# Presentation: 722542

## Ed Kowalchuk
Institute of Management Accountants Seminar
Richland, Washington
December 12, 2006

**Institute of Management Accountants Seminar**
**Richland, Washington**
**December 12, 2006**

**SOX 404 – Fluor Government Group Perspective**

## Global Business Segments

**Revenue**
**Last 9 Months**
**$10.4 Billion**

**Oil & Gas****	****Industrial & Infrastructure****	****Power****	****Global Services****	****	****	****Government****	**

**Backlog**
**$19.8 Billion**

## FGG Revenue – History and Outlook

## Growth of FGG* Resources

**Growth of FGG* Resources**

- * **Excludes FF/FH**

**1,033 People**

**1,593 People**

** ****695 People**

**2005**

**1,599 People**

**2003**

**2002**

**2004**

**Sept 2006**

**1,422 People**

## FGG Revenue by Industry/Client

- Environmental/Nuclear – DOE, UK Government
- Contingency Operations – DOD, DHS, DOS
- Base Operations/Maintenance and Job Corps – DOD, DOL

## Fluor Corporation Structure

- 5 external reported (SEC) Business Segments
- Segments function as stand alone units
- Strong centralized Corporate Finance & IT organizations
- Systems
- Policies and Procedures
- Audit
- Corporate oversight of Project Execution Functions
- Project Management
- Engineering
- Construction
- Procurement/Contracts
- Project Controls

## Definition of Internal Control Over Financial Reporting

_**Internal controls and procedures**_ are processes, effected by an entity’s board of directors, management and other personnel, that are designed _to provide reasonable assurance that the Company’s financial statements are prepared in conformity with generally accepted accounting principles_.  Those processes should ensure that:
-  the company's transactions are properly authorized;
-  the company's assets are safeguarded against unauthorized or improper use; and
-  the company's transactions are properly recorded and reported
*(Source: SEC)*
*Note:  Does not extend to efficiency and effectiveness of operations*

## Section 404 Compliance will be demonstrated by:

- A well documented system of policies & controls
- A thorough internal self-testing of significant financial & business processes.
- Test results must be documented as proof of control effectiveness.
- CEO & CFO must provide an annual assessment of internal control effectiveness.
- External Auditors must attest to the effectiveness of internal controls on an annual basis.

## SOX Planning & Implementation	

- Centralized cross-functional team led by Corporate Finance
- FGG Finance lead
- Federal Cost & Pricing lead
- Appointed focal point in FGG Finance
- Are FGG practices different than the rest of the company ?
- Government vs. Commercial
- FGG followed corporate lead
- Adjusted or added policies only when required

## SOX Planning & Implementation

- Centralized ICFR developed
- Eliminate outdated/unnecessary existing policies and procedures
- Flowcharts and controls analysis forms were developed
- Separate procedure developed for government rate application
- Support from senior corporate management
- Support from senior SBU management
- Responsibility for compliance driven down to desk level

## Ongoing Compliance with SOX 404

- Testing performed by location
- Internal Audit, Ernst & Young, some management self assessment
- SOX processes are our daily work processes
- Continue to have minor audit findings
- Document findings and action plan
- Stress importance on compliance with policies and procedures
- Continuous employee training

## Closing Remarks	

- Finance and Senior Management must champion
- Finance sets the pace
- SOX 404 controls are not just Finance
- IT
- Estimating
- Procurement/Contracts
- Centralized approach works well if your organization moves employees frequently
- Decentralize responsibility for compliance
- Business Units
- Locations
- Functions
- People

## Closing Remarks

- Reward successful startup
- Recognition
- Pizza lunches
- Government agencies and contractors already have a compliance mindset