GM Audit Services (GMAS) Presentation: IIA F b 09 2010IIA ...

1 Audit Services . Auditing the Management of Large Capital Projects in GM. GM Audit Services ( gmas ) presentation : IIA F. February b 09. 09, 2010. 1. Agenda 9 Large Engineering-based Capital Projects - Definition 9 Project Audit Background 9 Matrixed Project Management 9 Project Audit Value Proposition / Vision / Mission / Objectives 9 Risks of Weak Project Management Controls / Risk Drivers 9 Project Execution Key Enablers / Processes 9 Project Audit Plan Development Process 9 Project P j t Auditing A diti - gmas Approach A h / Example E l Risk Ri k M. Matrix t i / Key K Strategies St t i 9 Audits to Date and Control Concerns from Early Project Audits / Associated risks 9 Areas with Audit Issues from Current Audits 9 Consultative Efforts 9 Continuous Improvement 2.

2 Definition - Large Engineering-based Capital Projects Large (Executive Committee-approved). Committee approved) engineering engineering-based based projects, typically to acquire / improve land, construct / modify buildings or other permanent structures, procure / install machinery and equipment (M&E), procure special tooling 9 Product program-driven - vehicle, powertrain 9 Facilities construction ( , engineering centers, offices). 9 Equipment replacement ( , press modernization / upgrades). 9 Other ( , greenfield sites). 9 Typical spend - US $100M to 1B(+). 3. Background gmas Project Audit 9 The gmas Global Project Audit program was developed and piloted in 1998 in response to a senior GM management request 9 It replaced l d th the fformer gmas S.

3 Supplier li AAudit dit construction t ti auditdit activity ti it (concluded ( l d d 1999) where pull-based audits were conducted at the request of construction project managers 9 It was implemented p in 1999 to complement p the p process audits that were being g performed in engineering and other functions ( , change management, procurement, capital management, etc.). 9 It expanded to encompass all aspects of large engineering-based capital projects and project management using sing a holistic Audit a dit approach and the existing e isting gmas . risk-based process-focused Audit methodology 9 It recognizes that projects vary in size and complexity complexity impacted significantly g y byy the extent to which theyy entail vendor tooling, g, M&E,, M&E.)

4 Installation, facilities construction (green-field, brown-field, rearrangement), land /. land improvement, IT systems, containers, incentives, etc. 9 gmas Project Audit performs central monitoring of global capital project activity 4. Background gmas Project Audit (concluded). 9 It keeps its finger on the pulse of the capital spending execution control environment (generally post Appropriation Request (AR) approval and pre-Start of Production or equivalent). q ) dynamically y y changing g gpprocesses and sub-processes p 9 It looks vertically at specific representative projects: Recognizes the matrix project organization Synergizes S i with ith process and d other th operational ti l audits dit and d avoids id dduplication li ti 9 Puts itself in the shoes of the single point owner, accountable for the project: What am I or should I be most concerned about?

5 9 Adds value for both the specific project and the sponsoring organization(s) and their concurrent / future projects 9 Solves the dilemma: 1) projects are too big to see in a process Audit (s) and 2) too many process audits would be required to address risks at the lower / functional project levels (across projects). 9 Provides consultation reactively and proactively 5. Th Three-Dimensional Di i l Matrixed M t i d Project P j t Management M t 9 Regional / Global Funding: North America, Europe, Latin America / Africa / Middle-East / Asia- Pacific (International). 9 Organizational Ownership: Global Product Development, GM Powertrain, Worldwide Facilities, Manufacturing Engineering, Service and Parts Operations, Holden, GM.

6 Do Brazil, GM India, etc. 9 Functional F ti lEExecution: ti Program Management, Purchasing and Supply Chain, the Manufacturing Engineering silos, Worldwide Facilities, Finance, Product g g, IT,, Marketing, Engineering, g, HR,, etc. 6. Project Audit Value Proposition Applying effective project management and control practices optimizes the productivity of resources allocated to develop and d li deliver capital it l projects j t ffor GM. GM, th thus conserving i ththem tto h help l achieve hi other GM business objectives 7. Project Audit Value Proposition (continued). 9 The Project Audit program / group maintains dedicated expertise and a globally consistent approach across all regions and involved business units to monitor how effectively large capital investment projects are executed - took several years of project-focused dedication to build expertise - auditing projects provides invaluable auditor training globally 9 The group has optimal focus between 1) Audit shops that have no project /.

7 Construction auditing capability, and 2) those that Audit on a recovery basis only (tooling, construction, etc.). 9 Project Audit promotes a one company approach globally with respect to best project management processes huge $ volumes constantly being spent by many different and highly autonomous organizations involved in project delivery 8. Project Audit Value Proposition (continued). 9 The group monitors and assesses the project execution control environment within GM through timely, ongoing coverage of dynamically changing processes and sub sub-processes processes - leverages the continuous opportunity to identify new and / or previously unidentified processes and sub-processes, globally 9 It provides input to and direction for less frequent audits of larger and higher-level processes used by functional units involved in project delivery delivery.

8 By annually looking vertically at how a few specific, representative projects are being managed in various regions, the Project Audit program supplements other gmas . audits of horizontal processes used by such functional units 9 The program purposely maintains a project-wide focus in support of project management identifies and evaluates project-specific risks (unlimited variation;. , products / technology, duration, complexity, outsourcing level, degree of in- h house skilled kill d ttrades d usage, ttypes off contracts, t t use off professional f i l Services , i funding level, number of spending areas including plant locations, degree of cross-regional / business unit involvement, joint venture operations, etc.)

9 9. Project Audit Value Proposition (continued). 9 The program avoids looking at the same project multiple times, unless deemed necessary (only ( l ttwice i very large l projects j t with ith extended t d d titimelines). li ). 9 The program plans Audit work to the timeframe in the project's life cycle to add value optimally to both the specific project and the sponsoring business unit(s). 9 It provides consultation to project managers who may have varying levels of expertise with certain functional areas, processes, and sub-processes sub processes that support the project 10. Project Audit Value Proposition (continued). 9 The program recognizes and evaluates risk within the context of these highly- matrixed t i d / cross-functional f ti l project j t tteam organizations, i ti which hi h can iinvolve:: l Compliance with established, templated processes Adherence to project-developed processes intended to address unique risks i k associated i t d with ith th the project j t Communications between the various functional areas that support the team and how their processes interact Understanding U d t di off itits members'b ' iindividual di id l roles l and d responsibilities ibiliti and d th the interrelationship of their activities to the project as a whole 11.

10 Project Audit Value Proposition (continued). 9 The program recognizes the importance of lower-level processes to a specific project j t that th t might i ht nott otherwise th i beb considered id d as iimportant t td during i a stand-alone t d l process review; , lien / claim resolution, incentives management, contractor site-specific safety plans, contract management, etc. 9 Project Audit has a compliance element important to the finality of the lifecycle of a project to the extent project team organizations may be templated /. common, it can best assess compliance to such during a focused review at and through all project levels across line item owners very important as the control environment always depends upon the degree to which single-point accountability is understood, accepted and exercised by the project manager (including tone-at-the-top ) and how all processes are integrated 12.