Archive for category Compliance

Rise of the Project Workforce, Chapter 5: Complying with Labor Laws and Accounting Regulations

For more details about how Project Workforce Management eases the burdens of compliance, see Rise of the Project Workforce.

Despite the widespread availability of information in the flat world–which minimizes barriers and increases the velocity of business—the increasing burden of government compliance threatens to slow things down. Heavy requirements for accounting and documentation, spanning multiple departments, are too extensive to be met with spreadsheets and email. Point solutions (such as separate software tools for HR, finance, project management, and IT) increase the operational load, especially when they require custom integration or data warehousing. High-performing companies demand true enterprise-wide systems, and this is the promise of Project Workforce Management.

Here, we illustrate just a few of the compliance issues (in addition to SOX) that North American companies face, and the ways that Project Workforce Management helps not only to lighten the burden, but also increase agility and performance.

U.S. Federal and Local Labor Laws

Laws such as the Fair Labor Standard Act (FLSA), which establishes minimum wages and overtime pay, and the Family Medical Leave Act (FMLA), which establishes unpaid leave for families, are just two of the many labor laws that require companies to keep strict records and accounts. In addition to these, state/province and local governments may have additional laws, and companies have their own policies and rules.

Companies must track which people are eligible for what pay, leave, and hours, and which of the tasks they perform, in various situations, applies to various regulations. When workers of varying eligibility participate in different types of work, the compliance issues can get too complex for spreadsheets or even many time-tracking programs.

Project Workforce Management automates business rules, and implements differentiated time tracking so that time entries are attributed to the proper tasks, locations, rates, overtime, and leave regulations. It greatly reduces the amount of time required to calculate compensation, reduces disputes, and even saves companies from legal fees and fines.

GAAP and Software Investments

In the U.S., Generally Accepted Accounting Principles (GAAP) Statement of Position (SOP) 98-1 standardizes how companies report revenue earned, expense, capitalize, depreciate, and amortize their software investments. Software investments fall into four distinct categories, each subject to different accounting guidelines.

Because not all software development activities can be accounted for in the same way, and because it is common for workers to spend time on different projects, SOP 98-1 requires companies to carefully differentiate the time their workers spend on developing software for each of these categories of use.

Project Workforce Management provides the differentiated time capabilities required to comply with SOP 98-1. Organizations can track all development costs by project, stage, activity, and person, and then capitalize and expense these items appropriately, without the additional complexity and overhead of siloed, non-automated data.

Government and Defense Contracts

The Defense Contract Audit Agency (DCAA) reviews contracts between vendors and the U.S. Department of Defense, to ensure that costs are legitimate and allowable. Contractors must not only submit routine reports, but are also subject to audits. They must keep stringent timekeeping records, and accurate accounting records showing direct and indirect costs. Failure to comply has significant penalties and risks.

Project Workforce Management differentiates time and cost data appropriately, deploys time and expense recordkeeping to employees, and assures adherence to federal standards. Because data collection and reporting are automated, it dramatically decreases the burden of on-demand audits.

Scientific Research and Exploratory Development

Canadian-controlled companies can earn significant investment tax credits for their research and development efforts under the Scientific Research and Exploratory Development (SR&ED) program. Allowable expenses include salaries and wages, materials, contracts performed on the company’s behalf, lease costs and other overhead—as long as these costs can be directly related to qualified research and development activities.

Eligible work must be planned and documented as such; personnel working on these activities must be properly qualified; all time and expenses must be reported accurately; and all project activities must be documented. Without proper records and documents, qualifying for SR&ED can result in burdensome audits.

Project Workforce Management simplifies compliance with SR&ED by providing processes for project initiation and definition; managing resource allocation and skill matching; tracking time and expenses accurately; providing workflows for scope change and risk management; and collecting and consolidating data for reports.

Conclusion: Fringe Benefits of Compliance

Project Workforce Management offers the automation and integration of time and expense tracking, cost and revenue accounting, workforce planning, project management, and analytics that makes compliance with these and other laws and regulations much less cumbersome. Moreover, as laws change, Project Workforce Management provides the flexibility to adapt to change quickly.

Like the gold miner who gave up drilling and stopped three feet away from a rich vein that would be discovered years later, companies that work hard to comply with government regulations might be “stopping three feet from gold” in their efforts. Forward-thinking organizations don’t stop at minimum compliance. They also drill for the agility and responsiveness that will lead them to success in the flat world.

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Rise of the Project Workforce, Chapter 4: Why Project Managers Need to Know about Sarbanes-Oxley

For more details about project management and Sarbanes-Oxley, see Rise of the Project Workforce.

Now more than ever, project managers and the project management office (PMO) have to gain a better understanding of the roles they play in compliance. Sarbanes-Oxley (SOX) has made corporate governance mandatory for public companies, and project managers generate the raw data that make compliance possible. Forecasts of costs and revenue, measures of financial risk, real-time data of project status are a few examples.

SOX requires CEOs and CFOs to personally sign-off on quarterly financial reports. It also requires companies to have internal controls to flag irregularities and prevent errors; rapid disclosure of material changes to the company’s operations; and strict audit records and a comprehensive document retention policy which extends all the way down to emails and memos.

Without formal processes and systematic data capture, companies risk inaccurate measures, and too much subjectivity in the financial analyses that CEOs and CFOs must certify. Although formalizing these processes is possible without automation, the right software can reduce costs, improve project delivery, enhance the confidence of all stakeholders, and be a driver for positive change.

By automating their business processes with workflow software that is linked to the company’s financial applications, Project Workforce Management software enables the organization to enforce key processes, validate data at the point of entry, audit transactions, design reports and dashboards, and track all approvals and change requests.

Project Workforce Management facilitates compliance of specific sections of SOX in the following ways:

  • Section 302 requires CEO and CFO to sign-off on the accuracy, timeliness, and appropriate internal controls for quarterly financial reports. Project Workforce Management provides audited and effective controls that allow officers to sign with confidence.
  • Section 404 relates to the ability of internal controls to intercept and detect any irregular, questionable, or fraudulent activity. Project Workforce Management provides centralized and institutionalized processes for projects, workforce management, financial approvals, and change management, so that data is verifiable.
  • Section 409 requires the rapid disclosure of any material changes in the company’s projects and operations, such as a late release of a new product. Project Workforce Management provides detailed work process and project status information to analyze the company’s business in real time.
  • Section 802 requires the company to establish strict audit records and a comprehensive document retention policy which extends to emails, project plans, timesheets, memos, minutes, reports, proposals, and sign-offs. Project Workforce Management records all operational documents and transactions.
  • Section 906 outlines the penalties to officers, including fines and imprisonment, for certifying non-compliant reports under SOX. Project Workforce Management detects questionable transactions and protects assets before problems arise.

Officers cannot and should depend on error-prone, manual systems that can lead to false reports and even serious legal consequences, as demonstrated by Enron, WorldCom, and Arthur Andersen in recent years.

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