October 10, 2002
To: K.R. McKenzie F.C. Metcalfe A.E. Janes D.A. Harrison B.G. Elton L.I. Bell M. Costello Audit and Risk Management Committee
Internal Audit Report
BC Gas Customer Repatriation & Joint Meter Reading Projects
AU0308SS Audit Services Prepared by: P. Howard M. Tannenbaum
Executive Summary
q A review of the BC Gas Repatriation project and Joint Meter Reading Project was performed to ensure the integrity of BC Hydro customer information and meter reading systems was maintained, financial accounts were reconciled between BC Gas and BC Hydro, and changes in the activities for the meter readers and BC Hydro customer service representatives were supported by appropriate training and communication. The review occurred four weeks after the July 1, 2002 implementation with follow-up discussions in August 2002. Audit Findings - BC Gas Repatriation q The BC Gas Repatriation project was well planned with adequate resources assigned to the project. Gas customer accounts were transferred from the BC Hydro Customer Information System (CIS) to the BC Gas CIS successfully with only minor balancing problems. Appropriate training and processes were in place for handling customer inquires and payments during the ninety day interim period ending September 2002. q The majority of outstanding accounts for gas-only services have been collected by BC Hydro. q A key project event was the calculation to split the installment and accumulator balance for customers paying one monthly installment for gas and electrical services. An algorithm was developed and approved by both BC Hydro and BC Gas to calculate this split. Subsequent to the conversion, it was determined that an inappropriate split was made for some customers. Approximately 65 customers with a significant imbalance were proactively called and provided with options to rectify the problem. Other accounts will be reviewed when a customer inquiry is received. Monitoring these accounts will be important to ensure billing correctness and to ensure continued customer satisfaction.
Internal Audit Report Page 2
Executive Summary
Audit Findings - Joint Meter Reading Agreement q The Joint Meter Reading Project was well planned with adequate resources assigned to the project. System controls were found to be adequate for the transfer of files to and from the BC Hydro meter reading system to BC Gas. Management completed the required training for the meter readers and staffing plans are in place to address an expected 22% increase in the volume of work. Issues related to the Joint Meter Reading Project included: u Progress on the project was hampered by delays in receiving correct files from BC Gas. As a result, the July 2002 conversion proceeded without a full end-to-end test being done. Further problems with file layouts have resulted in the deferral of an automated rerouting function between BC Hydro and BC Gas until November 2002. Review of the recently prepared completion report will be important given these concerns. Documentation of controls still needs to be completed. u BC Hydro will be paid by the number of regular reads and other meter reading services provided. Still to be developed is a permanent process to log and report on other services provided such as lock-offs.
q
Internal Audit Report
Page 3
Contents
Executive Summary 1. Background 2. Audit Objective and Scope 3. BC Gas Customer Repatriation 3a. Observations 3b. Recommendations 4. Joint Meter Reading 4a. Observations 4b. Recommendations
Internal Audit Report
Page 4
1.
Background
BC Gas Repatriation q Since the formation of BC Gas in 1988, BC Gas has contracted BC Hydro to provide meter reading, billing, credit and collection, and customer inquiry services for Lower Mainland gas customers. All Lower Mainland BC Gas customer accounts were maintained on the BC Hydro Customer Information System. q In preparation for the deregulation of the gas market, a decision was made in 2001 by BC Gas to repatriate its 500,000 Lower Mainland gas customers from BC Hydro’s CIS to their own CIS System. q The BC Gas Repatriation project was responsible for this transfer. The gas customer accounts were transferred to the BC Gas CIS on July 1, 2002. Joint Meter Reading Agreement q In preparation for assuming responsibility for customer services, BC Gas issued a tender to provide one or more services. BC Hydro successfully bid on a contract to provide meter reading services as well as special reads and gas lock-offs to BC Gas for a period of up to five years. The joint meter reading agreement was signed in December 2001. q To provide meter reading service after the July 1, 2002 repatriation, the Joint Meter Reading project was undertaken to transfer meter reading data to and from the BC Gas CIS using an automated route control system (ARCS).
Internal Audit Report
Page 5
2.
Audit Objective and Scope
Objective q Provide assurance, as a result of both the BC Gas Repatriation project and Joint Meter Reading project, that the following has occurred: u integrity of the BC Hydro customer information and meter reading systems was maintained; u financial accounts were reconciled between BC Gas and BC Hydro; and u changes in the activities for the meter readers and BC Hydro customer service representatives were supported by appropriate training and communication. Scope q Review the agreements, project plans, testing results and other documentation supporting the BC Gas Repatriation and the Joint Meter Reading to ensure: u business issues identified in the data conversion project specifications were addressed; u testing of data conversion is complete and all outstanding issues have been resolved; u reconciliation of the financial transfer between BC Hydro and BC Gas was reviewed and approved prior to payment; u contingency plans were in place in the event the conversion of either the meter reading files or customer service information could not be completed in the required timeframe; u a change management plan was prepared and staff received appropriate training; and u a plan and process is in place to address outstanding issues after the initial conversion.
Internal Audit Report
Page 6
3a. Audit Observations - BC Gas Customer Repatriation
Planning q The BC Gas Repatriation project was well planned with adequate resources assigned to the project teams.
u
Approximately 20 detailed business specifications were signed off by BC Gas and BC Hydro in the spring of 2001, addressing areas of major concern related to the conversion. A transition team and steering committee was formed, and responsibilities were assigned to address each of the business specifications. Representatives from each of the customer services impacted by the repatriation were included on the team. Westech and CIS analysts developed a detailed plan and tests to extract the customer information from the BC Hydro system and eliminate the ability to access gas related programs. Communication was sent to all customers identifying the split between BC Hydro and BC Gas. Additional communications were sent to customers impacted by specific changes in service.
u
u
u
Extraction of the Customer Files q Gas customer accounts were transferred successfully from BC Hydro to the BC Gas system.
u
Three complete dry runs of the conversion were performed prior to the actual extract, resulting in only minor balancing problems occurring on the weekend of the conversion. 538,861 gas accounts were successfully transferred to BC Gas. A balancing and control process was completed and user acceptance testing occurred prior to final approval.
Internal Audit Report
Page 7
3a. Audit Observations - BC Gas Customer Repatriation
u
Critical issues related to the timing of the extract and the impact on other integrated programs were not identified until the final week prior to conversion, resulting in last minute changes to the action plan and conversion testing. To assist in future projects, the process to identify the impact on other systems should be examined as part of the post implementation review. A contingency plan was in place and approvals to proceed were required throughout the conversion weekend.
u
Integrity of the Customer Information q Critical in the process was the determination of the split for the accumulator balances between BC Hydro and BC Gas for customers on equal payment plans and pay-as-you-go payment plans. An algorithm was developed to determine the customer’s new gas and hydro installment amounts and accumulator balances. For most of the 214,000 customer accounts on payment plans, the algorithm calculated a reasonable split between BC Hydro and BC Gas; however, the following exceptions were noted:
u
An extra energy period was included in the calculation of the equal payment accumulator for approximately 700 customers and an incorrect proportion of the accumulator was allocated to the new gas account. The split for some customers resulted in a large debit balance with one utility and a large credit balance with the other utility. An extract was completed to identify the majority of accounts with potential problems. Sixty-five customers with significant imbalances were contacted and provided with options to rectify the problem. Other accounts will be reviewed at the customer’s request.
Page 8
u
Internal Audit Report
3a. Audit Observations - BC Gas Customer Repatriation
Integrity of the Customer Information q A financial transfer of $5.6 million was made from BC Hydro to BC Gas representing customer installments and unbilled charges for gas services. The amount of the payment was calculated by the algorithm at the time of the transfer. Subsequent to conversion, the calculation of the amount to be transferred was reviewed by Westech and the Customer Service Information Systems analysts. Customer Service Finance verbally confirmed that they reviewed the net balance and supporting documentation and are satisfied that the amount was appropriate, though supporting documentation is weak. Appropriate training and processes are in place to address customer inquiries, payments and collections. u A training package was prepared for the call centre representatives. The volume of the calls increased by 20,000 for the period July 2 - 23, 2002. It is expected that further issues and questions will arise once more customers obtain their bills. u A three member team from the Customer Billings Department has been formed to respond to individual customer billing problems related to the conversion. They are currently flagging problems, including accounts where the accumulator balance is a problem. u During the first 90 days after the conversion, an agreement is in place to transfer nonelectronic customer payments sent to the wrong utility. Funds will be sent to the correct utility and the customer may be notified of the error. Approximately 600 payments have been made in error by customers for the first three weeks of July. A process has been established to log and handle these payments. Additional staff will be hired as necessary. A review of the security of the payments identified three potential improvements.
Internal Audit Report Page 9
Transition Period after Conversion q
3a. Audit Observations - BC Gas Customer Repatriation
Transition Period after Conversion
u
A temporary increase in workload occurred for the credit department as a result of the conversion. In addition to addressing issues related to the accumulator balances, the department had 3,421 single service gas accounts with a total outstanding balance of $700,000 to review. By September, the number of accounts outstanding had been reduced to approximately 169 accounts.
Post Conversion q q The steering committee supported by the Customer Services Information System analysts is responsible for addressing issues post conversion. Issues continue to be addressed as they occur. No plans are in place to complete a post implementation report.
Internal Audit Report
Page 10
3b.
Recommendations - Gas Repatriation
Management Action Plans
q
Recommendations
Conversion
q
Ensure that adequate documentation is available to support the calculation and approval of the $5.6M wire payment to BC Gas by Customer Service Finance.
Financial Services Manager - Distribution Line of Business (former Manager of Customer Services) will ensure that the supporting documentation and approval is available to support the payment. The Manager of the Customer Credit and Payment Services will ensure the following:
q q
Security and Control of Customer Payments
q
q
q
Maintain security of the payments, by attaching a header and seal the envelope for each batch of cheques transferred from BC Hydro to BC Gas during the transition period. Assess whether storage cabinets currently being used provide adequate security for the storage of cheques. Ensure that appropriate security and background checks are being done for employees hired to handle the additional workload. Prepare a post implementation review identifying lessons learned for future projects including a review of critical timing issues resolved in the week before testing.
Internal Audit Report
q
Cheques are batched effective immediately. Investigate the potential purchase of a safe by December 2002. Confirm with Human Resources and Tempworks that appropriate background checks are done for employees handling payments by December 2002.
q
Post Conversion
q q
Management will prepare a post implementation review by December 31, 2002.
Page 11
4a.
q
Audit Observations - Joint Meter Reading
ARCS Project Implementation The Joint Meter Reading Project was planned with adequate resources; however, progress was hampered by BC Gas delays.
u
Detailed project plans were prepared and monitored for the transfer of data to and from BC Gas using the Automated Route Control System (ARCS). Completion of the project before the weekend conversion on July 1st was hampered by delays in receiving the correct files from BC Gas. Further difficulties with file layouts required a portion of the project-automated rerouting to be deferred until fall 2002. Manual processing is required until the automated rerouting can be implemented. Final sign off of the BC Gas files will not occur until November 2002.
u
u
System Controls q System controls were found to be adequate over the transfer of files to and from BC Gas.
u
Controls are in place to ensure that files are received nightly. Daily reports generated from ARCS and the meter reading system identify read requests that are incomplete or incorrect. Reliance is placed on the BC Hydro CIS to identify errors or discrepancies from the meter readings transferred back from the meter reading system. Reliance is placed on BC Gas to review their files for potential errors. Limited feedback has been received from BC Gas at this time.
u
Internal Audit Report
Page 12
4a.
u
Audit Observations - Joint Meter Reading
The Risk and Control Analysis and Detailed Control Framework required for BC Hydro financial systems were not completed at the planning stage of the implementation of the ARCS. As requested by Audit Services, these worksheets will be completed to document implemented system controls.
Resources q Appropriate training and staffing issues have been addressed.
u
u
The volume of work for the meter readers is expected to increase gradually by 22%. The increased workload has been initially addressed and will be monitored. Limited training was required to instruct the meter readers on changes in the input from the handheld devices. Training for additional services such as gas lock-offs has been completed. The requirement to modify the job description for the meter readers is still being addressed. Job descriptions are still being finalized for the newly created MRMS/ARCS coordinator positions for handling both BC Gas and BC Hydro files.
Billing and Statistical Report q BC Hydro is to be paid by the number of regular reads and other meter reading services provided. Invoices are prepared based on system generated reports tracking regular meter reads and an electronic spreadsheet tracking other meter reading services. The use of an electronic spreadsheet is only temporary and is expected to be replaced as the volume of work increases. Careful monitoring will be required to ensure that this manual process is replaced prior to it becoming unmanageable.
Internal Audit Report Page 13
4a.
q
Audit Observations - Joint Meter Reading
The review of the approval process identified the requirement that the approver verify or check the reasonableness of the reported number of services prior to issuance of the monthly invoice to BC Gas.
Post Implementation q A completion report has been prepared summarizing lessons learned and recommendations for future projects. q A joint client committee has been formed with representation from BC Hydro and BC Gas to address outstanding issues and review service level agreements.
Internal Audit Report
Page 14
4b.
Recommendations - Joint Meter Reading
Management Action Plans
q
Recommendations
q
Complete the Risk and Control Analysis and Detailed Control Worksheet to ensure that system risks and controls are adequately documented. Develop a plan to replace the manual spreadsheet currently used to track other services such as lock-offs. Verify or check the reasonableness of the reported services prior to issuance of the monthly invoice to BC Gas.
Management is in the process of preparing the required documentation by October 2002.
q
q
Management is working with BC Gas to develop an automated dispatch process and replace the manual spreadsheet by December 2002. Management will ensure a process is in place to verify the accuracy of the invoice on a monthly basis beginning with the October 2002 invoice.
q
q
Internal Audit Report
Page 15