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6/19/2018
1
ICBC’s Application to Streamline IT
Compliance Reporting Requirements
Streamlined Review Process Presentation
June 19, 2018
• ICBC has been filing IT capital reports and IT
capital expenditure information in its IT Plan
filings for 12 years.
• ICBC’s IT capital spend has limited impact on
Basic insurance rates.
• The impact of IT Spend is provided in the
annual Revenue Requirements Application.
• Further to the BCUC Core Review Report, it
is appropriate to assess whether reporting
can be improved.
• ICBC’s proposals achieve effective oversight
more efficiently.
Opening RemarksOverview
June Elder
Manager of
Regulatory Affairs
2
6/19/2018
2
• Application – historical context
• ICBC’s proposals
• Improvements to ICBC’s internal
processes to facilitate BCUC review
• ICBC’s responses to written
questions
• Conclusion
• Questions
AgendaOverview
3
June Elder
Manager of
Regulatory Affairs
APPLICATION IN
CONTEXT
4
6/19/2018
3
• IT capital reporting has seen only 2
changes since 2006.
• IT capital reporting currently consists
of:
1. Individual IT capital project reports
2. Annual IT Capital Expenditure Plan (IT
capital plan)
3. Annual Update to the IT Strategic Plan
(IT strategic plan)
History of IT Capital ReportingContext
June Elder
Manager of
Regulatory Affairs
5
2014 Core Review emphasized proportionality
and focusing on areas of greatest impact:
“Compliance resources should focus on matters that
pose risks of increasing customer costs and rates…”
“The BCUC should make additional efforts to ensure
all compliance reports are necessary and useful, and
eliminate the reporting requirement for those that are
not.”
“The BCUC should place more responsibility on
regulated entities to report, on an exception basis,
deviations from forecasts that could affect costs and
rates, instead of routine reporting.”
2014 BCUC Core Review FindingsContext
6
June Elder
Manager of
Regulatory Affairs
6/19/2018
4
Impact of IT Capital on Basic
RatesContext
7
Phil Leong
Corporate Controller
Impact of IT Capital on Basic
Rates – Recent HistoryContext
8
Phil Leong
Corporate Controller
Basic Revenue Requirements Application
2013RRA
2014RRA
2015RRA
2016RRA
2017RRA
Approved Premium * $2,500M $2,600M $2,900M $3,200M $3,400M
IT Capital Depreciation Expense **
$9.0M $6.7M $6.4M $8.4M $8.6M
Depreciation as a % of Approved Premium
0.36% 0.25% 0.22% 0.26% 0.25%
* Amounts are rounded for illustrative purposes** Assumes 58% allocation to Basic insurance (Corporate Shared Services ratio)
Impact to Basic rates has been stable:
6/19/2018
5
Impact to rates at different IT capital reporting
thresholds:
Impact of IT Capital on Basic
RatesContext
9
Phil Leong
Corporate Controller
Reporting Threshold
100% allocation to Basic Rates *
Impact toAverage
Policy***
58% allocation to Basic Rates **
Impact toAverage
Policy***
# of Projects
(2015-20)
$1 million 0.006% $.06 0.003% $.03 20
$2 million 0.012% $.12 0.007% $.07 15
$3 million 0.018% $.18 0.010% $.10 13
$5 million 0.030% $.30 0.017% $.17 10
* Assumes 100% allocation to Basic insurance (unlikely)** Assumes 58% allocation to Basic insurance (Corporate Shared Services ratio)*** Based on average Basic insurance policy premium of $1,023 (excludes trailers, ORV and manual policies)
ICBC’S PROPOSALS
10
6/19/2018
6
1. Increase IT capital reporting
thresholds
2. Change IT capital plan content to
provide better information upfront
3. Exclude certain types of expenditures
from IT capital project report
requirements (not true “projects”)
4. Reduce frequency of IT strategic plan
filing to every 3 Years
Proposals in SummaryProposals
Gary Eastwood
Chief Information and
Technology Officer
11
Proposal 1:
a) Increase threshold for the IT capital plan to
$3 million.
b) Increase threshold for individual IT capital
project reports to $5 million.
Rationale:
Focus on higher impact/risk projects; providing
the right balance between efficiency and
Commission’s regulatory oversight.
Proposal 1: Increase IT Capital
Reporting ThresholdsProposals
Gary Eastwood
Chief Information and
Technology Officer
12
6/19/2018
7
Implications:
• Commission will still see information about
projects over $3 million threshold in the IT
capital plan.
• Total IT capital spend will still be shown.
• Commission will no longer see projects that
have low risk and low impact on rates.
Proposal 1: Increase IT Capital
Reporting ThresholdsProposals
Gary Eastwood
Chief Information and
Technology Officer
13
Proposal 2(a):
Reduce the forecast period shown in the IT
capital plan from three years to two years.
Rationale:
Provide more meaningful budget information;
based on more refined estimates.
Reduce potential for skewed forecast trends that
can arise from early estimation and changes in
technology.
Proposal 2: Change IT Capital
Plan ContentProposals
Gary Eastwood
Chief Information and
Technology Officer
14
6/19/2018
8
Implications:
• Focuses Commission’s oversight on more
meaningful budget information and away
from “placeholder” figures.
• Commission will still have visibility into
business strategy and IT trends that drive
the longer term expenditures IT Strategic
Plan.
• Commission will also be notified when there
are changes.
Proposal 2: Change IT Capital
Plan ContentProposals
Gary Eastwood
Chief Information and
Technology Officer
15
Proposal 2(b):
Merge the Figures 3 and 4 from the IT capital
plan and provide new information (providing
information requested by the Commission).
Rationale:
• Full picture of project lifecycle (better
information upfront);
• Aligns to information BCUC has requested
in the past.
Proposal 2: Change IT Capital
Plan ContentProposals
Gary Eastwood
Chief Information and
Technology Officer
16
6/19/2018
9
Current Format (proposing to be
changed) Proposals
• Limitations: No view of the total project budget; no
comparison of actuals at completion to budget.
17
Proposed FormatProposals
• ICBC agrees this format is better.
• Added columns include the project capital budget, total
actuals to date, estimate at completion, and planned and
actual schedule.
• Removed year over year forecasts.
18
6/19/2018
10
Proposed Format Proposals
Gary Eastwood
Chief Information and
Technology Officer
19
Implications :
• We will not be including year over year project
forecasts
• Can now see how the project is tracking against
initial project budget and schedule.
• Explanations of significant variances (estimate
at completion vs budget) will still be included in
the project summaries in the IT capital plan.
• Overall year over year forecast (proposed 2
year actual and 2 year forecast) will still be
included in the IT capital plan
Proposal 2: Change IT Capital
Plan Content
20
Proposals
Gary Eastwood
Chief Information and
Technology Officer
Figure 5 — Depreciation and Amortization of IT Capital Expenditures
2015 2016/17 2017/18 2018/19 2019/20
Description Actuals Forecast** Forecast Forecast Forecast
1Depreciation and Amortization
of IT Capital 11.5$ 16.1$ 13.4$ 14.1$ 15.1$
2 % of ICBC's operating expenses 1.9% 2.4% 2.0% n/a n/a
* ICBC’s new capitalization policy, as discussed in paragraph 10, has been applied to 2015 expenditures and beyond.
**As noted in paragraph 11, the 2016/17 forecast period reflects a 15 month f iscal year w ith January to December 2016 actuals and
January to March 2017 forecasts.
($ millions)
Line
No.
Proposal 2(c): Discontinue IT Asset Category
Cost Details.
Implications:
• Removes information that may be redundant.
• Excluding the asset category will streamline
the IT capital report content.
6/19/2018
11
Proposal 3: Confirm Reporting
Requirements for 3 Categories
ICBC seeks confirmation that it can exclude the
following costs from the requirement to file an
individual IT capital project report:
a) System enhancement costs
b) Hardware/software costs for new employees
c) True-up costs
21
Proposals
Phil Leong
Corporate Controller
Proposal 3(a): System
Enhancement Costs
Proposal: Exclude System Enhancement costs
from IT capital project reporting
Rationale:
• This is not a single project but an aggregate of
costs for discrete enhancement work.
• Not practical or useful to prepare an IT capital
project report.
Implications:
• Aggregated costs will be shown in the IT
capital plan.
22
Proposals
Phil Leong
Corporate Controller
6/19/2018
12
Proposal 3(b): Hardware/Software
for New Employees
Proposal: Exclude Hardware/Software Costs
for New Employees from IT capital project
reporting.
Rationale and implications:
• Bulk purchase of routine equipment for new
employees.
• No additional risk to warrant additional
reporting.
• BCUC already sees rationale for new staff
in RRA.
• Costs will be reported in the IT capital plan.
23
Proposals
Phil Leong
Corporate Controller
Proposal 3(c): True-up Costs
Proposal: Continue to exclude True-up
Costs from IT capital project reporting.
Rationale and implications:
• Not a new project but contractual true-up
of an existing project.
• No additional planning, analysis of risks,
examination of alternatives, etc.
• Going forward, these costs will be included
as part of the projects costs (at onset).
24
Proposals
Phil Leong
Corporate Controller
6/19/2018
13
Proposal 4: Reduce IT Strategic
Plan Filing Frequency
Proposal: Reduce the Filing Frequency of
the IT Strategic Plan from once every year
to once every three years with provision for
off year updates.
Rationale:
• ICBC uses a 3-5 year strategic planning
cycle so annual updates are typically
minimal.
• If there is any material change to the
Corporate or IT strategy in the interim,
ICBC will file an updated IT strategic
plan.
25
Proposals
Gary Eastwood
Chief Information and
Technology Officer
CONTINUOUS
IMPROVEMENT
26
6/19/2018
14
Improvements to Internal
Processes Regarding Timing
of IT Capital Project Reports
• Recent late filing for Guidewire Rating
resulted from a gap in our process
• ICBC has taken steps to improve the
internal process:
• Education and awareness (Finance, IT,
Corporate Planning).
• New process with help from Corporate
Planning.
27
Process
Gary Eastwood
Chief Information and
Technology Officer
RESPONSES TO
INFORMATION REQUESTS
28
6/19/2018
15
TREAD’s Questions Regarding
ICBC’s IT Strategic Plan and
RAAP
• RAAP is aligned with the current IT strategy.
• ICBC will be filing an updated IT strategic plan
in the next RRA.
• Guidewire Rating engine is the only RAAP IT
capital expenditure that has any funding from
Basic and IT capital report has been filed.
• RAAP involves a low degree of technology risk.
29
IRs
Gary Eastwood
Chief Information and
Technology Officer
Questions on Savings
• Clear savings in work effort but no
quantifiable bottom line savings.
• This Application is about ensuring that
reporting over and above the RRA is
focused on significant expenditures and
risk.
• ICBC’s proposals achieve effective
oversight more efficiently.
30
IRs
Phil Leong
Corporate Controller
6/19/2018
16
Alternative Approaches to
Thresholds
• Dollar values are an objective test that is
easily understood by all stakeholders.
• “Impact on customers” methodology is
subjective.
• Top 5 /10% methodology may be over or
under inclusive.
31
IRs
Phil Leong
Corporate Controller
CONCLUSION
32
6/19/2018
17
Conclusion Closing Remarks
33
• IT capital reporting requirements has had only 2
changes since 2006.
• Reporting and the level of scrutiny
commensurate with risk & the quantum of
expenditure is consistent with BCUC Core
Review findings.
• ICBC’s proposals maintain appropriate levels of
oversight and understanding of upcoming IT
capital expenditures.
• ICBC’s proposals achieve effective oversight
more efficiently.Phil Leong
Corporate Controller
QUESTIONS
34