ICBCs Application to Streamline IT Compliance Reporting Requirements - - PDF document

6/19/2018 1

ICBC’s Application to Streamline IT Compliance Reporting Requirements

Streamlined Review Process Presentation June 19, 2018

• ICBC has been filing IT capital reports and IT

capital expenditure information in its IT Plan filings for 12 years.

• ICBC’s IT capital spend has limited impact on

Basic insurance rates.

• The impact of IT Spend is provided in the

annual Revenue Requirements Application.

• Further to the BCUC Core Review Report, it

is appropriate to assess whether reporting can be improved.

• ICBC’s proposals achieve effective oversight

more efficiently.

Opening Remarks

Overview

June Elder Manager of Regulatory Affairs 2

6/19/2018 2

• Application – historical context
• ICBC’s proposals
• Improvements to ICBC’s internal

processes to facilitate BCUC review

• ICBC’s responses to written

questions

• Conclusion
• Questions

Agenda

Overview

3 June Elder Manager of Regulatory Affairs

APPLICATION IN CONTEXT

4

6/19/2018 3

• IT capital reporting has seen only 2

changes since 2006.

• IT capital reporting currently consists
• f:

1. Individual IT capital project reports 2. Annual IT Capital Expenditure Plan (IT capital plan) 3. Annual Update to the IT Strategic Plan (IT strategic plan)

History of IT Capital Reporting

Context

June Elder Manager of Regulatory Affairs 5

2014 Core Review emphasized proportionality and focusing on areas of greatest impact:

“Compliance resources should focus on matters that pose risks of increasing customer costs and rates…” “The BCUC should make additional efforts to ensure all compliance reports are necessary and useful, and eliminate the reporting requirement for those that are not.” “The BCUC should place more responsibility on regulated entities to report, on an exception basis, deviations from forecasts that could affect costs and rates, instead of routine reporting.”

2014 BCUC Core Review Findings

Context

6 June Elder Manager of Regulatory Affairs

6/19/2018 4

Impact of IT Capital on Basic Rates

Context

7 Phil Leong

Corporate Controller

Impact of IT Capital on Basic Rates – Recent History

Context

8 Phil Leong

Corporate Controller Basic Revenue Requirements Application 2013 RRA 2014 RRA 2015 RRA 2016 RRA 2017 RRA Approved Premium * $2,500M $2,600M $2,900M $3,200M $3,400M IT Capital Depreciation Expense ** $9.0M $6.7M $6.4M $8.4M $8.6M Depreciation as a % of Approved Premium 0.36% 0.25% 0.22% 0.26% 0.25% * Amounts are rounded for illustrative purposes ** Assumes 58% allocation to Basic insurance (Corporate Shared Services ratio)

Impact to Basic rates has been stable:

6/19/2018 5 Impact to rates at different IT capital reporting thresholds:

Impact of IT Capital on Basic Rates

Context

9 Phil Leong

Corporate Controller Reporting Threshold 100% allocation to Basic Rates * Impact to Average Policy*** 58% allocation to Basic Rates ** Impact to Average Policy*** # of Projects (2015-20) $1 million 0.006% $.06 0.003% $.03 20 $2 million 0.012% $.12 0.007% $.07 15 $3 million 0.018% $.18 0.010% $.10 13 $5 million 0.030% $.30 0.017% $.17 10 * Assumes 100% allocation to Basic insurance (unlikely) ** Assumes 58% allocation to Basic insurance (Corporate Shared Services ratio) *** Based on average Basic insurance policy premium of $1,023 (excludes trailers, ORV and manual policies)

ICBC’S PROPOSALS

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6/19/2018 6

• 1. Increase IT capital reporting

thresholds

• 2. Change IT capital plan content to

provide better information upfront

• 3. Exclude certain types of expenditures

from IT capital project report requirements (not true “projects”)

• 4. Reduce frequency of IT strategic plan

filing to every 3 Years

Proposals in Summary

Proposals

Gary Eastwood

Chief Information and Technology Officer

11

Proposal 1: a) Increase threshold for the IT capital plan to $3 million. b) Increase threshold for individual IT capital project reports to $5 million. Rationale: Focus on higher impact/risk projects; providing the right balance between efficiency and Commission’s regulatory oversight.

Proposal 1: Increase IT Capital Reporting Thresholds

Proposals

Gary Eastwood

Chief Information and Technology Officer

12

6/19/2018 7 Implications:

• Commission will still see information about

projects over $3 million threshold in the IT capital plan.

• Total IT capital spend will still be shown.
• Commission will no longer see projects that

have low risk and low impact on rates.

Proposal 1: Increase IT Capital Reporting Thresholds

Proposals

Gary Eastwood

Chief Information and Technology Officer

13

Proposal 2(a): Reduce the forecast period shown in the IT capital plan from three years to two years. Rationale: Provide more meaningful budget information; based on more refined estimates. Reduce potential for skewed forecast trends that can arise from early estimation and changes in technology.

Proposal 2: Change IT Capital Plan Content

Proposals

Gary Eastwood

Chief Information and Technology Officer

14

6/19/2018 8 Implications:

• Focuses Commission’s oversight on more

meaningful budget information and away from “placeholder” figures.

• Commission will still have visibility into

business strategy and IT trends that drive the longer term expenditures IT Strategic Plan.

• Commission will also be notified when there

are changes.

Proposal 2: Change IT Capital Plan Content

Proposals

Gary Eastwood

Chief Information and Technology Officer

15

Proposal 2(b): Merge the Figures 3 and 4 from the IT capital plan and provide new information (providing information requested by the Commission). Rationale:

• Full picture of project lifecycle (better

information upfront);

• Aligns to information BCUC has requested

in the past.

Proposal 2: Change IT Capital Plan Content

Proposals

Gary Eastwood

Chief Information and Technology Officer

16

6/19/2018 9

Current Format (proposing to be changed)

Proposals

• Limitations: No view of the total project budget; no

comparison of actuals at completion to budget.

17

Proposed Format

Proposals

• ICBC agrees this format is better.
• Added columns include the project capital budget, total

actuals to date, estimate at completion, and planned and actual schedule.

• Removed year over year forecasts.

18

6/19/2018 10

Proposed Format

Proposals

Gary Eastwood

Chief Information and Technology Officer

19

Implications :

• We will not be including year over year project

forecasts

• Can now see how the project is tracking against

initial project budget and schedule.

• Explanations of significant variances (estimate

at completion vs budget) will still be included in the project summaries in the IT capital plan.

• Overall year over year forecast (proposed 2

year actual and 2 year forecast) will still be included in the IT capital plan

Proposal 2: Change IT Capital Plan Content

20

Proposals

Gary Eastwood

Chief Information and Technology Officer

Figure 5 — Depreciation and Amortization of IT Capital Expenditures

2015 2016/17 2017/18 2018/19 2019/20 Description Actuals Forecast** Forecast Forecast Forecast 1 Depreciation and Amortization

• f IT Capital

11.5 $ 16.1 $ 13.4 $ 14.1 $ 15.1 $ 2 % of ICBC's operating expenses 1.9% 2.4% 2.0% n/a n/a * ICBC’s new capitalization policy, as discussed in paragraph 10, has been applied to 2015 expenditures and beyond. ($ millions) Line No.

Proposal 2(c): Discontinue IT Asset Category Cost Details. Implications:

• Removes information that may be redundant.
• Excluding the asset category will streamline

the IT capital report content.

6/19/2018 11

Proposal 3: Confirm Reporting Requirements for 3 Categories

ICBC seeks confirmation that it can exclude the following costs from the requirement to file an individual IT capital project report: a) System enhancement costs b) Hardware/software costs for new employees c) True-up costs

21

Proposals

Phil Leong

Corporate Controller

Proposal 3(a): System Enhancement Costs

Proposal: Exclude System Enhancement costs from IT capital project reporting Rationale:

• This is not a single project but an aggregate of

costs for discrete enhancement work.

• Not practical or useful to prepare an IT capital

project report. Implications:

• Aggregated costs will be shown in the IT

capital plan.

22

Proposals

Phil Leong

Corporate Controller

6/19/2018 12

Proposal 3(b): Hardware/Software for New Employees

Proposal: Exclude Hardware/Software Costs for New Employees from IT capital project reporting. Rationale and implications:

• Bulk purchase of routine equipment for new

employees.

• No additional risk to warrant additional

reporting.

• BCUC already sees rationale for new staff

in RRA.

• Costs will be reported in the IT capital plan.

23

Proposals

Phil Leong

Corporate Controller

Proposal 3(c): True-up Costs

Proposal: Continue to exclude True-up Costs from IT capital project reporting. Rationale and implications:

• Not a new project but contractual true-up
• f an existing project.
• No additional planning, analysis of risks,

examination of alternatives, etc.

• Going forward, these costs will be included

as part of the projects costs (at onset).

24

Proposals

Phil Leong

Corporate Controller

6/19/2018 13

Proposal 4: Reduce IT Strategic Plan Filing Frequency

Proposal: Reduce the Filing Frequency of the IT Strategic Plan from once every year to once every three years with provision for

• ff year updates.

Rationale:

• ICBC uses a 3-5 year strategic planning

cycle so annual updates are typically minimal.

• If there is any material change to the

Corporate or IT strategy in the interim, ICBC will file an updated IT strategic plan.

25

Proposals

Gary Eastwood

Chief Information and Technology Officer

CONTINUOUS IMPROVEMENT

26

6/19/2018 14

Improvements to Internal Processes Regarding Timing

• f IT Capital Project Reports
• Recent late filing for Guidewire Rating

resulted from a gap in our process

• ICBC has taken steps to improve the

internal process:

• Education and awareness (Finance, IT,

Corporate Planning).

• New process with help from Corporate

Planning.

27

Process

Gary Eastwood

Chief Information and Technology Officer

RESPONSES TO INFORMATION REQUESTS

28

6/19/2018 15

TREAD’s Questions Regarding ICBC’s IT Strategic Plan and RAAP

• RAAP is aligned with the current IT strategy.
• ICBC will be filing an updated IT strategic plan

in the next RRA.

• Guidewire Rating engine is the only RAAP IT

capital expenditure that has any funding from Basic and IT capital report has been filed.

• RAAP involves a low degree of technology risk.

29

IRs

Gary Eastwood

Chief Information and Technology Officer

Questions on Savings

• Clear savings in work effort but no

quantifiable bottom line savings.

• This Application is about ensuring that

reporting over and above the RRA is focused on significant expenditures and risk.

• ICBC’s proposals achieve effective
• versight more efficiently.

30

IRs

Phil Leong

Corporate Controller

6/19/2018 16

Alternative Approaches to Thresholds

• Dollar values are an objective test that is

easily understood by all stakeholders.

• “Impact on customers” methodology is

subjective.

• Top 5 /10% methodology may be over or

under inclusive.

31

IRs

Phil Leong

Corporate Controller

CONCLUSION

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6/19/2018 17

Conclusion

Closing Remarks

33

• IT capital reporting requirements has had only 2

changes since 2006.

• Reporting and the level of scrutiny

commensurate with risk & the quantum of expenditure is consistent with BCUC Core Review findings.

• ICBC’s proposals maintain appropriate levels of
• versight and understanding of upcoming IT

capital expenditures.

• ICBC’s proposals achieve effective oversight

more efficiently.

Phil Leong

Corporate Controller

QUESTIONS

34