Administration September 2, 2005

Industry Poll: Finance Outsourcing Can Help

February 9, 2005 (PLANSPONSOR.com) - Companies that have outsourced finance functions have achieved greater control over governance and compliance issues instead of less as was once feared, a new report asserted.
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An Accenture news release said that 43% of the executives surveyed who had already outsourced a finance function reported that by doing so, they had strengthened their governance and compliance systems. A nearly identical amount (44^) said outsourcing had made no adverse impact on their governance and compliance efforts.

The report was conducted by the Economist Intelligence Unit on behalf of Accenture Finance Solutions, which provides outsourced finance and accounting services to businesses and governments.

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According to the survey, 51% of respondents said the concern over the ability to maintain governance and compliance best practices is keeping them from taking the outsourcing step for their finance functions

However, among those who have had a good experience, 56% of the respondents said outsourcing providers are better equipped to deal with frequent changes to tax codes and accounting rules, while also providing an increased level of visibility into processes and transparency of information, the news release claimed.

Other survey findings included that 82% said that the establishment of finance outsourcing service-level agreements is essential for success – ones that define core finance processes and compliance requirements. Respondents also said clear lines of accountability were important, followed by instituting systematic status reports for outsourced processes, ensuring continuous evolution of the control framework and administering penalties for compliance and governance lapses, the news release said.

Executives noted several areas of compliance and governance that are of particular concern to them when outsourcing finance functions, including:

  • the quality of financial reporting provided to the management team by outsourcing service providers (64%)
  • service provider’s knowledge of the respondent company’s unique requirements and controls to prevent fraud (60%)
  • compliance with tax laws and accounting standards (50%)
  • transparency of accounts for auditors’ visibility (36%)
  • While 46% of respondents believe that Sarbanes-Oxley and related compliance legislation has had limited or no impact on their company’s outsourcing of finance functions, 39% said such legislation and activism reduces the likelihood of companies outsourcing finance functions.

Respondents said the top finance functions that should still be kept in house include:

  • budgeting and forecasting (81%)
  • treasury and cash management (71%)
  • information management and analysis (68%)
  • financial risk management (66%)

The online survey covered 203 senior executives including chief finance officers, finance directors and vice presidents of finance, representing companies around the world with revenues ranging from less than $500 million to more than $8 billion.

Compliance September 1, 2005

Judge: Oral COBRA Notice Legally Sufficient

September 1, 2005 (PLANSPONSOR.com) - A Michigan man suing his former employer over his health coverage won a mixed legal victory when a federal judge cleared the engineering firm of wrongdoing on one issue but paved the way for more proceedings on another.
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US District Judge Robert Holmes Bell of the US District Court for the Western District of Michigan ruled that Dreisenga & Associates had satisfied the notice requirements of the Consolidated Omnibus Budget Reconciliation Act (COBRA).

Even though President Daniel Dreisenga did not specifically refer to COBRA in his conversation with plaintiff Thomas Joiner, the interaction with Joiner allowed him to make an informed decision about his ability to continue coverage after he retired, Bell said.

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According to Bell, Joiner and Dreisenga discussed continuation of coverage and agreed Joiner would be responsible for the premium. This notification allowed Joiner to make an informed decision, the court said.

While Dreisenga “may not have specifically referred to [Joiner’s] continuation coverage as a benefit conferred under COBRA, the notice given adequately informed him of his ability to continue coverage. Thus, [Joiner] was able to elect to continue coverage that would otherwise terminate due to his retirement. In short, through [Dreisenga’s] notification and continuation of [Joiner’s] coverage, the purpose of COBRA was served,” Bell wrote in his opinion.

However, Bell refused to dismiss the remainder of Joiner’s case alleging that Dreisenga violated the Health Insurance Portability and Accountability Act (HIPAA) by terminating his coverage after learning he had prostate cancer. Bell said because there was conflicting testimony about how long Joiner was supposed to be covered and whether the employer was informed of the cancer before or after it terminated insurance coverage, Joiner had the right to keep that part of the case alive.

The company alleged that Joiner was entitled to coverage only until age 65 and that it notified Joiner it was terminating his coverage before he informed them he had cancer. Joiner asserted that the agreement on continued coverage did not have a specific termination date and that he notified the company of his cancer before the termination of coverage.

The case is Joiner v. Dreisenga & Associates Inc., W.D. Mich., No. 1:04-CV-437, 8/29/05.

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