs. The year-end projection for ERO Enterprise personnel expenses is to be over budget 0.5%, with FTEs under budget by 0.2%.

• NERC was slightly under budget and expects to be over budget $437k (1.0%) at year-end mainly because of transition costs and search fees.

• FRCC was over budget $1.5M (62.6%) primarily due to retention agreements at amounts higher than budgeted related to the RE dissolution. The company expects to be under budget $748k (15.5%) at year-end.

• MRO was under budget $476k (8.2%) mainly due to staff vacancies. MRO expects to be under budget $907k (7.8%) at year-end as it continues to work to become fully staffed.

Projected Projected2019 YTD 2019 YTD Year-End 2019 YTD 2019 YTD Year-End

Entity Actual Budget $ % Variance Actual Budget $ % Variance

NERC 22,578,141$ 22,627,743$ (49,602)$ (0.2%) 1.0% 201.8 205.9 (4.1) (2.0%) (1.4%)FRCC 3,928,314 2,415,515 1,512,799 62.6% (15.5%) 19.8 20.8 (1.0) (4.7%) (4.1%)MRO 5,308,369 5,784,835 (476,466) (8.2%) (7.8%) 52.4 59.0 (6.6) (11.2%) (5.1%)NPCC 5,055,355 5,214,429 (159,074) (3.1%) (1.6%) 36.7 38.9 (2.2) (5.7%) 2.1%

RF 9,555,522 9,842,885 (287,363) (2.9%) (2.0%) 76.8 78.2 (1.4) (1.8%) 0.3%SERC 6,931,580 6,777,262 154,318 2.3% 22.5% 70.0 78.0 (8.0) (10.3%) 12.8%

Texas RE 4,807,928 5,168,831 (360,903) (7.0%) 0.0% 58.0 60.0 (2.0) (3.3%) 0.0%WECC 9,585,325 9,855,338 (270,013) (2.7%) (3.1%) 129.3 143.0 (13.7) (9.6%) (4.0%)

67,750,534$ 67,686,838$ 63,696$ 0.1% 0.5% 644.6 683.7 (39.0) (5.7%) (0.2%)

* Represents equivalent full time positions from a budget and actual financial perspective and does not necessarily represent headcount.

FTEs*Personnel Expenses

Over (Under) Over (Under)


• RF was under budget $287k (2.9%) predominately due to staff vacancies and lower-than-expected training costs. The company expects to be under budget $384k (2.0%) at year-end.

• SERC was over budget $154k (2.3%) primarily because of higher salaries and payroll taxes resulting from financial obligations associated with staff restructuring, offset by a budgeted 10% vacancy rate. The company expects to be over budget $3.0M (22.5%) at year-end due to the additional FTEs needed as a result of the FRCC transition.

• Texas RE was under budget $361k (7.0%) as a result of staff vacancies and a less-than-projected health insurance increase. The company expects to be at budget at year-end.

• WECC was under budget $270k (2.7%) due to budgeted labor float assumptions differing from actual labor float in all program areas. The company expects to be under budget $627k (3.1%) at year-end for this same reason.

Travel, Meeting, and Conferencing Expenses For the ERO Enterprise, travel, meeting, and conferencing expenses were collectively under budget $39k (0.8%). The year-end projection for the ERO Enterprise is to be over budget 4.9%.

• NERC was over budget $264k (14.9%) primarily due to higher attendance at workshops and conferences, which is substantially offset by increased revenues for these events. The company expects to be over budget $367k (10.8%) at year-end.

• FRCC was under budget $30k (21.8%) largely because of minimal staff travel for reliability assessment activities and reduced travel for compliance monitoring and enforcement activities. The company expects to be under budget $69k (30.4%) at year-end.

• MRO was under budget $261k (49.7%) primarily due to fewer than anticipated personnel traveling. The company expects to be under budget $161k (15.3%) at year-end for this same reason.

• NPCC was under budget $56k (10.7%) mainly from timing of planned meetings, with the heaviest meeting schedule occurring in the fourth quarter. The company expects to be at budget at year-end.

Projected Year- 2019 2019 End Variance

Entity

Budget Meeting Travel Conferencing Actual $ % to Budget

NERC 1,771,450$ 144,364$ 114,145$ 4,996$ 2,034,956$ 263,506$ 14.9% 10.8%FRCC 139,104 (1,530) (29,300) 571 108,845 (30,259) (21.8%) (30.4%)MRO 525,582 (2,113) (259,324) - 264,145 (261,437) (49.7%) (15.3%)NPCC 519,660 (21,434) (26,804) (7,490) 463,932 (55,728) (10.7%) 0.0%

RF 525,420 18,792 (6,989) (9,165) 528,058 2,638 0.5% 0.8%SERC 431,073 92,338 80,150 (1,575) 601,986 170,913 39.6% 41.8%

Texas RE 190,294 (3,658) (11,686) (1,602) 173,348 (16,946) (8.9%) (3.3%)WECC 1,056,317 (18,489) (96,714) 3,374 944,488 (111,829) (10.6%) (1.8%)

5,158,900$ 208,270$ (236,522)$ (10,891)$ 5,119,758$ (39,142)$ (0.8%) 4.9%

Over (Under)

Meeting, Travel, and Conferencing Expenses


• SERC was over budget $171k (39.6%) primarily because of increased travel and meetings due to FRCC transition activities. The company expects to be over budget $412k (41.8%) at year-end for this same reason.

• Texas RE was under budget $17k (8.9%) as a result of lower-than-budgeted meeting and conference call expenses. The company expects to be under budget $13k (3.3%) at year-end.

• WECC was under budget $112k (10.6%) primarily due to less-than-anticipated travel as a result of sending fewer individuals to each audit. The company expects to be under budget $37k (1.8%) at year-end.

Operating Expenses For the ERO Enterprise, operating expenses, consisting of consultants and contracts expenses, office rent, office costs, professional services, miscellaneous costs, and depreciation expense, were collectively under budget $2.7M (10.0%). The year-end projection for the ERO Enterprise is to be slightly under budget.

• NERC was under budget $1.9M (12.4%) mainly due to lower costs from the CRISP program contractor and timing of expenditures for contracts and consultants. The company expects to be slightly over budget (1.1%) at year-end.

• FRCC was under budget $23k (2.7%) largely because of contract auditor and software costs that were not incurred, and SERC Compliance Enforcement Authority costs being less than budgeted. This is offset by the accrual of $255K of rent expenses through the remainder of the RE lease term, which expires in September 2020. The company expects to be under budget $684k (40.9%) at year-end.

• MRO was under budget $317k (16.9%) primarily due to timing of expenditures for contracts and consultants. The company expects to be under budget $143k (3.8%) at year-end.

• NPCC was under budget $162k (7.3%) mainly because of timing of contract auditor costs. The company expects to be slightly under budget at year-end.

• RF was under budget $88k (6.0%) primarily due to timing of contracts and consultants and office costs expenses. The company expects to be close to budget at year-end.

• SERC was slightly over budget mainly because advanced purchases of equipment and software for additional staff related to the FRCC transition, as well as legal fees associated with employment

Projected Year-2019 Contracts & Professional 2019 End Variance

Entity

Budget Consultants Office Rent Office Costs Services Miscellaneous Depreciation Actual $ % to Budget

NERC 15,599,647$ (1,808,809)$ 9,882$ 67,772$ 24,142$ 22,916$ (249,272)$ 13,666,278$ (1,933,369)$ (12.4%) 1.1%FRCC 853,466 (239,617) 222,586 (5,899) (11,219) - 10,809 830,126 (23,340) (2.7%) (40.9%)MRO 1,870,262 (309,345) (10,212) (155,970) 191,658 - (32,946) 1,553,447 (316,815) (16.9%) (3.8%)NPCC 2,213,883 (108,345) (1,817) (28,568) 1,551 (1,583) (23,736) 2,051,385 (162,498) (7.3%) (0.4%)

RF 1,463,726 (52,540) 25,304 (52,238) 1,103 2,535 (12,171) 1,375,719 (88,007) (6.0%) 0.8%SERC 1,444,881 (87,820) (38,749) 118,811 37,589 (22,780) - 1,451,932 7,051 0.5% 7.9%

Texas RE 1,152,981 (38,877) (53,445) (16,982) (36,547) - - 1,007,130 (145,851) (12.6%) (2.3%)WECC 2,674,393 (67,615) 13,420 (21,670) 5,842 - (257) 2,604,113 (70,280) (2.6%) 3.7%

27,273,239$ (2,712,968)$ 166,969$ (94,744)$ 214,119$ 1,088$ (307,573)$ 24,540,130$ (2,733,109)$ (10.0%) (0.1%)

Operating Expenses

Over (Under)


matters and a review of SERC bylaws. The company expects to be over budget $271k (7.9%) at year-end due to the impact of the FRCC transition.

• Texas RE was under budget $146k (12.6%) predominately due to lower-than-anticipated contracts and consultant, professional services, utility, internet, and software maintenance expenses. The company’s expects to be under budget $54k (2.3%) at year-end.

• WECC was under budget $70k (2.6%) primarily due lower-than-expected contracts and consultants expenses. The company expects to be over budget $185k (3.7%) at year-end due to unbudgeted consulting and meeting space expenses.

Indirect Expense Allocation NPCC and WECC allocate overhead expenses to their non-statutory functions. Through the second quarter, NPCC allocated $8k (3.8%) less than budgeted and WECC allocated $7k (2.5%) less than budgeted. At year-end, NPCC expects to be at budget and WECC expects to allocate slightly less than budget (0.9%). Fixed Asset (Capital) Additions For the ERO Enterprise, fixed asset (capital) additions (excluding the reversal of depreciation expense) were under budget $701k (25.1%). The year-end projection for the ERO Enterprise is to be over budget $437k (7.5%).

• NERC was under budget $650k (27.2%) largely because of the expected timing of expenditures versus budget and underspending to offset increased costs in other areas. The company expects to be under budget $930k (19.5%) at year-end.

• FRCC was under budget $34k (100%) because there has been no spending on compliance software enhancements and computer equipment. The company expects to be under budget $60k (88.6%) at year-end.

• RF was under budget $114k (80.5%) due to timing of computer hardware and software and leasehold improvement expenses. The company expects to be close to budget at year-end.

• SERC was over budget $86k (59.0%) because of leasehold improvements for new office space due to the impact of the FRCC transition and upgrades to document retention systems. The company expects to be over budget $1.4M (640.9%) at year-end for this same reason.

Projected Year- 2019 Equipment Leasehold Allocation of 2019 End Variance

Entity

Budget CapEx Improvements Fixed Assets Actual $ % to Budget

NERC 2,389,000$ (114,900)$ -$ (335,264)$ (200,000)$ -$ 1,738,837$ (650,163)$ (27.2%) (19.5%)FRCC 33,697 (20,000) - (13,697) - - - (33,697) (100.0%) (88.6%)MRO 7,838 - - - - - 7,838 - 0.0% 1.9%NPCC 42,500 (33,127) - 27,025 - - 36,398 (6,102) (14.4%) (1.8%)

RF 142,000 (98,953) - 1,595 (17,000) - 27,642 (114,358) (80.5%) 0.8%SERC 145,000 (125,575) - 34,958 176,124 - 230,507 85,507 59.0% 640.9%

Texas RE - - - - - - - - 0.0% 0.0%WECC 32,000 (5,000) - 34,379 (12,000) - 49,379 17,379 54.3% 10.4%

2,792,035$ (397,555)$ -$ (251,004)$ (52,876)$ -$ 2,090,601$ (701,434)$ (25.1%) 7.5%

Fixed Asset Additions (Excludes Depreciation)

Over (Under)Computer &

Software CapEx

Furniture and Fixtures

CapEx


• WECC was over budget $17k (54.3%) primarily due to the timing of an equipment purchase. The company expects to be over budget $13k (10.4%) at year-end.

Working Capital and Operating Reserves (excluding CRISP) The ERO Enterprise began the 2019 year with approximately $7.7M more in reserves than anticipated in the 2019 budget. This was primarily because of favorable budget variances from the 2018 year.

Through the second quarter, the ERO Enterprise budgeted the addition of $10.3M in reserves while actually generating $15.5M. This resulted in the unanticipated addition of $5.2M in total reserves through the second quarter.

The combined effect of higher balances at the beginning of the year and adding additional reserves through the second quarter of 2019 resulted in a combined year-to-date reserve balance of $53.1M, which is $12.9M more than was anticipated in the 2019 budget. During the remainder of 2019, the ERO Enterprise anticipates using some of these reserves for normal operations and expects the year-end balance to be $33.9M, which is approximately $8.4M over the 2019 budget amount of $25.6M.

Entity Actual Budget Over

(Under)NERC 10,842,801$ 8,453,020$ 2,389,781$ FRCC 461,305 1,333,844 (872,539) MRO 4,730,716 1,818,473 2,912,243 NPCC 4,969,944 4,453,571 516,373

RF 4,874,324 4,318,238 556,086 SERC 2,945,995 2,328,184 617,811

Texas RE 2,223,149 1,314,649 908,500 WECC 6,537,757 5,838,401 699,356

37,585,991$ 29,858,380$ 7,727,611$

2019 Beginning Reserve Balances

Entity YTD Actual YTD Budget Over

(Under)NERC 1,347,616 (1,361,306) 2,708,922 FRCC (794,171) (395,452) (398,719) MRO 911,717 (110,055) 1,021,772 NPCC 269,549 (153,357) 422,906

RF (256,773) (855,985) 599,212 SERC (259,727) 33,642 (293,369)

Texas RE 797,827 233,843 563,984 WECC 13,450,886 12,883,940 566,946

15,466,924$ 10,275,270$ 5,191,654$

2019 Change in Reserve Balances


As it approaches the 2020 budget year, the ERO Enterprise is expected to begin the year with $955k in additional reserves above what was planned in the combined budgets.

Entity YTD Actual YTD Budget Over

(Under) Entity

Year-EndProjected Balance

Year-EndBudgeted Balance

Over(Under)

NERC 12,190,417$ 7,091,714$ 5,098,703$ NERC 9,253,465$ 8,071,237$ 1,182,228$ FRCC (332,866) 938,392 (1,271,258) FRCC - 557,982 (557,982) MRO 5,642,433 1,708,418 3,934,015 MRO 5,488,515 1,369,042 4,119,473 NPCC 5,239,493 4,300,214 939,279 NPCC 4,458,235 3,720,593 737,642

RF 4,617,551 3,462,253 1,155,298 RF 4,249,862 3,144,752 1,105,110 SERC 2,686,268 2,361,826 324,442 SERC 1,142,615 1,800,001 (657,386)

Texas RE 3,020,976 1,548,492 1,472,484 Texas RE 2,652,753 1,622,503 1,030,250 WECC 19,988,643 18,722,341 1,266,302 WECC 6,722,649 5,302,021 1,420,628

53,052,915$ 40,133,650$ 12,919,265$ 33,968,094$ 25,588,131$ 8,379,963$

2019 YTD and Projected Year-End Reserve Balances

Entity

2019Year-End Projected Balance

2020BeginningBudgetedBalance

Over(Under)

NERC 9,253,465$ 9,454,106$ (200,641)$ FRCC - - - MRO 5,488,515 4,934,448 554,067 NPCC 4,458,235 4,426,112 32,123

RF 4,249,862 3,700,836 549,026 SERC 1,142,615 1,142,615 -

Texas RE 2,652,753 2,530,999 121,754 WECC 6,722,649 6,823,951 (101,302)

33,968,094$ 33,013,067$ 955,027$

2019 Ending Reserves vs 2020 Beginning Reserves

FRCC Regional Entity Division Unaudited Budget to Actual

Variance Comparison as of June 30, 2019 Summary For the six months ended June 30, 2019, FRCC is $1.4M over budget. Total Funding – Favorable Variance $1.0M

ERO assessments were $630K favorable to budget due to a FERC approved special assessment charged to LSEs to fund the wind down costs of the RE.

Penalty income was $383K favorable to budget due to the recognition of penalty monies received pursuant to the petition approving the RE dissolution.

Total Expenses – Unfavorable Variance $1.5M

Personnel Expenses (Actual - $1.5M over budget) o The unfavorable variance is primarily due to retention agreements at amounts higher than

budgeted related to the RE dissolution. The 2019 budget was approved prior to the FRCC board’s decision to dissolve the RE. The unfavorable variance is partially offset by budgeted profit-sharing expenses that will not be paid out, unbudgeted collection of an insurance claim and educational expenses budgeted higher than actual.

Meeting Expenses (Actual - $30K under budget) o The favorable variance is due to minimal staff travel for reliability assessment activities

and reduced travel for compliance monitoring and enforcement activities.

Operating Expenses (Actual - $23K under budget) o The favorable variance is primarily due to the following:

Consultants and Contracts Contract auditor costs budgeted but not incurred ($135K) SERC CEA costs less than budgeted ($46K) ERAG fees less than budgeted ($13k)

Software Guidance software costs not incurred ($15K) CRISP budgeted but not implemented ($13K)

The favorable variances were offset by an unfavorable variance in rent expense due to the accrual of $255K of rent expenses through the remainder of the RE lease term, which expires in September 2020.

Total Fixed Asset Expense – Favorable Variance $45K Software CapEx (Actual - $20K under budget)

o The favorable variance is primarily due to fewer enhancements to the Compliance software.

Computers CapEx (Actual - $14K under budget)

o The favorable variance is due to the freeze on fixed asset purchases due to the RE transition.

(In Whole Dollars)

2019 YTD Actual 2019 YTD Budget 2019 YTD Variance %

2019 Full Year Projection 2019 Budget

2019 Projected Variance %

FundingERO Funding

ERO Assessments 3,543,962$ 2,913,962$ 630,000$ 2,913,962$ 5,827,924$ (2,913,962)$ Penalty Sanctions 383,000 - 383,000$ 1,483,000 - 1,483,000 Total ERO Funding 3,926,962 2,913,962 1,013,000 34.8% 4,396,962$ 5,827,924$ (1,430,962)$ -24.6%

Membership Dues - - - - - - Testing Fees - - - - - - Services & Software - - - - - - Workshops 91,285 92,000 (715) 92,000 92,000 - Interest 3,690 - 3,690 - - - Special Assessment - - - - - - Non Cash Postretirement - - - - - -

Total Funding 4,021,937 3,005,962 1,015,975 33.8% 4,488,962 5,919,924 (1,430,962) -24.2%

ExpensesPersonnel Expenses

Salaries 3,414,827 1,783,682 1,631,145 3,428,591 3,595,017 (166,426) Payroll Taxes 187,503 135,119 52,384 91,860 221,843 (129,983) Benefits 127,136 261,700 (134,564) 334,187 523,400 (189,213) Retirement Costs 198,848 235,014 (36,166) 208,118 470,029 (261,911)

Total Personnel Expenses 3,928,314 2,415,515 1,512,799 62.6% 4,062,756 4,810,289 (747,533) -15.5%

Meeting ExpensesMeetings 59,283 60,813 (1,530) 68,654 68,826 (172) Travel 43,832 73,132 (29,300) 82,271 146,263 (63,992) Conference Calls 5,730 5,159 571 5,946 10,318 (4,372)

Total Meeting Expenses 108,845 139,104 (30,259) -21.8% 156,871 225,407 (68,536) -30.4%

Operating ExpensesConsultants & Contracts 214,304 453,921 (239,617) 310,235 875,842 (565,607) Office Rent 505,546 282,960 222,586 516,876 565,921 (49,045) Office Costs 48,281 54,180 (5,899) 52,157 106,860 (54,703) Professional Services 10,818 22,037 (11,219) 32,749 44,073 (11,324) Miscellaneous - - - - - - Depreciation 51,177 40,368 10,809 77,464 80,735 (3,271)

Total Operating Expenses 830,126 853,466 (23,340) -2.7% 989,481 1,673,431 (683,950) -40.9%

Total Indirect Expenses - - - 0.0% - - - 0.0%

Other Non-Operating Expenses - - - - - -

Total Expenses 4,867,285 3,408,085 1,459,200 42.8% 5,209,108 6,709,127 (1,500,019) -22.4%

Change in Assets/Additions (Use) of Reserves (845,348) (402,123) (443,225) 110.2% (720,146) (789,203) 69,057 -8.8%

Fixed Asset ExpendituresDepreciation (51,177) (40,368) (10,809) (77,464) (80,735) 3,271 Software CapEx - 20,000 (20,000) - 40,000 (40,000) Furniture & Fixtures CapEx - - - - - - Equipment & Computers CapEx - 13,697 (13,697) 7,696 27,394 (19,698) Leasehold Improvements - - - - - -

Increase/(Decrease) in Fixed Assets (51,177) (6,671) (44,506) 667.2% (69,768) (13,341) (56,427) 423.0%

Total Budget 4,816,108 3,401,414 1,414,694 41.6% 5,139,340 6,695,786 (1,556,446) -23.2%

CHANGE IN WORKING CAPITAL (794,171)$ (395,452)$ (398,719)$ 100.8% (650,378)$ (775,862)$ 125,484$ -16.2%

FTEs 19.77 20.75 (0.98) 19.89 20.75 (0.86)

Beginning Working Capital 1/1/2019 461,305$ 1,333,844$ (872,539)$ 1/1/2019 461,305$ 1,333,844$ (872,539)$ Change in Working Capital (794,171) (395,452) (398,719) (650,378) (775,862) 125,484 Working Capital at 6/30/2019 (332,866)$ 938,392$ (1,271,258)$ 6/30/2019 (189,073)$ 557,982$ (747,055)$

Florida Reliability Coordinating Council, Inc.Quarterly Statement of Activities - Total Actual To Total Budget

TOTAL Statutory OnlyJune 30, 2019

1

Ken Gartner, Interim Corporate Treasurer P: 651.855.1711 F: 651.855.1712

E: [email protected] July 22, 2019

Mr. Andy Sharp North American Electric Reliability Corporation (NERC)

RE: Unaudited Midwest Reliability Organization (MRO) 2019 Second Quarter Statement of Activity – Cash Flow through June 30, 2019

Dear Mr. Sharp:

To-date MRO has experienced variances greater than $10,000 and 10 percent. Second quarter results show that actual expenses are 13.0 percent under budget.

Meeting Expenses (Variance of $261,437 (49.7%) under budget) Meeting costs are expected to come in on budget, and travel expenses are under budget by 57.3 percent primarily due to fewer than anticipated personnel traveling. Operating Expenses (Variance of $316,815 (16.9%) under budget) Consultants and contracts are under budget by 56.2 percent; however, it is expected that costs will peak in the third quarter when compliance contracts become effective. IT consulting is also expected to peak in the third quarter as MRO participates in regional wide joint IT purchasing. Under budget expenses in consultants and contracts are partially offset by over budget expenses in professional services. Budget Outlook The 2019 budget projection also reflects an underage in personnel costs because we are not yet fully staffed at 59 FTEs. This is due to the strong economy, making the process take longer to source, identify, and recruit qualified candidates with the appropriate background and experiences necessary for the roles. In addition, we recently experienced the voluntary turnover of two team members. This has resulted in a variance of $476,465 or 8.2 percent under budget for personnel expenses. Recruitment efforts are underway; however, realization of all FTEs by year-end will be a challenge. Projected year-end personnel expenses are expected to be under budget by 7.8 percent. As staff levels continue to increase, MRO faces challenges with its current facility capacity and configuration. The addition of staff will absorb the remaining seating capacity in MRO’s office, and it appears necessary to expend one-time costs to reconfigure parts of the office to allow for efficient use of the space. Under budget personnel costs will be able to offset this one-time expenditure.

Operating expenses are anticipated to be over budget by year-end. One factor relates to regional IT expenditures unplanned in 2019 will take place in 2019 due to the joint purchase program among NERC and the regions. Overall, operating expenses will be partially offset by underage in other expense areas.

mailto:[email protected]

2

If you have any questions regarding this report, please contact me.

Thank you,

Ken Gartner Ken Gartner

Cc: Sara Patrick, MRO President and CEO

3

(In Whole Dollars)

2019 YTD

Actual

2019 YTD

Budget

2019 YTD

Variance %

Projected

2019 End Of

Year

2019

Budget

2019

Variance %

FundingERO Funding

ERO Assessments 7,735,835$ 7,735,835$ - 15,471,670$ 15,471,670$ - Penalty Sanctions 29,627 29,628 - 59,255 59,255 -

Total ERO Funding 7,765,463$ 7,765,463$ $ - 15,530,925$ 15,530,925$ $ -

Federal GrantsMembership Dues - - - - - - Testing Fees - - - - - - Services & Software - - - - - - Workshops - - - - - - Interest - - - - - - Miscellaneous/Transitional Funding - - - - - -

Total Funding 7,765,463$ 7,765,463$ $ - 15,530,925$ 15,530,925$ $ -

ExpensesPersonnel Expenses

Salaries 3,925,973$ 4,193,256$ (267,283) 7,845,488$ 8,386,512$ (541,024)Payroll Taxes 261,095 269,679 (8,583) 482,923 539,357 (56,434)Benefits 424,761 464,442 (39,681) 899,437 928,884 (29,447)Retirement Costs 696,540 857,458 (160,918) 1,434,382 1,714,916 (280,534)

Total Personnel Expenses 5,308,370$ 5,784,835$ (476,465)$ -8.2% 10,662,231$ 11,569,669$ (907,438)$ -7.8%

Meeting ExpensesMeetings 70,812$ 72,925 (2,113) 145,850$ 145,850$ - Travel 193,333 452,657 (259,324) 744,314 905,314 (161,000)Conference Calls - - - - - -

Total Meeting Expenses 264,145$ 525,582$ (261,437)$ -49.7% 890,164$ 1,051,164$ (161,000)$ -15.3%

Operating ExpensesConsultants & Contracts 240,660$ 550,005$ (309,345) 836,010$ 1,100,010$ (264,000)Office Rent 361,538 371,750 (10,212) 743,500 743,500 - Office Costs 273,037 429,007 (155,970) 878,513 858,013 20,500 Professional Services 398,158 206,500 191,658 513,000 413,000 100,000 Miscellaneous - - - - - - Depreciation 280,054 313,000 (32,946) 626,000 626,000 -

Total Operating Expenses 1,553,447$ 1,870,262$ (316,815)$ -16.9% 3,597,023$ 3,740,523$ (143,500)$ -3.8%

Total Direct Expenses 7,125,961$ 8,180,678$ (1,054,717)$ -12.9% 15,149,418$ 16,361,356$ (1,211,938)$ -7.4%

Indirect Expenses

Other Non-Operating Expenses -$ -$ - -$ -$ -$

Total Expenses 7,125,961$ 8,180,678$ (1,054,717)$ 15,149,418$ 16,361,356$ (1,211,938)$

Change in Assets 639,502$ (415,216)$ 1,054,717$ 381,507$ (830,431)$ 1,211,938.30$

Fixed AssetsDepreciation (280,054) (313,000) 32,946 (626,000) (626,000) - Computer & Software CapEx 3,129 3,129 - 245,000 245,000 - Furniture & Fixtures CapEx - - - - - - Equipment CapEx - - - - - - Leasehold Improvements 4,709 4,709 - 4,709 - 4,709

Inc(Dec) in Fixed Assets (272,215)$ (305,162)$ 32,946$ -10.8% (376,291)$ (381,000)$ 4,709$ -1.2%

Total Budget (B + C) 6,853,746$ 7,875,516$ (1,021,771)$ -13.0% 14,773,127$ 15,980,356$ (1,207,229)$ -7.6%

Change in Working Capital (A-B-C) 911,717$ (110,054)$ 1,021,771$ 757,798$ (449,431)$ 1,207,229$

Head Count 52.00 59.00 (7.00) 56.00 59.00 (3.00)FTEs 52.42 59.00 (6.58) 54.10 59.00 (4.90)

Beginning WC-1/1/19 4,730,716$ 1,818,473$ $ 2,912,243 4,730,716$ 1,818,473$ 2,912,243 Change to WC-2019 911,717 (110,054) 1,021,771 757,798 (449,431) 1,207,229

Working Capital at June 30 ,2019 5,642,433$ 1,708,419$ $ 3,934,014 5,488,514$ 1,369,042$ 4,119,472$

Midwest Reliability Organization

Statement of Activity

From 1/1/2019 to 06/30/2019

PRELIMINARY (Unaudited)

July 18, 2019 North American Electric Reliability Corporation 3353 Peachtree Road NE Suite 600, North Tower Atlanta, GA 30326 Attention: Mr. Andy Sharp Subject: NPCC Regional Entity Division Variance Comparison and Second Quarter 2019 Statement of Activities Dear Andy: The variance comparison for the period ended June 30, 2019 is included along with Northeast Power Coordinating Council, Inc.’s unaudited Second Quarter 2019 Statement of Activities. Please do not hesitate to contact me via email at [email protected] or via telephone at (212) 840-1070 should you have any comments or questions with regard to the materials provided. Sincerely,

Jessica Hala Jessica Hala Director, Finance and Accounting Enclosures cc: Mr. Christopher Weir, CPA – NPCC Treasurer Mr. Edward A. Schwerdt – NPCC President & CEO Ms. Jennifer Budd Mattiello – NPCC Senior Vice President & COO ERO Finance Group

mailto:[email protected]

1

NPCC Regional Entity Division Budget to Actual

Variance Comparison as of June 30, 2019

TOTAL EXPENSES

For the quarter ending June 30, 2019, the NPCC Regional Entity Division is $352k or -4.60% under budget year to date. Based on planned activities, NPCC’s current full year projection is an under budget variance of $168k or -1.06%. NPCC will reprioritize resources as necessary to fulfill all of its responsibilities under its Regional Delegation Agreement.

INCOME

• Penalty Sanctions No penalty sanctions were remitted from July 1, 2017 through June 30, 2018. All penalty sanctions remitted from July 1, 2018 through June 30, 2019 will be included in the NPCC 2020 Business Plan and Budget and applied to reduce 2020 assessments to NPCC U.S. load serving entity designees.

• Interest & Investment Income (Actual income of $33k year-to-date, not included in budget) NPCC accounts for but has not budgeted for interest income for operating fund investments as returns on U.S. treasury securities fund are negligible and corporate money market fund returns have been minimal.

o NPCC allocated $33k as a portion of total interest income (93%) to the Regional Entity Division

consistent with the ratio of Regional Entity (RE) to Criteria Services (CS) Division 2019 funding. A common system of accounts, with divisional separation, is used for both RE and CS revenue tracking and financial reporting.

EXPENSES

• Personnel Expenses (Variance of $159k under budget year-to-date, and $165k under budget FYP) o NPCC currently has three open positions resulting from recent retirements, which are anticipated to be

filled by September 2019. Recent vacancies were filled through a combination of in-house promotions, resource re-allocations and the retention of less seasoned successors with the expected net result of lower than budgeted salaries and related benefits.

• Meetings and Conference Calls (Variance of $56k under budget year-to-date, and as budgeted FYP) o The current underage is primarily due to timing of planned meetings, with the heaviest meeting schedule

occurring in the fourth quarter. Efforts to limit the number of attendees sent to off-site meetings, and to hold more meetings onsite, at member facilities or via webinar where effective, will continue.

2

• Consultants and Contracts (Variance of $108k under budget year-to-date, and as budgeted FYP)

o Year-to-date under budget is due to the timing of the use of independent contractors for compliance audits. The full year projection continues to be as budgeted.

• Fixed Assets (Variance of $18k over budget year to date and as budgeted FYP) o Year to date over budget variance is primarily due to the timing of scheduled software development

projects, which include website enhancements and the continued roll out of a document management system. Equipment capital expenditure includes hardware related to CRISP implementation.

(Unaudited) Submitted July 18, 2019

2019 YTD Actual

2019 YTD Budget

2019 YTD Actual

Variance from Budget %

2019 Projection

2019 Annual Budget

2019 Projection

Variance from Budget %

Funding Assessments 7,501,706 7,501,706 - 15,003,411 15,003,411 - Penalties - - - - - - Testing - - - - - - Services & Software - - - - - - Workshop Fees 37,860 - 37,860 67,500 67,500 - Interest 33,294 - 33,294 33,294 - 33,294 Miscellaneous - - - - - - Total Funding 7,572,860 7,501,706 71,154 0.95% 15,104,205 15,070,911 33,294 0.22%

Expenses Personnel Expenses Salaries 3,551,406 3,666,140 (114,734) 7,216,280 7,332,280 (116,000) Payroll Taxes 306,889 314,995 (8,106) 444,992 449,992 (5,000) Employee Benefits 779,822 806,539 (26,718) 1,585,078 1,613,078 (28,000) Savings & Retirement 417,238 426,755 (9,517) 837,510 853,510 (16,000)Total Personnel Expenses 5,055,355 5,214,430 (159,075) -3.05% 10,083,862 10,248,862 (165,000) -1.61% Meeting Expenses Meetings 141,866 163,300 (21,434) 370,750 370,750 - Travel 311,556 338,360 (26,804) 845,900 845,900 - Conference Calls 10,510 18,000 (7,490) 36,000 36,000 - Total Meeting Expenses 463,932 519,660 (55,728) -10.72% 1,252,650 1,252,650 - 0.00% Operating Expenses Consultants & Contracts 775,015 883,360 (108,345) 2,022,150 2,022,150 - Rent & Improvements 408,533 410,350 (1,817) 820,700 820,700 - Office Costs 309,605 338,173 (28,568) 676,347 676,347 - Professional Services 430,551 429,000 1,551 978,000 978,000 - Miscellaneous 23,917 25,500 (1,583) 51,000 51,000 - Depreciation 103,764 127,500 (23,736) 255,000 255,000 - Total Operating Expenses 2,051,385 2,213,883 (162,498) -7.34% 4,803,197 4,803,197 - 0.00%

Indirect Expense Allocation (199,995) (207,909) 7,914 -3.81% (415,818) (415,818) - 0.00%

Other Non-Operating Expenses - - - n/a - - - n/a

Total Expenses 7,370,677 7,740,064 (369,387) -4.77% 15,723,891 15,888,891 (165,000) -1.04%Net Change in Assets 202,183 (238,358) 440,541 -184.82% (619,686) (817,980) 198,294 -24.24%

Fixed Assets Depreciation (103,764) (127,500) 23,736 (255,000) (255,000) - Computer & Software CapEx 9,373 42,500 (33,127) 140,000 170,000 (30,000) Furniture & Fixtures CapEx - - - - - - Equipment CapEx 27,025 - 27,025 27,025 - 27,025 Leasehold Improvements - - - - - - Incr(Dec) in Fixed Assets (67,366) (85,000) 17,634 -20.75% (87,975) (85,000) (2,975) 3.50%

Total Budget (Expenses plus Incr(Dec) in Fixed Assets) 7,303,311 7,655,064 (351,753) -4.60% 15,635,916 15,803,891 (167,975) -1.06%Change in Working Capital (Total Funding less Total Budget) 269,549 (153,358) 422,907 -275.76% (531,711) (732,980) 201,269 -27.46%

Equivalent Full Time Employees 36.65 38.86 (2.21) 37.65 36.86 0.79 Headcount 38.00 41.00 (3.00) 41.00 41.00 -

Beginning Total Reserves - 1/1/19 4,969,944 4,453,571 516,373 4,969,944 4,453,571 516,373 Change to Reserves - YTD 2019 269,549 (153,358) 422,907 (531,711) (732,980) 201,269

Projected Total Reserves at 12/31/19 5,239,493 4,300,213 939,280 4,438,233 3,720,591 717,642

Northeast Power Coordinating Council, Inc. - Regional Entity DivisionStatement of Activities, Fixed Assets and Change in Working Capital

(Unaudited)For the Period Ended June 30, 2019

Forward Together • ReliabilityFirst

July 22, 2019 Mr. Andy Sharp North American Electric Reliability Corporation 3353 Peachtree Road, N.E. Suite 600, North Tower Atlanta, Georgia 30326

ReliabilityFirst’s 2019 2nd Quarter Statement of Activities Variance Report - Unaudited

Dear Mr. Andy Sharp:

As requested, the attached 2019 2nd Quarter Statement of Activities (unaudited) provides a comparison of budgeted and actual expenses relative to the 2019 ReliabilityFirst Corporation’s Budget. For more information, please contact me at 216.503.0600 or [email protected]. Very truly yours, RELIABILITYFIRST CORPORATION

Jill S. Lewton

Jill S. Lewton

Controller

Jill S. Lewton Controller

3 Summit Park Drive, Suite 600 Cleveland, OH 44131 Office: 216.503.0600

[email protected]


ReliabilityFirst’s 2019 2nd Quarter Statement of Activities Variance Report - Unaudited

Significant Variances For the quarter ending June 30, 2019 ReliabilityFirst Corporation is $475k (4%) under budget. The major contributors to this variance are:

Budget Funding • Investment Income: $124K (989%) over budget for YTD o Investment Income is over budget due to greater than anticipated growth in value of the

company’s investment portfolio.

Budget Expenses • Personnel Expenses

o Personnel Expenses: $288K (3%) under budget for YTD Personnel Expenses are primarily under budget due to staffing that is below the approved levels. ReliabilityFirst currently has two open positions and is actively pursuing qualified candidates. In addition to the effect of the vacant positions, Employee Benefits are also impacted by underutilized budgeted training.

• Meeting Expenses

o Meetings: $19K (12%) over budget for YTD Meeting expenses are primarily over budget due to the increased costs associated with the Spring Reliability & CIP workshops and the annual offsite leadership retreat.

• Operating Expenses

o Contracts & Consultants: $53K (19%) under budget for YTD Contracts and Consultants expense is under budget due to a budgeted security assessment in the 2nd quarter that will not occur until later in the year. This variance is offset by the increased hours and costs associated with the data warehouse project.

o Office Costs: $52K (12%) under budget for YTD Office Costs are primarily under budget due to an earlier than anticipated purchase of laptops in 2018 that were budgeted for in January 2019.


• Fixed Assets

o Computer Hardware & Software: $99K (79%) under budget for YTD Computer Hardware & Software is under budget due to the difference in timing of when purchases are estimated, compared to when they actually occur.

o Leasehold Improvements: $17K (100%) under budget for YTD Leasehold Improvements is under budget due to the reevaluation and rescheduling of the budgeted office modifications.

Reserves • Working Capital Reserve

The Working Capital Reserve of $2,144,752 will be utilized to satisfy projected cash flow for daily operations and to stabilize and minimize volatility in future years’ assessments.

• Operating Reserve The Operating Reserve of $1,000,000 has been designated with the intention of providing for any unbudgeted and unexpected expenditures for the organization.

Year-End Projection For the year-end projection ReliabilityFirst is $327K (1.44%) under budget. The variances in Investment Income, Personnel Expenses, Meetings, and Office Costs are expected to continue throughout the remainder of the year. Conference Calls is expected to be further under budget due to the savings that will be experienced by consolidating conferencing capabilities with NERC and the other regional entities. Contracts & Consultants is expected to be over budget due to the costs associated with the Data Warehouse project. Computer Hardware & Software and Leasehold Improvements are expected to be close to budget due to the completion of the budgeted IT projects and office modifications during the 4th quarter.

ReliabilityFirst CorporationStatement of Activities, Fixed Assets and Change in Working Capital

(unaudited)From 01/01/2019 Through 06/30/2019

(in Whole Numbers)

2019 YTD Actual

2019 YTD Budget

YTD Variance Over/(Under)

%Variance

Total 2019Projection

Total 2019 Budget

Total 2019 Projected Variance

Over/(Under)

% Projected Variance

Funding10,627,916 10,627,916 0 0.00% Assessments 21,255,831 21,255,831 0 0.00%

327,215 327,215 0 0.00% Penalty Sanctions 327,215 327,215 0 0.00%136,093 12,500 123,593 988.74% Investment Income 272,186 50,000 222,186 444.37%

700 0 700 0.00% Miscellaneous Income 0 0 0 0.00%11,091,924 10,967,631 124,293 1.13% Total Funding 21,855,232 21,633,046 222,186 1.03%

Expenses Personnel Expenses

6,752,997 6,835,219 (82,222) -1.20% Salaries 13,553,753 13,701,386 (147,633) -1.08%495,338 505,626 (10,288) -2.03% Payroll Taxes 800,895 807,085 (6,190) -0.77%

1,096,004 1,255,342 (159,338) -12.69% Employee Benefits 2,129,648 2,307,002 (177,354) -7.69%1,211,183 1,246,698 (35,515) -2.85% Savings & Retirement Costs 2,199,859 2,252,749 (52,890) -2.35%9,555,522 9,842,885 (287,363) -2.92% Total Personnel Expenses 18,684,155 19,068,222 (384,067) -2.01%

Meeting Expenses179,062 160,270 18,792 11.73% Meetings 344,200 314,200 30,000 9.55%332,061 339,050 (6,989) -2.06% Travel 678,600 678,600 0 0.00%16,935 26,100 (9,165) -35.11% Conference Calls 30,153 52,200 (22,047) -42.24%

528,058 525,420 2,638 0.50% Total Meeting Expenses 1,052,953 1,045,000 7,953 0.76%

Operating Expenses224,486 277,026 (52,540) -18.97% Contracts & Consultants 580,612 528,612 52,000 9.84%285,847 260,543 25,304 9.71% Rent & Utilities 555,847 521,086 34,761 6.67%401,538 453,776 (52,238) -11.51% Office Costs 775,130 815,130 (40,000) -4.91%224,164 223,061 1,103 0.49% Professional Services 423,522 423,522 0 0.00%22,403 19,868 2,535 12.76% Miscellaneous 44,806 43,886 920 2.10%

217,281 229,452 (12,171) -5.30% Depreciation 434,562 458,903 (24,341) -5.30%1,375,719 1,463,726 (88,007) -6.01% Total Operating Expenses 2,814,479 2,791,139 23,340 0.84%

0 0 0 0.00% Non-Operating Expenses 0 0 0 0.00%

11,459,299 11,832,031 (372,732) -3.15% Total Expenses 22,551,587 22,904,361 (352,774) -1.54%

(367,375) (864,400) 497,025 -57.50% Net Change in Assets (696,355) (1,271,315) 574,960 -45.23%

Fixed Assets(217,281) (229,452) 12,171 -5.30% Depreciation (434,562) (458,903) 24,341 -5.30%

1,595 0 1,595 0.00% Equipment 1,595 0 1,595 0.00%26,047 125,000 (98,953) -79.16% Computer Hardware & Software 180,000 180,000 0 0.00%

0 0 0 0.00% Furniture & Fixtures 0 0 0 0.00%0 17,000 (17,000) -100.00% Leasehold Improvements 23,000 23,000 0 0.00%

(189,639) (87,452) (102,187) 116.85% Increase/(Decrease) in Fixed Assets (229,967) (255,903) 25,936 -10.14%

11,269,660 11,744,579 (474,919) -4.04%Total Budget

(Expenses + Incr/(Decr) in Fixed Assets)22,321,620 22,648,458 (326,838) -1.44%

(177,736) (776,948) 599,212 -77.12%

Change in Working Capital(Total Funding less Total Budget)

(466,388) (1,015,412) 549,024 -54.07%

76.76 78.20 (1.44) -1.84% FTE 78.47 78.20 0.27 0.35%

2,613,256 1,173,486 1,439,770 WC - 12/31/2018 2,613,256 1,173,486 1,439,770(883,684) 0 (883,684) Less: Adjustment for future liabilities (883,684) 0 (883,684)

1,729,572 1,173,486 556,086 Available Working Capital 1,729,572 1,173,486 556,086

(177,736) (776,948) 599,212 Change to WC - 2019 (466,388) (1,015,412) 549,024(79,037) (79,037) 0 Other Adjustments to Reserves (158,074) (158,074) 0

1,472,799 317,501 1,155,298 Total Working Capital 1,105,110 0 1,105,110

2,144,752 2,144,752 0 Working Capital Reserve 2,144,752 2,144,752 01,000,000 1,000,000 0 Operating Reserve 1,000,000 1,000,000 0

4,617,551 3,462,253 1,155,298 Total Working Capital and Operating Reserve 4,249,862 3,144,752 1,105,110

3701 Arco Corporate Drive, Suite 300, Charlotte, NC 28273 • Office: 704-357-7372 • Fax: 704-357-7914 • www.serc1.org

July 15, 2019 Mr. Andy Sharp North American Electric Corporation 3353 Peachtree Road, NE Atlanta, GA 30326 RE: SERC 2019 Q2 Unaudited Financial Statement – Budget vs. Actual Andy: Following please find SERC’s unaudited 2019 Q2 financial statement, reflecting actual to budgeted amounts with variance explanations. If you have any questions, please let me know. Thank you,

George Krogstie Chief Financial Officer and Corporate Treasurer cc: Jason Blake

http://www.serc1.org/

2019 Actual2019 YTD Budget

2019 YTD Actual Variance

Over/(Under) %2019

Projection 2019 Budget

2019 Actual Variance from

Budget Over(Under) %

Funding ERO Funding 8,686,108 8,686,107 1 17,372,215 17,372,215 - Penalties 145,200 83,000 62,200 974,919 83,000 891,919 Workshops & Misc. 95,134 62,250 32,884 3,074,511 160,550 2,913,961 Interest 29,836 500 29,336 51,000 1,000 50,000

Total Funding 8,956,278 8,831,857 124,421 1.41% 21,472,645 17,616,765 3,855,880 21.89%

Expenses Personnel Expenses Salaries 5,333,758 5,138,364 195,394 12,443,871 10,276,729 2,167,142 Payroll Taxes 400,551 373,385 27,166 874,329 746,769 127,560 Benefits 545,926 600,299 (54,373) 1,669,962 1,172,398 497,564 Retirement Costs 651,345 665,214 (13,869) 1,576,639 1,330,427 246,212 Total Personnel Expenses 6,931,580 6,777,262 154,318 2.28% 16,564,801 13,526,323 3,038,478 22.46%

Meeting Expenses Meetings 215,913 123,575 92,338 578,300 306,700 271,600 Travel 372,648 292,498 80,150 788,922 648,922 140,000 Communications 13,425 15,000 (1,575) 30,000 30,000 - Total Meeting Expenses 601,986 431,073 170,913 39.65% 1,397,222 985,622 411,600 41.76%

Operating Expenses Contracts & Consultants 682,846 770,666 (87,820) 2,069,481 1,978,481 91,000 Office Rent 353,849 392,598 (38,749) 785,196 785,196 - Office Costs 350,148 231,337 118,811 678,985 535,986 142,999 Professional Services 85,169 47,580 37,589 150,340 110,340 40,000 Miscellaneous/Contingency (20,080) 2,700 (22,780) - 3,000 (3,000)Total Operating Expenses 1,451,932 1,444,881 7,051 0.49% 3,684,002 3,413,003 270,999 7.94%

Other Non-Operating Expenses - - - - - - - -

Total Expenses 8,985,498 8,653,216 332,282 3.84% 21,646,025 17,924,948 3,721,077 20.76%

Net Change in Assets (29,220) 178,642 (207,862) -116.36% (173,380) (308,183) 134,803 -43.74%

Fixed Assets Computer & Software CapEx 19,425 145,000 (125,575) 380,000 220,000 160,000 Furniture & Fixtures CapEx - - - - - - Equipment CapEx 34,958 - 34,958 - - - Leasehold Improvements 176,124 - 176,124 1,250,000 - 1,250,000 Increase(Decrease) in Fixed Assets 230,507 145,000 85,507 58.97% 1,630,000 220,000 1,410,000 640.91%

- Total Budget(Exp plus Incr/(Decr) in Fixed Assets 9,216,005 8,798,216 417,789 4.75% 23,276,025 18,144,948 5,131,077 28.28%

Change in Working Capital (Total Funding less Total Budget) (259,727) 33,642 (293,369) -872.04% (1,803,380) (528,183) (1,275,197) 241.43%

FTE's 70.00 78.00 (8.00) 88.00 78.00 10.00 Head Count 70.00 78.00 (8.00) 88.00 78.00 10.00

Beginning WC Reserve at 1-1-2019 2,945,995 2,328,184 617,811 2,945,995 2,328,184 617,811 Change to WC - 2019 (259,727) 33,642 (293,369) (1,803,380) (528,183) (1,275,197)

Working Capital Reserve at 6/30/2019 2,686,268 2,361,826 324,442 1,142,615 1,800,001 (657,386)

SERC Reliability CorporationYTD Report to Treasurer

From 1/1/2019 Through 6/30/2019(In Whole Dollars)

Budget to Actual Comparison as of June 30, 2019 (Unaudited) Overall Summary

• YTD spending $418K over budget associated with FRCC transition expenses • Funding $124k over budget attributable to distribution of SPP penalty funds and higher

than anticipated workshop attendance • Full year projected spending is $5.1M over budget, and funding $3.9M over budget,

reflecting the impact of the expected FRCC entity transition and partially offset by an additional $2.9M from FRCC Q3 and Q4 assessments, and $0.9M in penalty funds

Income

• Revenue (Actual - $124K over budget) o Includes $62K unbudgeted distribution of penalty funds from SPP o Full year projection includes $2.9M from FRCC Q3/Q4 assessments, and the

recognition of $0.9M in incremental penalty funds Expense

• Personnel Expenses (Actual - $154K over budget) o YTD salaries and payroll taxes over budget resulting from financial obligations

associated with staff restructuring o Projection reflects onboarding of additional FTEs to support FRCC activities

• Meeting/Travel Expenses (Actual - $171K over budget)

o Increased travel and meetings due to FRCC integrations activities

• Contracts/Consultants (Actual - $88K under budget) o YTD variance due to lower portal maintenance costs and timing of various project o FRCC data transfer and documentation retention system upgrades driving full

year budget increases

• Office Rent (Actual - $39K under budget) o True up of prior year operating costs resulted in a refund from landlord

• Office Costs (Actual – $119k over budget)

o YTD and projected variance driven by advanced purchases of equipment and software for additional staff related to FRCC transition

• Professional Services (Actual - $38K over budget) o Legal fees associated with employment matters and review of SERC bylaws

driving budget variance

• Fixed Asset Purchases (Actual - $86K over budget) o YTD and projected variance due to leasehold improvements for new office space

and upgrades to current document retention systems

TEXAS RELIABILITY ENTITY, INC. PAGE 1 OF 3 805 LAS CIMAS PARKWAY, SUITE 200 AUSTIN, TEXAS 78746 512-583-4900

July 12, 2019 Mr. Andy Sharp Controller North American Electric Reliability Corporation 3353 Peachtree Road NE, Suite 600, North Tower Atlanta, GA 30326 RE: Texas Reliability Entity, Inc. Second Quarter 2019 Statement of Activities and Variance Report Dear Andy, Attached is the 2019 Second Quarter Statutory Statement of Activities (unaudited) and Variance Report for Texas RE. Year-to-date Texas RE is 8.0% under budget. Please contact me if you have questions or comments. Thank you. Judy Foppiano Judy A. Foppiano, CPA CFO & Director of Corporate Services Texas Reliability Entity, Inc. 805 Los Cimas Parkway, Suite 200 Austin, Texas 78746 [email protected] 512.583.4959


Budget to Actual Comparison as of June 30, 2019 Year-to-date variances greater than $10,000 and 10% explained below.

FUNDING

• Penalty Sanctions: (Actual penalty income of $114,449 remitted to Texas RE as of June 30, 2018 has reduced 2019 assessments.) All penalty sanctions remitted from July 1, 2018 through June 30, 2019 will be included in the Texas RE 2020 Business Plan and Budget and applied to reduce 2020 assessments.

• Interest: $40,284 is greater than budget. Texas RE’s banking account is the Business Banking U.S. End of Day Money Market Mutual Fund Sweep account. This account type allows for higher interest and dividend collections than budgeted.

EXPENSES

Total Budget as of June 30, 2019 is $523,700 less than budget (-8.0%).

• Personnel Expenses: $360,903 less than budget (-7.0%).

o Variance due to vacancies in CMEP department for salaries, payroll taxes, and retirement plans.

o Health insurance did not increase as projected.

• Meetings and Travel Expenses: $16,945 less than 2019 budget (-8.9%).

o The spring workshop costs were less than budget along with the unified communication system contract being less than budgeted.

• Total Operating Expenses excluding Depreciation: $145,852 less than budget (-12.6%). o The cost for compensation studies is less than budget due to using the same

vendor for all studies and cost savings in IT managed services contract renewals cause the variance in Consultants and Contracts.

o The utility true up was less than anticipated. o Due to negogiations with vendors for internet expense and software

maintenance, office expense is less than budget. o Unused legal fees and lower costs for penetration testing cause Professional

Services to be less than budget.

Certain variances are timing issues and expected to level out as the year progresses. Otherwise, the forecast has been adjusted.


Texas Reliability Entity, Inc.

Statement of Activities and Fixed Assets For period ended June 30, 2019

(Unaudited)

Revenue 2019 Actual 2019 Budget

YTD Actual Variance

from Budget %2019

Forecast 2019 Annual

Budget

Forecast Variance from

Budget % ERO Funding Assessments 6,624,000$ 6,624,000$ -$ 13,248,000$ 13,248,000$ -$ Penal ty Sanctions 114,449 114,449 - 114,449 114,449 - Interest & Membership Dues 47,784 7,500 40,284 70,000 15,000 55,000 Total Revenue 6,786,233$ 6,745,949$ 40,284$ 0.6% 13,432,449$ 13,377,449$ 55,000$ 0.4%

Expenses Personnel Expenses Sa laries 3,451,971$ 3,663,845$ (211,874)$ -5.8% 7,394,175$ 7,394,175$ -$ Payrol l Taxes 276,349 280,372 (4,023) -1.4% 506,087 506,087 - Employee Benefi ts 578,547 718,550 (140,003) -19.5% 1,383,051 1,383,051 - Savings & Reti rement 501,061 506,064 (5,003) -1.0% 1,019,478 1,019,478 - Total Personnel Expenses 4,807,928$ 5,168,831$ (360,903)$ -7.0% 10,302,791$ 10,302,791$ -$ 0.0%

Meeting & Travel Expenses Meetings 2,742$ 6,400$ (3,658)$ -57.2% 10,000$ 19,800$ (9,800)$ Travel 162,198 173,884 (11,686) -6.7% 349,770 349,770 - Conference Expenses 8,408 10,010 (1,602) -16.0% 17,000 20,000 (3,000) Total Meeting & Travel Expenses 173,349$ 190,294$ (16,945)$ -8.9% 376,770$ 389,570$ (12,800)$ -3.3%

Operating Expenses Consul tants & Contracts 167,916$ 206,793$ (38,877)$ -18.8% 375,000$ 400,250$ (25,250)$ Rent & Improvements 292,659 346,104 (53,445) -15.4% 692,214 692,214 - Office Costs 326,852 343,834 (16,982) -4.9% 701,070 701,070 - Profess ional Services 219,703 256,250 (36,547) -14.3% 525,000 553,700 (28,700) Total Operating Expenses 1,007,129 1,152,981 (145,852) -12.6% 2,293,284 2,347,234 (53,950) -2.3%

Total Expenses 5,988,406$ 6,512,106$ (523,700)$ -8.0% 12,972,845$ 13,039,595$ (66,750)$ -0.5%

Change in Assets 797,827$ 233,843$ 563,984$ 241.2% 459,603$ 337,853$ 121,750$ 36.0%

Fixed Asset Additions, excluding Right of Use Assets -$ -$ -$ 0.0% 30,000$ 30,000$ -$ 0.0%

TOTAL BUDGET 5,988,406$ 6,512,106$ (523,700)$ -8.0% 13,002,845$ 13,069,595$ (66,750)$ -0.5%

Change in Working Captial (Total Revenue less Total Budget) 797,827$ 233,843$ 563,984$ 241.2% 429,604$ 307,854$ 121,750$ 39.5%

FTE's 58 60 60 60

Beginning WC - 1/1/19 2,223,149$ 1,314,649$ 908,500$ 2,223,149$ 1,314,649$ 908,500$

Change to WC - 2019 797,827 233,843 563,984 429,604 307,854 1,030,250

Working Capi ta l 6/30/2019 3,020,976$ 1,548,492$ 1,472,484$ 2,652,753$ 1,622,503$ 1,938,750$

Jillian Lessner Vice President and Chief Financial and

Administrative Officer July 18, 2019

155 North 400 West | Suite 200 | Salt Lake City, Utah 84103

Mr. Andy Sharp Interim Chief Financial Officer and Controller North American Electric Reliability Corporation 3353 Peachtree Road, N.E. Suite 600, North Tower Atlanta, GA 30326

RE: WECC Q2 2019 Statutory Statement of Activities and Variance Report

Dear Andy,

Attached is WECC’s second-quarter Statutory Statement of Activities (Unaudited) and Variance Report. WECC’s 2019 year-to-date unaudited results are $567,000 under budget.

If you have any questions or need more information, please contact me.

Regards,

Jillian Lessner Vice President and Chief Financial and Administrative Officer

Enclosures

Cc: Melanie Frye, President and Chief Executive Officer WECC Finance and Audit Committee

Statutory Statement of Activities

(Unaudited) As of June 30, 2019

Variance Report

155 North 400 West | Suite 200 | Salt Lake City, Utah 84103 www.wecc.org

Year-to-date variances greater than $10,000 and 10 percent are explained below. The explanations pertain to all statutory activities.

Revenue

• Workshop Fees: $49,000 over budget

Workshop Fees are over budget due to higher-than-expected attendance at the April Reliability and Security Workshop. Workshop Fees are expected to be over budget by $112,000 at year-end, due to higher-than-anticipated attendance at the April and October Reliability and Security Workshops.

• Interest: $79,000 over budget

Interest is over budget due to higher-than-expected yields on short-term investments and are expected to be over budget by $129,000 at year-end.

• Miscellaneous: $11,000 over budget

Miscellaneous is over budget due to higher-than-expected unrealized gains on short-term investments and equipment recycling proceeds.

Expenses

• Travel: $97,000 under budget

Travel is under budget due to less-than-anticipated CEMP-related travel, due to sending fewer individuals to each audit.

Fixed Assets

• Equipment CapEx: $34,000 over budget

Equipment CapEx is over budget due to timing of a SAN purchase, originally budgeted in July.

• Leasehold Improvements: $12,000 under budget

Leasehold Improvements are under budget due to the timing of updates to the Salt Lake City office space, originally budgeted in January.

Statutory Statement of Activities and Variance Explanations (July 18, 2019)

3

(In W hole Dollars)

2019 YTD Actual

2019 YTD Budget

2019 YTD Variance

Over(Under) % 2019 Projection

2019 Annual Budget

2019 Projected Variance

Over(Under) %

Funding Assessments 25,282,000 25,282,000 - 0.0% 25,282,000 25,282,000 - 0.0% Penalties 587,686 587,686 - 0.0% 587,686 587,686 - 0.0%

Federal Grants - - - - - - Testing - - - - - - Services & Software - - - - - - Workshop Fees 236,650 187,500 49,150 26.2% 536,150 424,500 111,650 26.3% Interest 139,213 60,000 79,213 132.0% 248,741 120,000 128,741 107.3% Miscellaneous 10,792 - 10,792 10,792 - 10,792 Total Funding 26,256,342 26,117,186 139,156 0.5% 26,665,370 26,414,186 251,184 1.0%

Expenses Personnel Expenses Salaries 7,354,751 7,511,586 (156,836) -2.1% 15,294,512 15,865,018 (570,506) -3.6% Payroll Taxes 524,422 561,911 (37,489) -6.7% 968,996 1,037,393 (68,397) -6.6% Employee Benefits 1,065,790 1,160,468 (94,678) -8.2% 2,273,268 2,302,710 (29,442) -1.3% Savings & Retirement 640,362 621,373 18,989 3.1% 1,352,805 1,311,110 41,695 3.2%Total Personnel Expenses 9,585,324 9,855,338 (270,014) -2.7% 19,889,580 20,516,231 (626,651) -3.1% Meeting Expenses Meetings 286,421 304,910 (18,489) -6.1% 694,699 640,953 53,746 8.4% Travel 625,893 722,607 (96,714) -13.4% 1,316,066 1,408,868 (92,802) -6.6% Conference Calls 32,174 28,800 3,374 11.7% 59,280 57,600 1,680 2.9%Total Meeting Expenses 944,488 1,056,317 (111,829) -10.6% 2,070,045 2,107,421 (37,376) -1.8% Operating Expenses Consultants and Contracts 667,599 735,214 (67,615) -9.2% 1,333,759 1,292,890 40,869 3.2% Rent & Improvements 499,862 486,442 13,420 2.8% 1,015,455 972,909 42,546 4.4% Office Costs 842,105 863,775 (21,670) -2.5% 1,640,544 1,557,679 82,865 5.3% Professional Services 475,532 469,690 5,842 1.2% 927,280 908,280 19,000 2.1% Miscellaneous - - - - - - Depreciation 119,015 119,272 (257) -0.2% 238,288 238,545 (257) -0.1%Total Operating Expenses 2,604,113 2,674,393 (70,280) -2.6% 5,155,327 4,970,303 185,024 3.7%

Direct Expenses 13,133,926 13,586,048 (452,123) -3.3% 27,114,953 27,593,955 (479,002) -1.7%

Indirect Expenses (258,835) (265,530) 6,695 -2.5% (537,565) (532,909) (4,656) 0.9%

Other Non-Operating Expenses - - - - - -

Total Expenses 12,875,091 13,320,517 (445,427) -3.3% 26,577,388 27,061,046 (483,658) -1.8%

Net Change in Assets 13,381,251 12,796,669 584,582 4.6% 87,982 (646,860) 734,842 -113.6%

Fixed Assets Depreciation (119,015) (119,272) 257 -0.2% (238,288) (238,545) 257 -0.1% Computer & Software CapEx - 5,000 (5,000) -100.0% - 5,000 (5,000) -100.0% Furniture & Fixtures CapEx - - - - - - Equipment CapEx 49,379 15,000 34,379 229.2% 79,379 105,000 (25,621) -24.4% Leasehold Improvements - 12,000 (12,000) -100.0% 62,000 12,000 50,000 416.7% Allocation of Fixed Assets - - - - 6,065 (6,065) -100.0%Incr(Dec) in Fixed Assets (69,636) (87,272) 17,636 -20.2% (96,909) (110,480) 13,571 -12.3%

Total Expenditures 12,805,455 13,233,245 (427,791) -3.2% 26,480,479 26,950,566 (470,087) -1.7%

Change in Working Capital (Total Funding less Total Budget) 13,450,887 12,883,941 566,946 4.40% 184,892 (536,380) 721,272 ########

FTEs 129.27 143.00 (13.73) 137.27 143.00 (5.73) Headcount 129.00 143.00 (14.00) 141.00 143.00 (2.00)

Beginning WC - 1/1/19 6,537,757 5,838,401 699,356 6,537,757 5,838,401 699,356 Change to WC - 2019 13,450,887 12,883,941 566,946 184,892 (536,380) 721,272

Working Capital at 6/30/19 19,988,645 18,722,342 1,266,303 6,722,650 5,302,021 1,420,629

Western Electricity Coordinating Council Statutory Statement of Activities

From 1/1/2019 to 6/30/2019 (Unaudited)

Documents

Agenda Finance and Audit Committee Finance and Audit Co… · 14/08/2019 · Finance and Audit Committee Informational Session and Webinar May 30, 2019 | 1:00 - 3:00 p.m. Eastern