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Financial Executives International

Committee on Finance and Information Technology

Committee Meeting

KPMG

Mountain View, California

March 12 and 13, 2009

 

MINUTES

ATTENDEES

 

Members
Arthur Alderson (conference call)	Wal-Mart Stores, Inc.
William Burns (conference call)	Gartner
John Ferrara (conference call)	EDGAR Online Inc.
Taylor Hawes	Microsoft Corporation
Garry Lowenthal	Marner Storage Technologies, Inc.
William Overell	Overell Solutions
Gary Petrangelo	Japs-Olson Company
David Pleasance	Deloitte Consulting
Leslie Porter	Leventhal Scholol of Accounting
Robert Shultz	Hewlett Packard
Guests
Ann Flatz	Intel Corporation
Tom Lamoureux	KPMG
David Taylor	Trintech
Guest Presenters
Angela Carter	KPMG
Scott McClellan	Hewlett Packard
Carole Switzer	OCEG (Open Compliance & Ethics Group
FEI Staff
Marie Hollein
William Sinnett
Maria Zadravac

 

I.          Call to Order

Chairman Bob Shultz called the meeting to order at 9:00 a.m. on Thursday, March 12, 2009. He thanked the CFIT members present for coming to the meeting, even though many companies have instituted travel restrictions, and asked them to introduce themselves.

 

Bob Shultz welcomed Tom Lamoureux, KPMG’s Global Advisory Sector Leader, who was hosting this meeting. Tom said that he is responsible for KPMG’s Technology Industries Practice.

 

Bob Shultz then welcomed Marie Hollein, FEI’s new President and CEO. Marie said that she had over 30 years of corporate and financial services experience, including 20 years at Westinghouse and positions at Citigroup, ABN Amro, and KPMG, her most recent position, where she led the treasury practice. Marie said that she is pleased to have the opportunity to lead FEI. She said that FEI is looking to upgrade its Information Technology capabilities, so that it can demonstrate that it is the pre-eminent organization for financial executives.

 

II.         Committee Business – December CFIT Meeting Minutes

Bob Shultz asked for comments on the minutes from the December 2008 CFIT meeting. There were no suggested changes. Upon a motion duly made and seconded, the CFIT Committee accepted the minutes of the December 4, 2008, CFIT meeting.

 

III.        Technology and Reporting Subcommittee Report

Bob Shultz asked Taylor Hawes to present the report of the CFIT Technology and Reporting Subcommittee, which Taylor chairs. Taylor said that his subcommittee had met by conference call, and had developed a vision and a mission.

 

Taylor said that they had taken the CFIT mission, broke it down into its details, and asked “What are the deliverables?” He said that they would have both an external and internal focus. David Pleasance described this as both fiduciary (external) and decision support (internal).

 

Taylor described the scope of the subcommittee:

• Financial Reporting & Technology (i.e., reporting transparency through the use of technology)
• eXtensible Business Reporting Language (XBRL)
• International Financial Reporting Standards (IFRS)
• Corporate Performance Management (CPM)
• Scorecards/Dashboards
• Government reporting standardization
• Business Intelligence and Data Mining (Microsoft will develop a data warehouse to bring silos together)
• Enterprise Data Warehouse

 

Taylor discussed some of the programs for 2009 that are planned:

• Sponsorship and support of a FERF research project on “Performance Management Strategies: Leveraging Technology in Times of Crisis and Recovery”
• A position paper or white paper on subprime reporting. (Mark Bolgiano, president of XBRL-US, testified on March 11 to the Domestic Policy Subcommittee of the Oversight and Government Reform Committee.)
• Position paper or white paper on government reporting standardization. Bill Overell noted that CFIT already submitted a position paper to the SEC, recommending that the SEC decide on one format and then promote it: ../../eweb/dynamicpage.aspx?site=_fei&webcode=fnr_comm_letters_SEC
• Support FEI’s Current Financial Reporting Issues (CFRI) Conference (November 16 and 17) and the annual conference of XBRL US, which is scheduled for the following day (November 18), to create a greater value proposition for the CFRI conference.
• Speaker’s bureau for conferences on topics of relevance to the subcommittee’s efforts.
• Participation in the Gartner Key Performance Indicator (KPI) taxonomy development efforts outlined by the WICI/EBRC http://www.worldici.com/ Taylor explained that soliciting companies and analysts to participate in this effort could support their CPM efforts.

 

Taylor noted that this was an ambitious agenda.

 

Art Alderson observed that CPM was of interest to both the Technology & Reporting Subcommittee and the Business and Technology Optimization Subcommittee. Taylor said that David Pleasance of Deloitte and Arun Kumar of KPMG could be the liaisons.

 

IV.        Emerging Technologies Subcommittee Report

Bob Shultz asked Bill Overell to present the report of the CFIT Emerging Technologies Subcommittee, which Bill chairs. Bill Overell referred to the “Emerging Technologies Subcommittee Report: March 2009” which had been provided in the meeting materials.

 

Bill said that the Emerging Technologies Subcommittee would identify and develop emerging technologies until they are taken up by another subcommittee.

 

Bill then referred to the Top Emerging Technologies spreadsheet which had also been provided in the meeting materials. He then described the columns of the spreadsheet:

• The first column would draw from the results of CFIT’s annual Technology Issues for Financial Executives survey.
• The second column was the AICPA’s Top 10 Technologies for 2009
• The third column was Gartner’s Top 10 Strategic IT Initiatives
• The fourth column was Saugatuck’s 2009 Top 10
• The fifth column showed which topics from the other columns had been identified by CFIT.
• The sixth column listed CFIT efforts related to the topics in the other columns. He said that this column serves as a status report on CFIT’s efforts.

 

David Pleasance said that an important development today was the convergence of technologies, and that CFIT should look for points of convergence between discrete technologies. He also suggested that CFIT connect “clever technologies” to business applications. He said that this would change how companies do business.

 

Art Alderson said that his Business and Technology Optimization subcommittee would welcome new topics identified in the various surveys. He said that CFIT should address issues that CFOs are concerned with.

 

Tom Lamoureux said that there were three factors that would drive technology:

• Cost reduction
• Virtualization
• Collaboration

 

V.         Business and Technology Optimization Subcommittee Report

Garry Lowenthal presented the Business Technology Optimization Subcommittee report because Art Alderson participated by conference call.

 

The subcommittee’s goal is to share technology optimization best practices through FERF research projects, articles in Financial Executive magazine and other publications, FEI TV and FEI Summit IT Track sessions.

 

The scope of the Business and Technology Optimization subcommittee focused on a number of areas, including:

• Business applications and technology,
• Business systems architecture and integration,
• Application development methods,
• Service delivery, including Software as a Service (SaaS),
• Infrastructure, including mainframe and open systems, and
• Strategy and technology integration.

 

Programs of interest to the subcommittee members include Arun Kumar and David Pleasance on Corporate Performance Management (CPM).  Bob Shultz suggested that this include continuous monitoring, which is address by both AS 5 from the PCAOB and the recent COSO publication. David Pleasance said that CPM would connect fiduciary responsibilities and decision support.

 

The subcommittee will examine ways in which companies can use technology to reduce business costs. For example, Art mentioned that Wal-Mart uses Telepresence to conduct meetings with participants in Japan, China, and Brazil. He added that Wal-Mart provides little cameras on employees’ computer monitors for use during conference calls. Bob Shultz said that this would be a good magazine article, and asked if Wal-Mart had done a cost analysis.

 

Art said that his subcommittee would put some substance around these ideas during their next subcommittee meeting. He suggested that CFIT could collaborate with technology vendors to facilitate presentations to FEI members.

 

VI.        Small and Medium Business Subcommittee Report

In the absence of Mahesh Shetty, Bob Shultz asked Gary Petrangelo to present the report of the CFIT Small and Medium Business Subcommittee. Gary said that this subcommittee could apply all that CFIT does to small and medium businesses. He said that their two big initiatives for 2009 were Software as a Service (SaaS) and XBRL.

 

Gary described some of the subcommittee’s initiatives for 2009:

• XBRL Library, with links to tools, resources and blogs
• CPE Webinar
• Registry of vendors
• SaaS case studies, as a follow up to the article in the June 2008 issue of Financial Executive magazine.
• Use FELIX as a platform to educate and inform members. CFIT members could insert information on SaaS and XBRL to keep members informed.
• Use a blog to monitor developments in XBRL and SaaS.

 

Marie Hollein said that FEI was planning new IT initiatives that could enable CFIT’s efforts.

 

Garry Lowenthal asked how FEI’s membership database categorized members by annual revenues.

 

The FEI membership database provides a check off for size of company by annual revenues with the following categories:

• Less than $50 million
• $50 million to $99 million
• $100 million to $499 million
• $500 million to $999 million
• $1 billion to $5 billion
• More than $5 billion

 

VII.       Technology Issues for Financial Executives Survey

 

Bill said that John Van Decker, Vice President of Research for Gartner, will write the research report and present the results at the FEI Summit.

 

Bill said that the survey was launched on Thursday, January 22, and had just been closed. He said that there were now 164 completed responses. Bill said that this total was significantly less than the number of responses in past years, which totaled over 600, and that this was a concern.

 

VIII.      Future Meetings

 

June 4 and 5, 2009

Maria Zadravac said that the New York Stock Exchange would let CFIT ring the opening bell on Friday morning, June 5. This would be followed by a tour of the trading floor, highlighting the technology aspects of the stock exchange. She said that CFIT would be given a meeting room for the morning, but that there would not be any teleconference facilities. She said that the NYSE would want an attendee list well in advance of the meeting.

 

Bill Sinnett said that CFIT could meet on Thursday, June 4, at the Manhattan offices of either Microsoft or KPMG. Taylor Hawes said that he would check the availability of Microsoft’s offices.

 

September 10 and 11, 2009

Art Alderson said that Wal-Mart would host the September meeting of CFIT in Bentonville, Arkansas. He said that Wal-Mart was centrally located, and it was easy to get in and out of the Northwest Arkansas airport (XNA), which was about 15 minutes from their offices.

 

Art said that potential presenters from Wal-Mart could include the CIO, the CFO, and the heads of merchandising, investor relations and treasury. He added that Wal-Mart could provide an interesting tour. Taylor Hawes suggested distribution and RFID (radio frequency identification) as possible topics for presentations. Art added that Wal-Mart was leading the nation in sustainability, and its objective was to become carbon neutral.

 

IX.        FEI President’s Report

Bob Shultz invited Marie Hollein, FEI’s new President and CEO, to give a President’s report.

 

Marie said that she had now been in the President’s positions for six weeks. She said that one of her first initiatives has been a strategic planning initiative. This strategic planning process will be completed by June, and the resulting plan will be used for the next three years. She said that there would be four stages to this process:

1. Needs Assessment: This stage would involve mining existing information for insights. Tecker Consultants was hired for this project.
2. Segmentation Research: What do the various types of FEI members want from FEI?
1. Technical Committee members
2. Chapter Meeting members
3. Mail Box members
4. “I Pod Generation” members
3. Pre-Meeting Survey of the Strategic Planning Group: What do we want FEI to be?
4. Strategic Planning Sessions

 

The next steps will be to create the strategic plan and develop a subsequent organization alignment.

 

Marie said that FEI was currently doing an FEI National Staff Position Review. She said that this six week project would first identify job responsibilities and priorities, and then review and evaluate the staff structure. Marie said that this review was being done by Joe Caso, president of Caso and Company.

 

Marie said that FEI would like to strengthen the value proposition of FEI membership. She said that FEI had 800 members in transition. She said that FEI had a Staff Membership Recruiting Campaign to grow the membership.

 

Marie said that FEI was planning an IT assessment to evaluate its IT platforms. The plan was to update its systems and add to the infrastructure as needed to provide better service to the members. She said that FEI would like to make its Web site easier to use. Marie said that FEI will form an IT Task Force, and she would like to leverage the expertise of CFIT. Bob Shultz asked if FEI would consider sharing its back office.

 

Marie said that FEI would like to develop better chapter relations. She said that she was now recruiting for a new head of membership, and had received 100 applications. She added that she was also looking for someone to do program development, or education, and that she would like to bring back FEI’s Committee on Corporate Finance (CCF). Marie said that FEI would also like to increase its international presence. Art Alderson noted that many FEI companies have a global presence and use internally developed programs to educate their associates.

 

Marie said that all members of FEI’s technical committees would receive the FEI leadership discount.

 

Marie said that FEI was considering certification, and an ethics certificate might be possible, because FEI has always represented ethics. Art said that he used to serve on FEI’s Ethics and Eligibility Committee, when Rich Schrader was the chair.

 

X.         A Technology Blueprint for GRC

Carole Stern Switzer, president of OCEG, joined the meeting by conference call.

 

Carole said that OCEG is the only non-profit that helps organizations drive Principled Performance by enhancing corporate culture and improving governance, risk management, internal control and compliance (GRC) capabilities via:

• Community
• Interdisciplinary, Cross-Industry
• Benchmarking and Research
• Education, Webinars and Events
• Content
• Standards and Guidelines
• Repositories of Laws, Regulations and Related Standards
• Media, Research and other Resources
• Certification
• Entire Programs or Components of a Program
• Solutions, Products and Services

 

Carole said that an organization must clearly define what it will achieve and how it will create value while addressing uncertainty, protecting value and staying within boundaries. The outcome of this effort will be Principled Performance.

 

Principled Performance requires the integration of a number of enterprise processes, most notably Governance, Risk Management & Compliance.

 

Carole referenced a Gartner Research Briefing: “By 2009, the annual worldwide total software spending for GRC will be about $14billion.”

 

Carole described the OCEG GRC Capability Model:

 

Content Domains provide topical or industry-specific information that integrates with and assumes that a capability is in place.

 

Capability Model describes common elements of an effective program that integrates the principles of good corporate governance, risk management, compliance, ethics and internal control.

 

Taxonomy & Technical Standards define key entities and systems that comprise a GRC “backbone” and interface standards so that these systems more easily and effectively integrate.

 

Carole then described the eight components of the OCEG GRC Model:

• Culture & Context
• Organize & Oversee
• Assess & Align
• Prevent & Promote
• Detect & Discern
• Respond & Resolve
• Monitor & Measure
• Inform & Integrate

 

Carole said that today’s important lessons were:

• The use of technology for GRC is not an option, it is a necessity.
• Using the OCEG Red Book and GRC-IT Blueprint can help you benchmark against an independent standard and other companies.
• There are barriers beyond budget, because people like their spreadsheets. Data hoarding has perceived benefits.
• But don’t attempt to boil the ocean. Look for small quick wins and build support for more.

 

David Pleasance said that companies need to balance all stakeholder needs to optimize their businesses. Carole replied that it is important where companies set the respective boundaries. She added that employees will follow the values and behaviors of their immediate supervisors.

 

Les Porter asked Carole if any company has implemented OCEG’s model. Carole replied that Dow has implemented OCEG’s Red Book guidance. She added that there were 40 companies serving on OCEG’s Leadership Council, and that they were working on Red Book 2.0, which should be released later this month.

 

XI.        Understanding the Cloud

Bob Shultz introduced Scott McClellan, VP and Chief Technologist, Scalable Computing & Infrastructure.

 

Scott defined Cloud Computing as “an environment where highly scalable and elastic services can be easily consumed over the internet through a low-touch, pay-per-use business model.”

 

From a provider perspective, all the details related to providing a complete solution, at an attractive price, on a cost structure that leads to a profitable business model is your responsibility.

• You own and manage all of the IT assets.
• You assume the specific costs and risks of the service components.

 

From a consumer perspective, all you need is a device and an internet connection to get the value.

• You don’t need software, hardware or technical knowledge.
• You don’t own the assets.
• You don’t assume the specific costs and risks of the service components.

 

Scott recommended that standards be developed for how services are described and how SLAs (Service Level Agreements) are delivered.

 

Scott concluded with the following assertions:

• Enterprise IT (an individual company’s IT systems) transformation is an evolutionary process that has been happening for years.
• The future of Enterprise IT is a hybrid environment, including services sourced internally, outsourced, or from cloud service providers.
• Cloud computing is revolutionary and will ultimately change the world, but not overnight.
• There are significant barriers for creating and adopting cloud services for enterprises.

 

XII.       Automating the Financial Close

Bob Shultz introduced David Taylor, VP Strategy & Business Development for Trintech.

 

David said that Trintech was started in 1987 and went public in 1999. He said that Trintech provides financial governance software, and the typical Return on Investment for the software was one year. David said that Trintech’s customers include 22 Fortune 50 companies and 106 Fortune 500 companies.

 

David described Trintech’s aspirations for the Office of Finance:

• Transform the daily operations in the Office of Finance from largely manual to technology-enabled, thus allowing key resources to focus on critical issues;
• Integrate and automate the approach to managing all Financial Governance activities, including reconciliations, financial close, financial reporting, compliance and enterprise risk;
• Close the gap in technology between transaction systems and reporting that is filled by sheer human effort; and
• Provide a production platform for preparation and delivery of financial information to the marketplace.

 

David then described the benefits of an automated financial close:

 

Streamlined: Standardize and Consolidated Processes

• Focus on value-added activities
• Improve service levels
• Train employees faster

 

Confident: Real-time Visibility to Information

• Monitor key controls
• Enterprise collaboration
• Better information = better decisions
• Isolate and escalate issues rapidly

 

Agile: Supportive Environment for Enterprise Growth

• Rapid integration of acquisitions
• Smoother transitions
• Framework to support new initiatives, such as XBRL and IFRS

 

XIII.      The Effects of IFRS Conversion on Information Systems

Bob Shultz introduced Angela Carter, Partner, Advisory Services for KPMG LLP.

 

Angela said that, like U.S. GAAP, International Financial Reporting Standards (IFRS) are investor-oriented and based on a framework that is similar to that of the FASB. However, IFRS does not provide as much detailed and prescriptive implementation guidance as found in U.S. GAAP. As a result, there are more instances when judgment must be exercised. She said that widespread IFRS adoptions began in 2005, and the standards are now in use in more than 100 countries. She said that in the U.S., it is a question of when, not if. Tom Lamoureux said that KPMG has asked the SEC to pick a date certain.

 

Angela said that IFRS is an accounting-driven initiative, but it will drive major changes to information systems, internal controls, business processes and personnel.

• A major impact of converting to IFRS will be the increased challenge within the company to capture, analyze and report new data to comply with the changes in accounting.
• The organization must have a detailed understanding of the accounting differences, and the impact and risks of these differences, before they can understand and evaluate the needed system changes.
• The data and systems impact analysis is time consuming, and should take place at the initiation of the conversion. It is the foundation for determining the potential IT impact and translating the accounting differences to technical system specifications.
• One of the difficulties organizations often face in creating the technical specifications is a lack of understanding of the detailed end-to-end flow of data from the source systems (including models) to the general ledger.

 

Angela said that, based on KPMG’s experience with IFRS conversion projects in Europe, KPMG learned that:

• IFRS conversions have more often led to enhancement, rather than system replacement;
• Multiple global legacy systems can create problems for conversion as reporting entities learn to convert to IFRS;
• Some companies have used the conversion process as an opportunity to implement a new consolidation system while others have been concerned about introducing too much change at any one time.
• Some companies are electing to embed IFRS in local ledgers where appropriate, but many have left the decision on how they address the issue to individual entities.

 

Angela suggested some elements of a successful IFRS conversion:

• Start early
• Plan to utilize synergies with other projects
• Corporate-level sponsorship and strong governance
• Engage key stakeholders and resources
• Invest in education at all levels, including shareholders

 

Angela concluded that:

• IT costs will be 50% or more of total implementation costs.
• Standardized tools and charts of accounts will help
• Do an assessment of each accounting issue, down to the transaction level, to gauge the impact of IFRS
• Handle IFRS with its own Project Team
• Involve the IT team early on

 

XV.       Adjournment

The CFIT meeting was adjourned at 11:35 a.m. PT on Fri

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