Nonelectronic ControlsBy Mel Duvall | Posted 2003-08-01 Email Print
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Shareholders nearly deify Warren Buffett for the way he manages his diverse holding company, Berkshire Hathaway of Omaha.
NetJets, a Berkshire firm that sells fractional aircraft ownership to a clientele of millionaires, sports stars and Hollywood actors such as Arnold Schwarzenegger, is recognized as a technology leader. It recently spent $20 million to build a customer relationship management system that tracks the minutest details about its customers' preferences and itineraries. When Buffett boards a plane, the system instructs attendants to have a Cherry Coke waiting by his seat.
But when it's time for the $2 billion-a-year subsidiary to report its finances, there are no electronic links to the head office, says CIO Mike Midkiff.
Borsheim's and NetJets' financials are manually consolidated at Berkshire's Omaha headquarters with the rest of the company's subsidiaries every quarter. It's an exhausting task for the 16-person staff. "Every quarter and year-end, my heart goes out to those guys, because they're working all hours," Limas says.
That system amazes most outside observers. Bruce Nearon, a technology expert at the New York State Society of Certified Public Accountants, says a company of Berkshire's size typically has sophisticated financial software consolidating results, such as a suite from enterprise software vendor SAP. Increasingly, he says, outside auditors are being provided with direct access to a company's electronic records so they can more thoroughly trace entries.
The nonelectronic controls over corporate reporting at Berkshire are balanced by a culture that sees only black and white when it comes to accounting. "There is zero tolerance for anything considered unethical or dishonest," Limas says.
"I don't feel any pressure to make up numbers. Besides, if the season's not going well, Warren already knows that."
Jacques agreed: "It's not that I feel more pressure to be honest as a Berkshire CEO," she said. "We feel it's a privilege to work for him and we would never endanger that trust."
Even companies that have adopted advanced financial reporting software aren't convinced there are measurable returns for doing so.
Like Berkshire, Fluor Corp., a $10 billion engineering firm in Aliso Viejo, Calif., is known for being thrifty with technology. Fluor spends just 0.2% of its annual revenue on information systems, according to research firm Alinean.
Still, Fluor wanted a clear on-screen view of financial results for its entire North American operations and got it by installing SAP's enterprise software in 2001. Fluor also uses software from Comshare to consolidate financials from SAP with those of its international operations. To meet the CEO and CFO certification requirement of Sarbanes-Oxley, Fluor is installing Paisley's Risk Navigator package. It will map Fluor's internal controls and processes, identify weaknesses and provide links to the underlying policies.
While the software provides Fluor's senior management with some comfort that it is meeting the new requirements, Controller Victor Prechtl sees it as an added expense with few, if any, concrete benefits. "All of the infrastructure that's going out under Sarbanes-Oxley is going to be expensive to implement and the payback is difficult to evaluate," he says.