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Enron Mail |
As you know, we have substantially wrapped up our work related to this
project. Today, we are making what I hope are final changes to the maps and deliverables, with the anticipation that we will deliver to you complete binders by Wednesday. One issue that we wanted to communicate relates to the use of manual payment processes and the risk that processing manual payments presents in the automated Unify/SAP environment. This issue was raised by Melissa during our discussion of the manual cash reconciliation effort caused by the inability of SAP to auto-match cash receipts and disbursements in situations where the money has moved or been received, but the corresponding JE has not been made in SAP. Both Melissa and Cindy Morrow have been involved in subsequent discussions related to the below-mentioned risks. 1. Risk of JE and payment duplication: Payments taken directly to Treasury and underlying transaction is recorded in Unify: In the event that the transaction giving rise to the manual payment is entered initially into Unify (which would be the case for all normal commodity payments, excluding broker fee and broker margin payment transactions), a risk exists that the payment could be recorded and paid twice (once by either A/P or Treasury when the manual payment is wired and subsequently recorded, and once during the normal Unify to SAP interface). Process controls will be put in place to mitigate this risk; however, all controls will be people-based, not system-based. It is too late to rebuild the Unify to SAP interface to better address the use of manual payments. One additional suggestion might be to work with each group to reduce the use of manual payments except under well-defined, important circumstances. Payments taken to Treasury, and underlying transaction is recorded directly to SAP (does not go through Unify): If the payment is not entered into SAP with payment method "J", A/P will not realize that the payment has already been made and will process the disbursement a second time. 2. Risk of understated expense: Payments taken to Treasury and underlying transaction is recorded in Unify: For manual payments that are not finalized in Unify (a process performed in the system to mark an invoice as final) by month-end (but the disbursement has already happened), expense will be understated. Payments taken to Treasury, and underlying transaction is recorded directly to SAP (does not go through Unify): If payment is not input into SAP by month-end but cash has moved, expense will be understated. (Cash outflow account will show a credit balance which will be flipped to A/P, but no income statement entry will be made at that time.) 3. Risk of cash misappropriation: In addition to the above risks related to the use of manual payments, we also believe that a risk exists related to the use of Excel-generated counterparty invoices and the lack of segregation between the person responsible for preparing these invoices and also for handling/having access to the related accounting records. We believe that it may be possible for a settlements coordinator to change the bank routing instructions or bank account number on the Excel invoice mailed to the counterparty and then manipulate the accounting records during the cash application process to either write off the account balance or to reflect the receivable as being paid while constantly moving cash application balances from one counterparty to another (so that no one account balance ages past an acceptable range). We have been unable to determine a set of control procedures that would mitigate this risk. 4. Revision to counterparty banking details: We are currently investigating the procedure performed by Treasury when problems with bank account details cause payments to kick-out of Treasury workstation. If the risk of misappropriation exists related to this procedure, we will separately communicate. The above may be unclear. If so, we would be glad to sit down with you for 15 minutes or so and clarify. Please let me know if you have any questions. Thank you for the opportunity to work on this project.
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