COSO Lends a Hand for Effective Control Monitoring

It’s one thing to build solid internal controls, but quite another to have a system in place to monitor those controls on a regular basis. While many companies do the former, not enough are good at the latter. That’s the core take-away behind the latest release from COSO, the Committee of Sponsoring Organizations of the Treadway Commission. The recently released exposure draft, Guidance on Monitoring Internal Control Systems, was developed in cooperation with a team of partners at Grant Thornton LLP.

“Companies need more insight into how to become much more efficient and cost effective in maintaining internal controls,” says COSO chairman Larry Rittenberg, adding that the draft was developed after COSO members observed that some public companies monitor their internal controls over financial reporting just once a year, in order to comply with Section 404 of the Sarbanes-Oxley Act. “Companies should monitor their controls every day through ordinary operations, to make sure those controls [are] operating effectively,” Rittenberg explains. The proposed guidance provides practical guidance and concrete examples of using the monitoring component of the COSO internal control framework to develop effective and efficient internal controls. “Once you establish good internal controls you ought to think of how to maintain them,” Rittenberg adds.

As the report states, central to effective monitoring is a system of procedures that evaluates key controls over specific risks to the organization. The proposed guidance illustrates effective monitoring with examples taken from real companies—including an international insurer, a beverage maker and distributor and a small software company. The report contains a monitoring model that walks users through the process of prioritizing risks, identifying controls, identifying information and implementing monitoring practices. Among the examples of effective monitoring practices is a beverage manufacturer and distributor that has built monitoring procedures for the owners of certain controls, who perform self-assessments on a monthly, quarterly and annual basis and then report the results in a tool on the company’s network. Supervisory reviews are then carried out by managers of the control owners.

In another example, the audit committee at a small manufacturing company directed internal audit to scrutinize manual journal entries with a focus on potential management overrides. The reviews were structured in such a way to determine the reasonableness and frequency of such entries, with an eye toward identifying potential fraudulent activities. “COSO believes that companies would benefit by examples of the leverage they could gain from their current monitoring activities, particularly public companies,” says Charles E. Landes, vice president for professional standards and services at the AICPA and a COSO board member. Landes notes that public companies that treat Section 404 compliance as “something additional to their own systems of internal control” needlessly duplicate their monitoring procedures, “and that’s not what Sarbanes-Oxley wants.”

The proposed guidance also distinguishes direct information from indirect information for monitoring, and explains how indirect information can be used. As described, direct information confirms the operation of internal controls by observing, reperforming or testing them, whereas indirect information can be used to infer whether controls or control components continue to operate effectively. “Companies’ monitoring has been mostly direct testing of internal controls,” says Rittenberg. “We’re saying, ‘let’s think of combinations of direct and indirect information that may tell you that internal controls have deteriorated over time.’”

The full report can be downloaded via the COSO website, www.coso.org. Comments on the proposed guidance, which COSO expects to adopt this fall, are due by Aug. 15.

Article found in Governance & Accounting, Compliance

The Difference for Real Estate May Be in the Fundamentals

It’s no secret that the U.S. commercial real estate market is down—down by a lot in most regions—from the peaks reached in 2006 and 2007. But considering the fundamentals, the current cycle looks a lot better than past downturns, according to Susan Smith, manager of the real estate services group at PricewaterhouseCoopers. New construction, on a whole, has been restrained and cash flow assumptions on the part of real estate investors are more realistic. “The market is poised to rebound once the economy turns around,” says Smith. “Investors are finding comfort from the notion that the fundamentals are still much better than they were during the last downturn in the mid-1990s.”

That doesn’t disguise the fact that commercial sales are looking grim, compared with the recent past, a fact that is supported by the just published PricewaterhouseCoopers Korpacz Real Estate survey. Office space, for example, took an 80 percent hit in the 12-month period from April 2007 to April 2008, compared with a huge 182 percent gain in the same period from 2006 to 2007, according to Real Capital Analytics, whose data is sourced in the survey. Industrial property sales fell more than 67 percent by the first quarter of 2008, compared with a 43 percent rise in the prior period. Smith, who is the survey’s editor-in-chief, points to the ongoing credit crunch, tepid tenant demand and declining rent growth. “We are definitely in a downturn,” says Smith.

Meanwhile, foreign investors are taking advantage of the weak dollar to scoop up U.S. assets, with high-quality properties in top-performing markets faring the best. Middle Eastern and Australian investment now outstrips that made by German investors, who had been big buyers before the downturn. Moreover, there is a steady flow of new buyers from all over Europe.

Article found in Economy

Careers

BearingPoint Inc., the $3.5 billion management and technology consulting firm based in McLean, Va., announced that Eileen A. Kamerick resigned as executive vice president and CFO after three weeks in that position. No reason was given for her departure. Kamerick, 49, joined BearingPoint from Heidrick & Struggles International Inc., where she was executive vice president, CFO and chief administrative officer. Eddie R. Munson, 57, a BearingPoint board member since last October, was appointed interim CFO until a replacement is chosen.

Quanex Building Products Corp., the $2 billion manufacturer of engineered materials and components headquartered in Houston, promoted Deborah M. Gadin to vice president and corporate controller from assistant controller. Gadin, 38, replaced Brent L. Korb, 34, who has accepted a job at an unidentified company. Gadin joined Quanex as assistant controller in 2005. From 2004 to 2005, Gadin was director of financial planning, reporting and analysis at Hexion Specialty Chemicals Inc.

Leap Wireless International Inc., the $1.6 billion wireless communications company based in San Diego, appointed Jeffrey E. Nachbor chief accounting officer. Nachbor, 42, replaced acting CAO Steven R. Martin, 47, who will remain with the company. Nachbor joined Leap Wireless as senior vice president of financial operations in April 2008, after three-and-a-half years as H&R Block’s senior vice president and controller. Before that, Nachbor was senior vice president and CFO of Sharper Image Corp.

Kaiser Aluminum Corp., the $1.5 billion producer of fabricated aluminum products based in Foothill Ranch, Calif., hired Neal E. West as vice president and chief accounting officer. West, 49, replaced Lynton J. Rowsell, 33, who returned to the accounting firm Ernst & Young. West joined Kaiser Aluminum from PC retailer Gateway Inc., where he had been vice president and controller since April 2005. Before that, West spent 19 years with global container shipping and logistics company APL Ltd.

Barnes Group Inc., the $1.4 billion aerospace and industrial components manufacturer based in Bristol, Conn., announced that William C. Denninger, 57, retired after eight years as senior vice president of finance and CFO and after two years as a director. Denninger joined the company in 2000 from BTR Inc., where he was CFO and controller. Francis C. Boyle Jr., 58, will serve as acting CFO while remaining vice president and controller, until Denninger’s replacement is chosen.

Ticketmaster, the $1.3 billion entertainment ticketing and marketing company owned by IAC/InterActiveCorp and based in West Hollywood, Calif., hired Brian Regan as executive vice president and CFO. Regan replaced Susan Bracey, who resigned to pursue other opportunities after eight years with the company. Regan joined Ticketmaster after four years at Expedia Inc., where most recently he was senior vice president of finance. Before that, Regan worked at LendingTree LLC, prior to its acquisition by IAC/InterActiveCorp.

TriMas Corp., the $1.1 billion diversified manufacturer based in Bloomfield Hills, Mich., named A. Mark Zeffiro CFO. Zeffiro, 42, took over from Robert J. Zalupski, 43, who in addition to being vice president of finance and treasurer had been acting CFO since April, when E.R. Autry Jr., 53, resigned to pursue other opportunities. Zeffiro joined TriMas from Black & Decker Corp., where he was vice president of finance for its global consumer products group.

Whataburger Restaurants L.P., the $1 billion regional hamburger chain based in Corpus Christi, Tex., promoted Edward E. Nelson to CFO and controller from controller. Nelson, 40, succeeded Wendy A. Beck, 43, who left Whataburger in April to become executive vice president and CFO of Domino’s Pizza Inc. Nelson, who has nearly 20 years of experience in corporate finance, joined Whataburger in 2004, after eight years with Denny’s Corp.

Ferrellgas Partners L.P., the $1.9 billion propane gas distributor based in Overland Park, Kan., appointed interim CFO J. Ryan VanWinkle to serve in that position on a permanent basis. VanWinkle had been interim CFO since March, when Kevin T. Kelly, 42, resigned as senior vice president, CFO and treasurer. VanWinkle, who joined Ferrellgas Partners in 1999, also will remain vice president of finance and corporate development, a position he has held since September 2007.

Drew Industries Inc., the $668.6 million manufacturer of components for recreational vehicles and manufactured homes based in White Plains, N.Y., promoted Joseph S. Giordano III to CFO and treasurer from corporate controller and treasurer. Giordano, 39, replaced Fredric M. Zinn, 57, who was named president and a company director after seven years as executive vice president and two years as CFO. In addition, Christopher L. Smith, 33, was promoted to corporate controller from assistant controller.

UDR Inc., the $500.2 million real estate investment trust (REIT) based in Highlands Ranch, Colo., promoted David L. Messenger to senior vice president and CFO from senior vice president and CAO. Messenger, 38, succeeded Michael A. Ernst, 47, who stepped down citing travel reasons after the company moved from Richmond, Va., in January. UDR also promoted Thomas P. Simon, 47, to senior vice president of finance and treasurer from vice president and treasurer.

Marsh & McLennan Cos., the $11.4 billion professional services firm based in New York, announced that Matthew B. Bartley will resign as executive vice president and CFO. Bartley, 51, joined Marsh & McLennan as vice president and treasurer in April 2001 and was promoted to CFO in September 2006. Previously, he served for 10 years in senior international treasury and tax positions at PepsiCo, Inc. Bartley will remain with the company until a successor is found.

AirTran Holdings Inc., the $3.2 billion parent of Orlando, Fla.-based AirTran Airways Inc., promoted Arne G. Haak to CFO, senior vice president of finance and treasurer from vice president of finance and treasurer. Haak succeeded Stanley J. Gadek, who resigned in March to become president and CEO of Sun Country Airlines. A nine-year company veteran, Haak joined AirTran from US Airways in 1999, and became vice president of finance and treasurer in November 2006.

Tidewater Inc., the New Orleans-based owner and operator of vessels serving the global offshore energy industry with $1.1 billion in 2007 revenue, promoted Craig J. Demarest to principal accounting officer, vice president and controller from vice president and controller. Demarest, 42, joined Tidewater in May 2004 as corporate controller and was promoted to controller in April 2005 and to vice president in June 2007. Previously, Demarest spent 17 years with accounting firm KPMG.

Article found in Corporate Finance, Careers

Sending Money Around the Globe Just Got Easier

Travelex has updated its GlobalPay international business payment service with new features that help all-size companies better monitor currency risk and cash management through greater transparency and real-time tracking functions. Users can call up electronic statements at any time for instant reconciliation, notes Adam Tiberi, Travelex vice president of global product management.

New features also allow companies to make domestic and international payments on the same screen and opt for low-value global payments, if speed is not an issue, by sending the transaction through the automated clearinghouse system (ACH) instead of the high-cost SWIFT messaging service.

These functions provide a valuable service to corporations, says Tiberi, citing a recent Travelex survey of 600 financial executives, which revealed that on average, companies juggle six foreign currency accounts. “Businesses shouldn’t have to jump through hoops to make international payments, but our research shows they are.” Some 40 percent of survey respondents say they still process international payments manually through methods that aren’t integrated with their enterprise resource planning (ERP) systems. Moreover, 13 percent either call or visit their banks and 25 percent use multiple online bank platforms, according to the survey. GlobalPay can be used with just about any ERP, accounting or treasury system, says Tiberi.

GlobalPay reflects Travelex’s enhancements to a Ruesch International product following the acquisition of the business-to-business payment solutions company in September. Next up, says Tiberi, is a service that lets customers’ vendors track payments electronically, so they can see when a payment has been made.

Article found in Treasury Management, Tools & Technology, Globalization, Corporate Finance

Share and Share Alike

IBM introduced Business Content Services, an integrated software solution that helps control and analyze information created and shared by different workgroups within an organization. The product connects Web-based collaboration and documentation management applications—including IBM’s Lotus Quickr and Lotus Notes, and Microsoft’s Office and SharePoint—to FileNet and Content Manager, IBM’s enterprise content management (ECM) applications. “This is the first time IBM has come out with a comprehensive vision around business content services,” says Ken Bisconti, IBM vice president for workplace, portal and collaboration products.

Also introduced were IBM FileNet Connectors for SharePoint version 2.2. These software patches automate the flow of business information from SharePoint to IBM ECM data libraries, and let users manage this information without ever leaving SharePoint. Together, says Bisconti, the business content services software and SharePoint connectors provide a “seamless spectrum” for content as it moves from simple document management to the “more robust” content management of ECM.

Article found in Tools & Technology