Upload
luke-patterson
View
215
Download
3
Embed Size (px)
Citation preview
Flash to ActualAudit Report
September 25, 2001
Confidential
Enron Americas (“EA”)
Enron Assurance Services
Enron Industrial Markets (“EIM”)Enron Global Markets (“EGM”)
2Enron Assurance Services
Project Objective (EA, EGM, & EIM):
Our review was designed to identify and test key policies, procedures, and controls related to:
the tie-out between the Management Summary and Hyperion the reconciliations between the Daily Position Report (“DPR”) and General Ledger
(“G/L”) by product
the causes for and frequency of reconciling items and the magnitude of these variances
the reasonableness of frequent and infrequent reconciling items
Project Objective (EA, EGM, & EIM):
Our review was designed to identify and test key policies, procedures, and controls related to:
the tie-out between the Management Summary and Hyperion the reconciliations between the Daily Position Report (“DPR”) and General Ledger
(“G/L”) by product
the causes for and frequency of reconciling items and the magnitude of these variances
the reasonableness of frequent and infrequent reconciling items
Flash to Actual Audit
Enron Team Members:
AA Team Members:
Tom Bauer
John Boudreaux
Kate Agnew
Mark Meador
Allen Capps
Robin Dupuis
Georganne Hodges
Elaine Schield
Greg Whiting
Cassie Mayeux
Tracy Irvin
Sarah Brown
EA EGM
Tom Myers
Angeles Beltri
Jeff Smith
Mark Medwedeff
EIM
Allen Ueckert
Darin Talley
Kristen Hanson
Mike Moscoso
Shelly Wood
Donnie Myers
3Enron Assurance Services
DPR to G/L Reconciliations DPR to G/L Reconciliations
Flash to Actual Sample Summary
Testing Procedures
• AALLP reviewed the entire population of DPR to G/L reconciliations from 1/1/01 to 6/30/01 by business unit and selected a sample as detailed below:
* Judgmentally selected based on risk and volume
^ Represents all reconciliations (Paper, Lumber, & Steel)
• From these samples, we judgmentally selected various frequent and infrequent reconciling items and requested and reviewed the associated support. We also met with client personnel and discussed the items selected, in order to gain a better understanding of the cause behind the specific items and the procedures conducted to clear those items.
Testing Procedures
• AALLP reviewed the entire population of DPR to G/L reconciliations from 1/1/01 to 6/30/01 by business unit and selected a sample as detailed below:
* Judgmentally selected based on risk and volume
^ Represents all reconciliations (Paper, Lumber, & Steel)
• From these samples, we judgmentally selected various frequent and infrequent reconciling items and requested and reviewed the associated support. We also met with client personnel and discussed the items selected, in order to gain a better understanding of the cause behind the specific items and the procedures conducted to clear those items.
Business Unit
EA EGM EIM
Reconciliation Level
Book Profit Center Product
Sample Size
8* 6* 3^
4Enron Assurance Services
DPR to G/L Reconciliations DPR to G/L Reconciliations
Flash to Actual Sample Summary
Testing Procedures
• AALLP reviewed the entire population of DPR to G/L reconciliations from 1/1/01 to 6/30/01 by business unit and selected a sample as detailed below:
Testing Procedures
• AALLP reviewed the entire population of DPR to G/L reconciliations from 1/1/01 to 6/30/01 by business unit and selected a sample as detailed below:
EA (Books)
NG Price Options NG Price FT Intra East FT Denver LT Transport East FT Intra Central Power FT West
EGM (Profit Centers)
US Refined Products Interest Rate Affiliate Coal Weather US ARB US Residual Fuels
EIM (Products)
Paper Newsprint Pulp Recycled
Lumber Steel
5Enron Assurance Services
DPR to G/L Reconciliations DPR to G/L Reconciliations
Flash to Actual Sample Summary
Frequent Reconciling Items:
• Incorrect general journal (FI) entries Duplicated entries - booked twice Entries booked in reverse - debits that should have been credits G/L entries that did not get booked in the proper month are being booked in
subsequent months
• Entries booked to the the wrong Profit Center or book
• Inter-month timing differences between what has liquidated in one month and settled in a subsequent month.
• Outstanding 2000 items due to lack of time and resources in financial settlements as well as due to the complexities of the conversion from MSA to SAP
• 95 day true-up for weather products causing the need for a G/L adjustment
• Items that were booked as settled but not recognized as liquidated on the DPR because not properly captured in the liquidation system
• Gas Daily rates are incorrect when the last day of the month falls on a weekend
• Occasional differences between systems (for example, differences TAGG & ERMS) are allowed to flow through as reconciling items to be cleared once the Settlements group books the correct amount
Frequent Reconciling Items:
• Incorrect general journal (FI) entries Duplicated entries - booked twice Entries booked in reverse - debits that should have been credits G/L entries that did not get booked in the proper month are being booked in
subsequent months
• Entries booked to the the wrong Profit Center or book
• Inter-month timing differences between what has liquidated in one month and settled in a subsequent month.
• Outstanding 2000 items due to lack of time and resources in financial settlements as well as due to the complexities of the conversion from MSA to SAP
• 95 day true-up for weather products causing the need for a G/L adjustment
• Items that were booked as settled but not recognized as liquidated on the DPR because not properly captured in the liquidation system
• Gas Daily rates are incorrect when the last day of the month falls on a weekend
• Occasional differences between systems (for example, differences TAGG & ERMS) are allowed to flow through as reconciling items to be cleared once the Settlements group books the correct amount
6Enron Assurance Services
DPR to G/L Reconciliations DPR to G/L Reconciliations
Flash to ActualSample Summary
Infrequent Reconciling Items:
• Category on reconciliations called “NYMEX Income” where amounts booked to the G/L are incorrect due to accounting errors
• Broker fees not completely captured or not captured at all in the DPR
• Entries that should have auto-reversed in prior months that did not auto-reverse
• Changes in P&L due to the incorrect capture of closing prices
• Deals entered incorrectly into the system (for example TAGG) as financial instead of physical
• Transportation Spreads not discovered as a reconciling item during the financial close process are discovered during the DPR to G/L reconciliation process and cause a need to adjust the G/L
Infrequent Reconciling Items:
• Category on reconciliations called “NYMEX Income” where amounts booked to the G/L are incorrect due to accounting errors
• Broker fees not completely captured or not captured at all in the DPR
• Entries that should have auto-reversed in prior months that did not auto-reverse
• Changes in P&L due to the incorrect capture of closing prices
• Deals entered incorrectly into the system (for example TAGG) as financial instead of physical
• Transportation Spreads not discovered as a reconciling item during the financial close process are discovered during the DPR to G/L reconciliation process and cause a need to adjust the G/L
7Enron Assurance Services
DPR to G/L Reconciliations DPR to G/L Reconciliations
Flash to ActualOutstanding Reconciling Statistics
Enron AmericasAs of June 30, 2001
The following books were selected for further disclosure from our sample based upon risk and volume.
Enron AmericasAs of June 30, 2001
The following books were selected for further disclosure from our sample based upon risk and volume.
FT West Power
Pre 2001 Uncleared Income (982,499) (79,870,534) Pre 2001 Uncleared Loss 7,540,443 75,176,713 Net Pre 2001 Uncleared 6,557,944 (4,693,821) 2001 Uncleared Income (14,178,587) (167,258,709) 2001 Uncleared Loss 7,468,115 207,141,113 Net 2001 Uncleared (6,710,472) 39,882,404
Net Uncleared (152,528) 35,188,583
8Enron Assurance Services
DPR to G/L Reconciliations DPR to G/L Reconciliations
Flash to ActualOutstanding Reconciling Statistics
Enron Global MarketsAs of June 30, 2001
The following profit centers were selected for further disclosure from our sample based upon risk and volume.
Enron Global MarketsAs of June 30, 2001
The following profit centers were selected for further disclosure from our sample based upon risk and volume.
Refined Products Weather
Pre 2001 Uncleared Income 5,157,442 2,280,541 Pre 2001 Uncleared Loss (6,521,137) (2,290,198) Net Pre 2001 Uncleared (1,363,695) (9,657) 2001 Uncleared Income 19,207,534 6,550,294 2001 Uncleared Loss (10,528,915) (18,125,732) Net 2001 Uncleared 8,678,619 (11,575,438)
Net Uncleared 7,314,924 (11,585,095)
9Enron Assurance Services
DPR to G/L Reconciliations DPR to G/L Reconciliations
Flash to ActualOutstanding Reconciling Statistics
Enron Industrial MarketsAs of July 31, 2001
Enron Industrial MarketsAs of July 31, 2001
Paper Lumber SteelTotal Unreconciled Income (18,886,944) (185,423) (10,830,248) Total Unreconciled Loss 17,496,147 - 14,107,381 Net Unreconciled Balance (1,390,797) (185,423) 3,277,133
10Enron Assurance Services
Flash to Actual
High Priority Items
11Enron Assurance Services
Flash to Actual Audit ObservationsHigh Priority
Items to be addressed Action Step Target Date
Responsible Party
A Due to EIM being a newly formed business unit
in FYE 2001, the process of reconciling between
the DPR and G/ L for physical trading is
currently being implemented. Currently EIM
reconciles Paper, Steel, & Lumber separately,
and variances for each of these products
between the G/ L and DPR have been
established. However, there is an uncertainty
as to what comprises the majority of the detail
of these balances. Each month the new variance
balance is determined, all detailed variances
that can be isolated are cleared, and the
remaining balance is rolled to the following
month.
EIM should enhance its reconciliation process for
physical trading to ensure efficient and timely clearing
of items. Implementing a process similar to the one
utilized by EA & EGM would help ensure all variances
are detailed and cleared in as timely a manner as
possible.
11/ 30/ 01 Allen Ueckert/
Kevin Sweeney
12Enron Assurance Services
Flash to Actual Audit ObservationsHigh Priority
Items to be addressed Action Step Target Date
Responsible Party
B EA and EGM have various reconciling items
related to FYE 2000 that are being rolled
monthly in the current reconciling variance
from the DPR to the G/ L for numerous profit
centers within the respective business unit. The
balances created have not been cleared in a
timely manner as a result of turnover in the
Settlements group. Thus the settlements
function has not remained current.
Compounding the problem for EGM is the fact
that they are a relatively new business unit
created approximately one month after the
implementation of SAP and the subsequent
transition from MSA.
Both EA and EGM personnel have informed us that
clearing these items is a priority and the ultimate goal
is to clear all reconciling items in a timely manner. EA
and EGM have committed to clearing FYE 2000
reconciling items by 2001year end. Both business units
should concentrate efforts on clearing these old
balances in the near future.
12/ 31/ 01 (EA)
12/ 31/ 01 (EGM)
Greg Whiting (EA)
Tom Myers (EGM)
13Enron Assurance Services
Flash to Actual Audit
Low Priority Items
14Enron Assurance Services
Flash to Actual Audit ObservationsLow Priority
Items to be addressed Action StepA EGM has variances called NYMEX Income on their respective
reconciliations. These represent swaps entered through a NYMEX broker.
The amounts are captured properly on the DPR; however, a single
individual in the EA group prepares a report to book the amount to the
G/ L that is based on links to various DPRs for “NYMEX Income”.
EGM personnel currently book an accrual to correct these errors and have
suggested implementing an internal confirmation process to ensure the
correct amounts are booked.
B EA, EGM and EIM (physical trading) have no documented procedures in
place for the DPR to G/ L reconciliation process. EIM currently has
procedures in place for the financial OA process.
EA, EGM, & EIM should document their procedures. This documentation
should include, but not be limited to:
a detail of the process,
the authorized approvers for the reconciliations and journal entries to
correct reconciling errors,
procedures for reducing the amount of recurring errors,
and limitations for how long an item can remain as a reconciling items
without being cleared.
C We noticed various inconsistencies in the method used to reconcile the
DPR to G/ L among the various books for EA and profit centers for EGM.
Thus it appears there is no uniform method for reconciling between the
DPR and G/ L within the different business units. This may ultimately
create difficulty to a secondary user who prepares a reconciliation.
EA, EGM, & EIM should utilize a uniform reconciliation method, within
each business unit, so that reconciliations are comparable, and can be
performed in a consistent manner. This standardization should improve
efficiency and minimize error.