You have a well conceived strategy for your remedial approach. You may even have a lifecycle estimate and various proposals from your environmental consultants. You are ready to execute. But hold on, you may be missing out on the opportunity to manage the project and all of the uncertainties within a framework that will give you better visibility and a higher probability of success. In this presentation, we will discuss three financial controls that you can put in place to more effectively and efficiently layout the cash flow forecast, manage work commitments, spending against the plan, and reserve balances. The three controls include: • Establishing and enforcing a work breakdown structure across forecasts, work commitments, and spend • Controlling work commitments against the reserve balance • Controlling spend against work commitments

1. datathat savesourworld
ENFOS Webinar
with Environmental Risk Communications, Inc.
Three Critical Financial Controls for Reserve Management
February 24 and 25 , 2015

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About Us
ERCI builds tools, training
and reports for duty
holders to recognize,
measure and display their
environmental and asset
retirement obligations.
ENFOS is a cloud software
platform that expertly
manages all of the
complexities of remediation
and decommissioning - from
the financial to the technical.

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Speaker Background – Roger Well, C.P.G.
 Currently leading customer deployments on over 100,000
projects and $10B in forecasts and transactions through
the ENFOS enterprise platform
 26 years of environmental remediation and
decommissioning experience in various technical and
managerial roles
 Author of recent white papers:
 The Case for the Enterprise Environmental Liability
Management System
 Operational Risk Management for Environmental
Remediation
 Operational Excellence for Environmental
Remediation Programs
 M.B.A., Keller Chicago
 M.S., University of Toledo (Hydrogeology)
 B.A., Monmouth College (Geology)
Roger Well
Executive Vice President & COO
roger@enfos.com
Naperville, IL

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Speaker Background – John Rosengard
 21 years at ERCI; founder/creator of Defender software suite
 14 US corporate remediation teams (>60 CPA audits)
 3300 unique liabilities
 200 decision analysis projects
 4 US port authority remediation teams (>10 CPA audits)
 Counterparty/non-performance risk tracking system
 MBA, Northwestern
 BS, Georgetown
John Rosengard
President & CEO, ERCI
john@erci.com
Oakland, CA

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 Opportunity Statement
 Financial Controls Overview
 Work Breakdown Structure Control
 Work Commitment Control
 Spend Control
 Questions and Answers
Agenda

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Write the Caption Contest

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Opportunity Statement

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What Every Executive Wants
High Visibility (aka “No Surprises”)
Strategic Alignment with Corporate Value Drivers
Improved Effectiveness and Efficiency of Operations
Data-Driven Decision Making and Narrative
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2
3
4

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Convergence of Practices & Competencies

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The Charge of Internal and External Auditors
 Enforce generally-accepted accounting principles
• Relevant
• Faithful Representation (fair value)
 Encourage good capital stewardship
• Measure similar liabilities in similar ways
• Confirm spending matches liability burn-down
• Anticipate repeats of lessons learned

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Matching Spending to Liability Burn-down
 Remeasure liability periodically at “fair value”
• Remedy implemented
• Regulator/community accepted remedy
• Counterparty default risk resolved/paid
 Remember: remaining liability ≠ uncommitted funds
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
Q1 Q2 Q3 Q4
Liability Commitment Spending

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Financial Controls Overview

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Business Objectives
(Governance, Control, Certification, Risk Management)
Operational System
(front-end)
ERP System
(back-end)
Internal
Controls
Automated
Controls
Reporting
Controls
Security
Controls
Manual&Procedural
Controls
Efficient and
Sustainable
Operations
Technology People
A Business Model for Control Systems

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Integrated Business Process Management
Enables Financial Controls
Forecasting &
Budgeting
Vendor
Proposals
Purchases
Invoices &
Recovery
Commitments
can’t Exceed
Plan Balance
Spend can’t
Exceed
Commitments
LEVEL 1 – “Phase”
LEVEL 2 (optional) – “Activity”
LEVEL 3 (optional) – “Element”
LEVEL 4 (optional) – “Component”
WORK BREAKDOWN STRUCTURE
Common thread across all processes
Finance Workflow Summary
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2 3

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Work Breakdown Structure Control

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The “Harmonized” WBS Explained
 Definition: A WBS that is uniformly applied across all financial
activities from forecasting through spending on every project
in the portfolio
 But not necessarily applied to all WBS levels in all financial activities
(to be clarified)
 Do not confuse the company-wide WBS to project-level work tasks
contained in a contractor scope-of-work
 The more granular the detail, the more financial control (there may be
a point of diminishing return)
 The operational system contains the detail, the ERP system may not

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The “Harmonized” WBS Example
WBS Level
Forecasts &
Budgets
Proposals &
Purchases Invoices Example
 Phase X X X Remedial Implementation
 Activity X X X Groundwater Remediation
 Element X X Engineering Design
 Component X Direct Labor
 When the work is invoiced, the lowest level of details are known and should be
tracked uniformly across the portfolio
 When forecasts are made, because of the uncertainty, lower levels of detail may
be useful for cost buildup but not for financial control purposes
 Harmonized WBS provides the highest visibility and the baseline data required
for additional financial controls during project execution stages

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Work Commitment Control

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 Definition: Monitoring and controlling the expenditure
commitment against a budget and balance
 A harmonized WBS is essential if the control is to be made in any
detail below the overall total budget/balance
 Four key financial variables used for the control:
1. Current Balance (e.g., of the Reserve or Budget)
2. Open Commitments
3. Available to Commit
4. New Commitment Request Amount (i.e., the Proposal)
 All four variable amounts change through time as work progresses
– many moving parts
The Commitment Control Explained

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Commitment Control Example
Phase Activity
Current Year
Plan
CY
Expenditure CY Balance
Open
Commitments
Available
to Commit
Site Characterization
Project Management $1,000 $1,000 $0 $0 $0
Subsurface Investigation $5,000 $5,000 $0 $0 $0
Monitoring & Sampling $6,500 $3,000 $3,500 $1,500 $2,000
Reporting $5,000 $2,000 $3,000 $3,000 $0
Interim Corrective Measures
GW Plume Control $12,000 $2,000 $10,000 $5,000 $5,000
Water Disposal $5,000 $2,500 $2,500 $2,500 $0
Remedial Options Appraisal
Hydrogeological Assessment $10,000 $4,000 $6,000 $6,000 $0
Alternatives Evaluation $4,000 $0 $4,000 $0 $4,000
Engineering Study $25,000 $10,000 $15,000 $15,000 $0
Construct & Startup
GW Remedial System Install $350,000 $0 $350,000 $0 $350,000
OM&M Plan $1,000 $0 $10,000 $0 $10,000
H&S Plan $5,000 $0 $5,000 $0 $5,000
System Startup $18,000 $0 $18,000 $0 $18,000
TOTALS $456,500 $29,500 $427,000 $33,000 $394,000
Configuration Options: 1. Current Year by WBS
2. Current Year by Plan Total
3. Lifecycle by WBS
4. Lifecycle by Plan Total
Commitment Controls
Control Monitoring
Hard Stop/Control

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Spend Control

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The Spend Control Explained
 Definition: Monitoring and controlling expenditures against
a work commitment that may be an entire project or a
subproject
 A harmonized WBS is essential if the control is to be made in any
detail below the overall total budget and work commitment scope of
work detail
 Three key financial variables used for the control:
1. Commitment Open Amount
2. Available to Spend
3. Expenditure Amount being Processed
 May be linked to Earned Value Management

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Spend Control Example
Phase Activity
Open
Commitments
Purchase
Order 1
Balance
Purchase
Order 2
Balance
Invoice 1
(PO1)
Invoice 2
(PO2)
Site Characterization
Monitoring & Sampling $1,500 $1,500 N/A $1,500 N/A
Reporting $3,000 $3,000 N/A $2,000 N/A
Interim Corrective Measures
GW Plume Control $5,000 $5,000 N/A $6,000 N/A
Water Disposal $2,500 N/A $2,500 N/A $1,500
Remedial Options Appraisal
Hydrogeological Assessment $6,000 $4,000 $2,000 $4,000 $2,000
Engineering Study $15,000 $5,000 $10,000 $5,000 $12,000
TOTALS $33,000 $18,500 $14,500 $18,500 $15,500
Configuration Options: 1. PO Total
2. PO and Change Order Individually
3. By WBS Level
4. Rate Sheet Item Quantity Level
Validated
Rejected
Spend Controls

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In Summary: Putting it Back Together
Forecasting
& Budgeting
Vendor
Proposals
Purchases
Invoices &
Recovery
Commitments
can’t Exceed
Plan Balance
Spend can’t
Exceed
Commitments
LEVEL 1 – “Phase”
LEVEL 2 (optional) – “Activity”
LEVEL 3 (optional) – “Element”
LEVEL 4 (optional) – “Component”
WORK BREAKDOWN STRUCTURE
Common thread across all processes
Finance Workflow Summary
1
2 3

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Questions and Answers

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Thank You for Attending
For follow-up, please contact:
Lacey Orr
(630) 689-0220 x17
lacey@enfos.com