Forging a union.

A CPA's quest for consistency, accuracy and relevance in the face of one utility company's growth.

Sean D. Windsor is the manager of diversification accounting services at Brooklyn Union Gas Co., a $1.4 billion utility that serves the New York City boroughs of Brooklyn, Staten Island and Queens. In addition to its core business as a natural gas utility, the company maintains energy-related investments, such as a Houston subsidiary that explores for and produces oil and natural gas and some natural gas pipeline investments. Win&or is the liaison between Brooklyn Union's financial operations and those at its nonregulated or subsidiary companies. He reports to Brooklyn Union's comptroller, Dick Desmond, and works closely with the subsidiaries' comptrollers and accounting personnel.

His job entails ensuring that accounting policies are consistent, reviewing the subsidiaries' operations to identify problems and keeping the far-flung companies abreast of new developments in accounting literature or applications. When the subsidiaries send him their monthly earnings, he analyzes variances from budget and identifies trends that should be examined, such as investment losses or declines. Frequently, he tackles a special project, such as determining what would be in the parent subsidiary's best interest if, for example, the oil and gas unit converts from the fun-cost method of accounting for its oil and gas properties to the successful efforts method. In another case, last fall, Brooklyn Union sold part of its oil and gas subsidiary in an initial public offering. Windsor worked with the underwriters to prepare financial statements, to ensure that written information in the offering wasn't misleading and to look out for the parent company's interests.

TECHNOLOGY'S UPS AND DOWNS 

Windsor relies in part on commercial databases, such as Lexis/Nexis, and the Internet to help keep him up to date with the workings of the Financial Accounting Standards Board and its emerging issues task force, the American Institute of CPAs pronouncements, the Securities and Exchange Commission's staff accounting bulletins and any other relevant professional standards. "There are so many different organizations putting out accounting literature or opinions, it's tough to keep on top of all of them.

So a search-word-driven database can give a much more complete picture," he notes. In Brooklyn Union's case, the company was able to use the SEC home page and commercial databases in putting together its pending merger with the Long Island Lighting Co. and finding out its accounting options. "We looked to see if similar companies had used the pooling-of-interests or the purchase method of accounting and how they treated merger expenses."

At the same time, Windsor found that technology sometimes cannot keep pace with the company's needs. "As part of our reengineering effort, we looked at our purchase and payment process," he explains. "We had a future model of how we wanted the process to look, but when we went out to find accounting and operational software to support it, the technology didn't exist." For example, the company wanted to use electronic data interchange to avoid triple matching of invoices, purchase orders and receipts in the purchasing process. "But the software developers hadn't moved as fast as the utility industry had in trying to become more efficient and to streamline to avoid using paper." Without software at the ready, the company had to choose between making a significant investment to design its own application from scratch or waiting for the vendors to catch up to its needs. "We decided to wait," Windsor reports. "The purchasing process is fairly generic across industries. In six months or a year, the software we need may be out there."

DEREGULATION 

A major issue for the company has been the New York Public Service Commission's decision to mandate limited open market competition for natural gas, which began on a trial basis a year ago. As the company becomes deregulated and the market decides gas prices, the utility's focus and its accounting procedures will necessarily change, Windsor says. "We've always had a strong emphasis on earnings. We've been able to defer items that we would not have been able to defer under deregulation." (The main standard for the utility until now has been FASB Statement no. 71, Accounting for Regulated Entities. It will now look to standards relied on by other commercial companies, such as Accounting Principles Board Opinion no. 16, Business Combinations, and Financial Accounting Standards Board Statement no. 109, Accounting for Income Taxes. "For deregulated companies, there is more of an emphasis on cash flows and other market measurements." The regulated company was allowed to set up some assets and liabilities that a nonregulated company could not, such as excess costs that will be recovered from customers in the future. "Before, we could set those up as assets and bring them down as we recovered the costs through higher rates in the future. Now, we have to expense them right away."

The pending accounting changes are nothing new to Windsor, who has spent nearly five years at the company working with unregulated subsidiaries. "The subsidiaries have often not understood why the parent is so earnings driven. Trying to get the subsidiaries to focus on earnings is difficult at times, because in their respective industries earnings are not as important as cash flow or other considerations."

RECONSIDERING THE CPA'S ROLE

Windsor, who attended the 1995 AICPA Under 35 Symposium (JofA, Sep. 96, page 103), observes that much of the discussion about younger CPAs covers workload compression and work/life balance, but his main concern is the profession's continued relevance. "We opine on old information" he says. "It's nice to know financial statements are honored, but people have already acted on the information they contain." A member of the AICPA accounting careers subcommittee, he believes that nothing short of a reconsideration of the CPA's role will solve the relevance problem. "Instead of creating new audit-related services, why don't we question why we audit the way we do? Every industry has reinvented itself, and the best companies are those that go back to square one and ask, Why do we do it this way?"

Along those lines, Windsor, who spent eight years at Coopers & Lybrand before moving to Brooklyn Union, believes an accountant's job is "to learn the nuts and bolts of accounting and then to try to figure out how you can help people. We should be proactive, but we are often perceived as the people who say no." In his work with the subsidiaries, he has tried to avoid that role, instead developing a relationship in which he might offer advice on how to take advantage of a favorable accounting or tax treatment, for example. "That way, I hope, the subsidiaries come to me and ask advice before they do something rather than telling me what they did after the fact." For example, in conjunction with its efforts to acquire an engineering company, Windsor has advised management at one of the subsidiaries on ways to structure the deal to minimize goodwill and maximize earnings in the current year.

As for his own future, Windsor expects that the company's subsidiaries will remain an important part of its financial picture, even after its merger. "The combined companies will still focus on diversifying and going into other energy-related fields," he says. "That's where the growth is-- it's not necessarily in standard service territory." Diversification, Windsor observes, "will allow us to offer customers what they want and to gain additional revenues."

EXECUTIVE SUMMARY

* AS LIAISON BETWEEN a major utility's financial operations and those at its subsidiaries, CPA Sean D. Windsor concentrates on ensuring that accounting policies are consistent, reviewing the subsidiaries' operations to identify problems and keeping the far-flung companies abreast of new developments in accounting literature or applications. Special projects include preparing financial statements for an IPO and consulting on proposed changes in a unit's accounting procedures.

* TECHNOLOGY PLAYS an important part in the job. To keep up with developments at myriad standard setters and to examine other companies' accounting choices, Windsor relies on the Internet.

* PENDING DEREGULATION AMONG New York utilities will change the company's accounting procedures.

* WINDSOR BELIEVES THE PROFESSION must continue to examine the relevance of what it produces. In working with the subsidiaries, he has tried to cultivate a proactive role to produce a more cooperative relationship.

ANITA DENNIS is a Journal contributing editor.

Company Profile

Name: Brooklyn Union Gas.

Location: Brooklyn, New York.

Date founded: 1895.

Sales: $1.4 billion.

Number of employees: 3,300.

Form of ownership: Public company.

What we do/produce: Natural gas utility with energy-related investments.

Our main customers: Residential natural gas customers with a growing number of commercial and industrial users.