Subject: Doorstep Review Process
From: [email-masked]
To: [email-masked]
Cc: [email-masked], [email-masked], [email-masked]
Date: Tue, 6 Feb 2001 13:29:00 -0800 (PST)

Doorstep reviews are by design a quick look at commercial activities and the 
mid and back office support for those activities in our wholesale 
businesses.   (EBS and EES will be included in 2001.)  The controls around 
mid and back office activities are best understood by conducting a deal test 
- i.e. following the process and documentation around a series of 
transactions from the inception of a deal through the collection of cash.  
Asking someone to explain their processes and controls is more the act of 
explaining what we think happens.  Doing a deal test tells us what does 
happen.  And it is when there are differences between the controls that we 
believe to be in place and what actually happens, that we identify where 
operational, and perhaps financial, risk is created. 

These reviews are not designed to replace the internal audit work for which 
Enron has contracted with Arthur Andersen.  As such, they are purposely 
designed to be conducted in a shorter timeframe than AA's reviews and to 
produce less paperwork.  It is both the quick assessment of control gaps and 
potential operational risk, and the quick solutions to correct these, that 
are valuable in these reviews.  These reviews also look  for ways to leverage 
success stories from one office to another in terms of best in class 
practices or practical solutions to shared problems.  Briefly, the doorstep 
review process would follow this set of steps:

 1)  Cross-functional doorstep review team arrives at subject office.  This 
is usually unannounced, but key personnel in the subject office may be 
notified of the review a few days prior to the team's arrival to be certain 
that key individuals in that office will be not be out of town. 

 2)  Doorstep team lead will meet with the head of the subject office to tell 
them about the parameters of the review and to ask their co-operation in 
making information and personnel available to complete the review.  

 3)  The review is conducted, including information sessions with key 
commercial personnel to understand the business conducted in the office and 
key control/operations personnel to understand the business processes.  The 
deal test is conducted on a relevant sample of deals to verify the process 
and controls that were followed in the life of the transactions.  

 4)  The doorstep team usually has a rough draft of key points by the end of 
the review, which includes both controls that are working well and those 
which may not be working as designed.  Potential action items are suggested.  
This information is reviewed with the head of the office, as they are usually 
very interested in knowing what can be done to improve controls to support 
their business.   There are times when the head of an office will suggest an 
additional point to be added to the list of action items, knowing that with 
this focus he/she can get help in accomplishing certain efforts to support 
the growth of their business.  The doorstep team lets the head of the office 
know to whom this information will be communicated and the timing for doing 
so. 

 5)  Starting late in 2000, the findings from doorstep reviews would next be 
reviewed with Ted Murphy and me.  Ted's viewpoint would be from Risk Controls 
and mine from the mid and back office operations point of view.  Ted and I, 
assisted by Cassandra Schultz and Shona Wilson, would work with appropriate 
personnel in the subject offices to understand who would assume 
responsibility for addressing action items noted from the doorstep review and 
to determine the appropriate time period for completing these action items.  
Then on a quarterly basis, Ted and I would meet with Rick Buy and Rick Causey 
to give them a recap of doorstep reviews completed during that quarter, 
doorstep findings that had been handled, updates on any outstanding doorstep 
findings and plans for the next quarter.  Through most of 2000, the doorstep 
teams met with Rick and Rick within a few days of returning from each 
doorstep review.  This immediate feedback step was passed to Ted and me 
sometime late in 2000.  We did agree that we would meet with Rick and Rick 
before the quarterly review if certain doorstep findings were of particular 
concern or if we felt that they needed to be informed on an issue in a more 
timely manner than quarterly.   

Steps 1 through 4 were followed in the review of the scrap metals business in 
Germany.  Shona did conduct a debriefing session with the managing directors 
in charge of the scrap metal business.  Her impression was that they were not 
concerned over the length of time that it was taking to implement the 
integration plan nor over the somewhat irregular payment methods that were 
discovered during the deal test that are not in keeping with Enron's 
practices.  Shona also debriefed with Mike Jordan, and I believe that Fernley 
was involved in that session as well.  At my suggestion, she also contacted 
Joe Gold to inform him of her findings.  I do not know what the timing was 
for Joe to get back to Shona, relative to Rick Buy's e:mail message.  

Michael, I understand that you may have felt blind-sided by the e:mail from 
Rick Buy on his concerns over the scrap metal business.  And if that was the 
case, I apologize for that.  While Shona did debrief with Mike and Fernley, I 
know that she did not review the teams findings directly with you.  If you 
would like to be included in a direct debriefing with the doorstep team when 
they review businesses that are managed by EEL, we can certainly add that as 
a clear step from this point going forward.   The out of the ordinary step in 
this doorstep review was Shona's call to Rick Buy and Rick Causey to alert 
them to the doorstep team's concerns over irregular payment methods and the 
level of interest in controls that she perceived from the commercial managing 
directors.   I attribute that to a miscommunication between Shona and 
myself.   Although we had changed the process at year end so that the 
download after doorstep was to be with Ted and me, as Shona and I voice 
mailed back and forth she thought that I had asked that she initiate a 
meeting with Rick and Rick.   This meeting should have been with Ted and me.  
In leaving a voice mail for the two Rick's about setting up a meeting, Shona 
mentioned some concerns.  Rick Buy is the one that called her back and asked 
for more detail.  She definitely covered both the teams findings and the 
integration plan that was underway with Rick Buy.  We don't, however, control 
which points Rick chooses to focus on or those to which he chooses to react.  

To reiterate, the findings from these doorstep reviews are shared with the 
heads of the subject offices at the close of the reviews.  The effort here is 
to help identify control issues that could create risk to a business and to 
offer solutions and resources that may be available from across the entire 
Enron organization.  The key is quick discovery and quick resolution.   The 
findings create a dialogue between the business units, RAC and Operations, 
which I believe is healthy.  We purposefully have chosen not to 
"over-wordsmith" the findings or to delay discussing concerns that can be 
surfaced through these reviews.  Frankly, I believe that these reviews can 
reveal things that are sometimes missed in AA's reviews from a practical 
perspective and afford us the opportunity to mitigate operational risk.  

I would be glad to discuss any details of the doorstep review process with 
you.  We certainly want you to be informed and to view this process as 
valuable input for you in managing EEL's business.  Mike Jordan and certain 
members of his team will be involved with doorstep reviews for other 
businesses outside EEL later in the year.  We are certainly open to any 
suggestions you may have on getting the most out of this process.