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LISI 2011 —
114
— financial report
Documents specific to the Ordinary General Meeting
Main internal control procedures relating to the drafting
and processing of accounting and financial information
– The Group carries out an annual review of the 4 to 5-year strategic
plan that has been set out and, based on this review, defines a
priority action plan. The budget for the coming financial year falls
within the scope of this plan for a 12-month period. The planning
process is approved first by the Executive Committee and then
by the Board of Directors. Progress on preparation of the budget
is assessed monthly at all levels: business units (B.U.); Group and
Divisions.
– The monthly consolidation of management indicators, the income
statement, the balance sheet and the funding table allow a precise
measure to be obtained within a short time of year-end. This
facilitates the decision-making process.
– The purchasing and investment process falls within the scope of the
strategic and budgetary mechanism. Any purchasing or investment
commitment that deviates from the budget authorizations must
have prior approval at the appropriate level.
– The sales and contract process is reviewed specifically by the local
teams, BUs, divisions or the Group depending on the materiality
level, before the actual commitment is made.
– The Cash Flow-Finance process also requires specific commitments.
So for instance all financial investments aremanaged at Group level.
– The pay process is managed at operational unit level and is regularly
reviewed both by the internal audit team and by external auditors.
– The Health, Safety, and Environment (HSE) process has been
subjected to the monthly review of management indicators
(industrial accident rates, non-compliances, etc.) and the major
resulting action plans.
2011 achievements and outlook
– The Internal Control Management Team has conducted 13 audit
missions and 15 recommendation-following missions. The entire
scope of the LISI sites is covered with the exception of new entities
acquired in 2011.
– In continuing difficult circumstances in 2011, some initiatives
have been conducted to address specific issues such as inventory
reconciliations with the logistics centers, the insufficiently reliable
ERP Reporting, or controls on incurred expenses. These will be
followed up in 2012.
– The “Risk Management” initiative, whose purpose is to strengthen
the Group’s internal controls, is today an integral part of the process
that is in use throughout all the divisions.
– An Internal Control Baseline is being elaborated. It is based on a
questionnaire containing all the processes from the Internal Control
Manual: Purchases, Capital Expenditures, Sales, Inventories, Cash,
and Human Resources. Specific monitoring will be conducted for
any management unit whose level of internal control will not pass
80% of the established score on that questionnaire.
– Alongside the Internal Control unit, the HSE (Health, Safety and
Environment) Audit unit has fully coordinated at Group level all HSE
actions and conducted HSE audit missions at all sites. Furthermore,
initiatives will be conducted jointly with Internal Control tomeasure
the effectiveness of the Maintenance process at sites.
– Moreover, LISI’s General Management have set up a centralized
accounts management system. Its main function consists of setting
up a global cash pool which manages cash flows and surpluses, and
exchange rate risks.
– Finally, other inter-departmental initiatives have been pursued, such
as:
• the inclusion of performance indicator and cash flow tables in the
Group’s integrated management system,
• the control of commitments to major investments,
• more systematic application of the legal review process,
• the implementation of a crisis management procedure.
– The Group deems that the internal control management methods
are satisfactory. Internal audit tasks will therefore follow the same
routine in 2012, with particular attention being paid to new entities
joining the Group and to those areas identified as being at risk.
Conclusion
Initiatives taken to strengthen internal control levels have led to
recommendations being approved and carried out by the relevant
personnel and to deadline. Subsequent follow-up procedures make it
possible to ensure they are applied properly.
This constitutes a permanent progress initiative for the Group.
Relying on knowledge that can always be improved and the strong
involvement of those in charge of key processes, it facilitates the
development and improvement of internal control over time.
Gilles KOHLER
Chairman of the Board of Directors