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Table of Contents

NON-STANDARDISATION OF PROJECT MANAGEMENT PROCESSES: A CASE STUDY OF ERICSSON SUB-SAHARAN AFRICA - Part 13

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4.5.3 SOX Adherence

Compliance to Sarbanes Oxley is mandatory within Ericsson and is split up into different sections of responsibility. The Project Office as part of Operational delivery is responsible for the following aspects:

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  • Control of supporting documentation in EAB Order Office Tool and/or Call-Off Ordering for sales creation.
    • When to use this key control: For each order creation in EAB Order Office tool or each time a Call-Off Ordering Contract is set up in the Call-Off Ordering system.
    • What paperwork is required: Customer purchase order or equivalent documents, i.e. Free of Charge approval or Early Start approval, together with the information in the EAB Order Office tool. Or the information stored in the Call-Off Ordering system like screenshots from the system, including supporting documents in the form of the Contract Handshake Checklist.
    • Person whom you should involve: Only the person who enters orders into the EAB Order Office tool.
    • How to sign off on this key control: Evidence of the control is the signed and dated customer purchase order or equivalent documents, such as the Free of Charge approval or Early Start approval, together with the information in the EAB Order Office tool. Or the signed and dated information stored in the Call-Off Ordering system in the form of a screenshot of the system, including the Contract Handshake Checklist as a supporting document.
  • Customer Project set-up in the financial system (SAP) – Check completeness of SAP Entry Form and attachments.
      • When to use this key control: For every new project that you need created in the financial system and for which you have a document pack as input criteria.
      • What paperwork is required: The Project Financial Controller must complete the Project Set-up Checklist, including the following Key Controls; CC4.1.1.1, CC4.2.1.1, and CC4.4.1.1. This needs to be completed before Milestone 3 (MS 3) and before the first invoice is issued.
      • Person whom you should involve: Project Financial Controller.
      • How to sign off on this key control: The Project Financial Controller and Contract Fulfilment Responsible (CFR) discuss the data and if the CFR agrees on the content, then he/she will sign and date it. Print your name on every report presented to you by the Project Financial Controller and hand the reports back to the Project Financial Controller for processing and archiving. Follow the prescribed process.

     

  • Project Closure in the financial system, by ensuring that all billing is generated in accordance with the customer contract before the status of your project is set to ‘TECO’.
    • When to use this key control: At TG5, as soon as you have generated all the revenue as stipulated in the customer contract, i.e. contract value = $100 and amount invoiced to customer = $100.
    • What paperwork is required: The Project Financial Controller will run the following reports: CNS41 to ensure that actual revenue equals planned revenue, CNS55 and ZZCHECKQTC (or VF04) to verify that actual billing equals planned billing, CNS55 and ZZCHECKQTC (or VF04) to report that actual revenue equals planned billing/billing plan.
    • Person whom you should involve: Project Financial Controller.
    • How to sign off on this key control: The Project Financial Controller and CFR discuss the data. If the CFR agrees with the content, then he/she will sign and date it. Print your name on every report presented to you by the Project Financial Controller and hand the reports back to the Project Financial Controller for processing and archiving.
  • Project Closure in the financial system once you confirm that all costs are incurred before the status of your project is set to ‘CLSD’.
    • When to use this key control: At TG5; as soon as you have accumulated all your costs, i.e. you have received all your supplier invoices, such as GSDC and everybody has completed their time reporting in the CATs module.
    • What paperwork is required: The Project Financial Controller will run the following reports: CJI5 to do a verification check on unprocessed purchase requisition, ME2J to identify purchase orders not fully invoiced, review the CATS error log, CADO to display time sheet data, S_ALR_87013568 for ‘Early Start’ projects after reposting of total actual cost, identification of CoS and CWIP, MBBS to verify project stock.
    • Person whom you should involve: Project Financial Controller.
    • How to sign off on this key control: The Project Financial Controller and CFR discuss the data and if the CFR agrees on the content, then he/she will sign and date it. Print your name on every report presented to you by the Project Financial Controller and hand the reports back to the Project Financial Controller.
  • A Quarterly check on planned and actual costs versus the latest cost budget.
    • When to use this key control: Quarterly; as input to this control, the Project Manager prepares a status report each quarter, which includes progress, deliveries, and quality issues. An updated cost budget is a mandatory input to this report. The actual and planned costs in the financial system are reconciled against the updated cost budget received from the Project Manager.
    • Corrective actions: Any differences are immediately communicated to the Sales Order Administrator so as they made adjustments to the planned cost in the financial system. If the actual cost is higher than the planned cost, this should be escalated to the Project Manager in order to retrieve and update the project status report.
    • What paperwork is required: The Project Financial Controller will run a CNS41 report and complete the Project Follow-up checklist.
    • Person whom you should involve: Project Financial Controller.
    • How to sign off on this key control: The Project Financial Controller and CFR discuss the data. If the CFR agrees with the content, then he/she will sign and date it. Print your name on every report presented to you by the Project Financial Controller and hand the reports back to the Project Financial Controller for processing and archiving.
  • Quarterly review and approval of the Project Follow-up Checklist.
    • When to use this key control: Quarterly, evaluating the risk of revenue and cost recognition not being aligned with supporting documents. This can lead to incorrect timing of revenue and cost recognition and valuation of CWIP.
    • What paperwork is required: The Project Controller has already signed the Project Follow-up Checklist after completion of CC4.2.1.2, CC4.4.1.2, CC9.3.1.1, CC9.3.1.2 and CC9.6.1.1. The Project Follow-up checklist is handed over to the Project Manager, together with printed supporting documentation.
    • Person whom you should involve: Project Financial Controller.
    • How to sign off on this key control: The Project Financial Controller and CFR discuss the data. If the CFR agrees with the content, then he/she will sign and date it. Print your name on every report presented to you by the Project Financial Controller and hand the reports back to the Project Financial Controller for processing and archiving.

Data gathered for auditing purposes in support of SOX compliance are:

  • Project financial analysis performed in support of CC9.6.1.1.
  • Project financial analysis performed in support of CC9.8.1.1.
  • Project documents archived.

Audit results recorded in support of SOX compliance are reflected in the tables (Table 4.13, Table 4.14, Table 4.15 and Table 4.16) below. Positivistic scoring is utilised in calculations, which are based on the following Likert scale in terms of the level of compliance against the projects audited:

0 = Non-compliance.

1 = Partial compliance.

2 = Full compliance.

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Evaluating results obtained from SOX audits performed on 27 projects in the Nigerian Project Office; performance is noted to be sub-standard in relation to financials (Table 4.13). The numerical values displayed represent the frequency of responses.

Table 4.13 SOX audit results for the Nigerian Project Office − count (Source: Own source, 2011).

In Table 4.14 referring to CC9.6.1.1, as well as CC9.8.1.1, a greater focus is needed in order to improve this area with 41% non-compliance. Though the percentage of full compliance is 44%, it could be argued that the focus should rather be on the higher percentage achieved. However, the crux of SOX compliance is based on risk exposure to the organisation, hence the high percentage of non-compliance projects are of far greater concern, taking into account that the financial risk to the organisation increases exponentially. Archiving of all project documents including financials seems to be performed on a regular basis with a score of 70%; participants are encouraged to continue with this practice while working on slight improvements. As mentioned earlier in this research, it would appear that the Nigerian Project Office is not very mature in the financial realm.

Table 4.14 SOX audit results for the Nigerian Project Office − percentage (Source: Own source, 2011).

Audit results for the South African Project Office are represented in Table 4.15 and 4.16 below. It displays that overall cost and budget control is well managed, with 67% of the 15 projects audited being fully compliant. Planned and actual costs versus the latest cost budget are measured in CC9.6.1.1; 67% full compliance indicates that Project Managers are in the know and effectively manage these financials throughout the project life cycle. A great concern is realised with 60% non-compliance in support of revenue and cost recognition not being aligned with the values indicated in the supporting documents. The customer contract governs all invoicing activities, while Ericsson governs revenue recognition to the organisation. The CFR and the Project Financial Controller take all these factors into careful consideration when they evaluate and sign off on the Project Set-up Checklist and Project Follow-up Checklist. Project Manager not adhering to the content of these financial documents has a direct impact on the organisation’s cash flow. Though both key controls form some of the cornerstones of the organisation, it could be said that non-compliance of CC9.8.1.1 has a far greater impact on the organisation, than non-compliance of CC9.6.1.1. Earned value analysis is thus not possible with a 33% compliance rate; therefore, non-standardisation can be seen in the inconsistency of financial management and reporting in the respective Project Offices.

Similar to the results achieved in the Nigerian Project Office, it is found that the Project Office in South Africa archives their documents in a consistent manner, as prescribed by the organisation. Standardisation is evident in the effective management of this particular SOX key control; however, an improvement in full-compliance is encouraged. Archiving of documents in a secure location does not just suffice as a means to curtail loss of misplaced paper work, it serves as a means to protect intellectual property rights and confidential information. Table 4.15 reflects frequency of responses, while Table 4.16 reflect the same data as a percentage.

Table 4.15 SOX audit results for the South African Project Office − count (Source: Own source, 2011).

Table 4.16 SOX audit results for the South African Project Office − percentage (Source: Own source, 2011).

4.5.4 SI Maturity Adherence

Table 4.7 is a representation of processes forming part of the audit criteria as a whole. It is significant, as SI Maturity adherence process requirements, as well as measurements, are already covered in part by the PEMA and the PROPS-C positivistic audit results. The essence of maturity as described in the PEMA framework, as well as SI Maturity requirements, support the degree to which tools and processes are used effectively. In continuation, it is then apt to discuss analysis of such data in respect to SI Maturity in each Project Office.

In making use of this comprehensive research strategy, non-standardisation is consistently found when comparing audit results of each Project Office by making use of methodological triangulation. Implementation of processes and adherence to them is also found to be inconsistent, which neither lends itself to achieving operational excellence, nor standardisation of project management processes as part of the key objectives.

4.5.5 CPM KPI Adherence

Requirements and measurements pertaining to CPM KPI Adherence are described as:

  • Project Evaluation as discussed in the PROPS-C section of this research.
  • Project Margin is partially covered in the discussion on CC9.8.1.1, however, further discussion is presented below.
  • Compliance to Billing Plan forms part of CC9.8.1.1, as defined under the SOX heading.
  • Project Add-on Sales results form part of the financial analysis reports as part of the SOX heading.
  • PROPS-C Adherence results as reflected in the PROPS-C section of the research.

Project Margin is partially covered in the discussion on CC9.8.1.1, however, in addition to the quarterly financial verifications governed by the SOX directive, the Project Offices also require Project Managers to generate weekly Project Financial Analysis Reports. This is accomplished with the support of the Project Financial Controller working closely with the Project Manager in order to run and analyse these reports. The metrics shown in Table 4.17 and Table 4.18 are indicative of the presence of such a report and not its actual content. The content of these financial reports is discussed and corrective actions are taken where needed, however, such detailed financial analysis falls outside the realm of this research. In table 4.5 results of Project Financial Analysis Reports are shown for the Nigerian and South African Project Offices. A total of 27 projects were evaluated in the Nigerian and a total of 14 projects were evaluated in the South African Project Office.

Table 4.17 Project Financial Analysis Reports − count (Source: Own source, 2011).

Table 4.18 Project Financial Analysis Reports − percentage (Source: Own source, 2011).

Referring to Table 4.18, full compliance projects in both Project Offices seem to be fairly equal in the level of application, though the percentages are very low. Less than half of all projects evaluated show evidence of Project Financial Analysis Reports being present. Partial compliance means that a report is present, however, it is either not the correct report or the full suite of reports is not generated from the financial system. Non-compliance as high as 57% in the South African Project Office shows that Project Managers rely solely on the Project Financial Controller to generate reports on their behalf and the Project Managers do not take the initiative themselves. In this regard it is evident that the Nigerian Project Office is more compliant than the South African Project Office. This generates an interesting debate, as results shown earlier in the research present that the South African Project Office is more compliant than the Nigerian Project Office in a measure generated on financial performance. Further analysis is required.

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In an effort to illustrate the variance in application of financial activities within the two Project Offices, the following is discussed. Performing comparative analysis on the financial component within each section discussed yields findings in support of maturity, as well as compliance. The comparative analysis in Table 4.19 reveals a trend or lack of it, as explained below. The Nigerian Project Office is consistent in its scoring pertaining to full compliance measures. This, however, seems to be the only consistent measure that can be learned from these results. Partial and non-compliant scores for both Project Offices, as well as full compliance scores for the South African Project Office, are in great flux and show no consistency at all.

Table 4.19 Comparative analysis of financial maturity and compliance (Source: Own source, 2011).

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