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Enron Mail |
Several related issues have resulted in an increase in the level of operating
risk for the Merchanting Metals business. Complexities surrounding the operation of the Off Balance Sheet Facility ("OBSF") which commenced two weeks before the year end. The uncertainty generated by the revocation of AA's signoff for the facility late in the year end audit. The discovery of a number of 'bugs' within the AS400 Merchanting code, arising from the release of OBSF designed functionality, which compounded the operational burden of supporting the OBSF. The requirement to amend the operational process and OBSF IT code as a result of the current renegotiation of the OBSF with Barclays ( and AA ). The senior IT developer for Merchanting has resigned and been sent on gardening leave. The Corporate requirement to lower working capital usage for the Merchanting business irrespective of the above parochial business issues. Various mitigating actions have been and will be taken to provide focus, gain comfort over control levels and to provide assurance to senior management as to the accuracy of the Q1 DPR and business balance sheet. The implementation for SAP for the Merchanting business has been delayed and effectively decoupled from the higher risk ( higher benefit ) Brokerage implementation - benefit is to provide sole focus on OBSF for IT Merchanting developers. The AR/AP SAP data quality reviews for both businesses are continuing so as to provide a detailed analysis as at end Q1. Middle Office have instigated a new daily working capital report process tracking cash settlement/ funding data to working capital components for all Metals businesses. An enhanced position signoff process will be implemented prior to end Q1 covering gross tonnage, spread positions and summarised analyses for brand and locations. The necessary report functionality should be available within the AS400, however contingencies have been initiated to build tactical VBA/excel reports outside of the AS400 but using AS400 data downloads. User requests for additional AS400 functionality and reports have been aggressively prioritised and a code freeze will commence prior to the end of Q1 following the delivery of three reports determined as minimum requirements for the support of OBSF. A resubstantiation of the full Q1 DPR will be completed by the Risk control staff reconciling the full trial balances between Q1 open and Q1 close A full internal balance sheet review will be completed within the Q1 audit timetable which incorporates A full circularisation of inventory balances, and matching to source documentation within Enron Inspection of certain of the above inventory balances, by third party inspectors, where there is an expectation that circularisation replies will not be received on a timely basis Substantive checks back to source contract documentation for the forward priced and unpriced positions report ( spot checking the key position report signed off by the traders ) Full reconciliation and recalculation of OBSF option premium values Full reconciliation of contracts within the OBSF to Barclays documentation ( thereby substantiating existence of stock that we have option to purchase ) and to AS400 Barclays account A risk based debtors review - matching to source documentation, where applicable, and any subsequent post quarter end cash movements A full substantiation of creditors to internal ( contract commitments ) or external documentation ( invoices/request for payment ) A full reconciliation of intercompany accounts A full substantive reconciliation of cash and funding accounts I intend to provide weekly updates on the status of the above actions during April If you have any questions please call me on x34703 Regards Mike
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