GREEN CORE

Geothermal Incorporated

595MW UNIFIED LEYTE

106MW MT APO

50 MW N. NEGROS

REFRESHER WORKSHOP in IMS INTERNAL AUDITING

(Nov. 26, 2012)

112.5 MW TONGONAN

192.5 MW S. NEGROS

150MW BACMAN

TONGONAN GEOTHERMAL POWER PLANT

Time Table
GREEN CORE
Geothermal Incorporated

TIME

SESSION

13:00 14:00 14:00 15:00

1. REVIEW OF AUDITING PRINCIPLES 2. REVIEW OF AUDIT CHECKLIST

15:00 15:15
15:15 16:00 16:00 16:45

Tea & Coffee Break

3. REVIEW OF AUDIT REPORTING 4. Q&A and AUDIT ASSIGNMENT

Overview of typical audit activities

GREEN CORE
Geothermal Incorporated

Initiating the audit

Conducting document review Preparing for the on-site audit activities
Conducting on-site audit activities Preparing, approving & distributing the audit report
2. Conducting the audit 1. Planning for the audit

3. Reporting the audit

Completing the audit

Conducting audit follow up

4. Corrective action & follow-up

Overview of typical audit activities

GREEN CORE
Geothermal Incorporated

Initiating the audit

- Appoint the audit team leader - defining audit objectives, scope & criteria - determining the feasibility of the audit - selecting the audit team - establishing initial contact with the auditee

Conducting document review

- reviewing relevant management system documents, including records, and determining their adequacy with respect to audit criteria.

Preparing for the on-site audit activities

- preparing the audit plan - assigning work to the audit team - preparing work documents

Planning the Audit

Overview of typical audit activities

GREEN CORE
Geothermal Incorporated

Conducting on-site audit activities

- conducting opening meeting - communication during audit - roles and responsibilities of guides and observers - collecting and verifying information - generating audit findings - preparing audit conclusions - conducting closing meeting

Conducting on-site audit activities

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A Value Added 3 Auditor

INTEGRATED MANAGEMENT SYSTEM PROCESS BASED INTERNAL AUDITING
GREEN CORE
Geothermal Incorporated

Personal Attributes
GREEN CORE
Geothermal Incorporated

Ethical fair, truthful, sincere, honest and

discreet Open minded willing to consider alternative ideas or points of view Diplomatic tactful in dealing with people Observant actively aware of physical surroundings and activities. Perceptive instinctively aware of and able to understand situations.
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Personal Attributes
GREEN CORE
Geothermal Incorporated

Versatile adjust readily to different situations Tenacious persistent, focused on achieving

objectives Decisive reaches timely conclusions based on logical reasoning and analysis; and Self reliant acts and functions independently while interacting effectively with others.

Initiate the Audit 4 Program

INTEGRATED MANAGEMENT SYSTEM PROCESS BASED INTERNAL AUDITING
GREEN CORE
Geothermal Incorporated

Audit Objectives
GREEN CORE
Geothermal Incorporated

Ensure conformance to the standards and own policies Evaluate the effectiveness of the measures planned Improve the current Integrated Management System Investigate nonconformities including incidents.

In Summary: To take an independent and accurate snapshot to see what an organization or process looks like at a point in time.
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Process Approach 7 to Auditing

INTEGRATED MANAGEMENT SYSTEM PROCESS BASED INTERNAL AUDITING
GREEN CORE
Geothermal Incorporated

GREEN CORE
Geothermal Incorporated

What to Look for during Internal Audit?

3 key aspects of process

Improvement

Effectiveness

Conformance
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Conformance
GREEN CORE
Geothermal Incorporated

What shall be done

VS

What is actually done

Conformance is the basic principle. Compare the actual activities against the audit criteria. In other words, do what have written and recorded down what you have done.
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Conformance Auditing
GREEN CORE
Geothermal Incorporated

IMS Manual
Activities Procedure Records

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Effectiveness
GREEN CORE
Geothermal Incorporated

How do we know if a process is effective? Is it able to maintain mountains of documentation? able to follow procedures strictly? able to produce results?

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Effectiveness of a Process
GREEN CORE
Geothermal Incorporated

Effectiveness of a process is shown by the results it achieved with the delivered output. Hence, auditors shall look at indicators/ measurable metrics to tell whether organization requirements (objectives) are met.

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Process Characteristics
GREEN CORE
Geothermal Incorporated

Every process has these characteristics: Process owner(s) Process is defined and if appropriate, documented Process linkages/ interfaces are established Process Performance Measurement is defined and monitored Records to show evidence of achievement and control

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Process Analysis
GREEN CORE
Geothermal Incorporated

Why?
(target, measurement & improvement)

With Who?
(responsibility, competency)

INPUT
HOW?
(procedures & methods of controls)

PROCESS

OUTPUT With What?

(equipment, material resources)

4 Questions about a Process WHO responsibility, authority and competencies required WHAT kinds of resources needed to perform the process WHY objective/target for the process, plus measurement & improvement HOW controls method to achieve desired results

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Audit 8 Planning
INTEGRATED MANAGEMENT SYSTEM PROCESS BASED INTERNAL AUDITING
GREEN CORE
Geothermal Incorporated

Preparations for the Audit

GREEN CORE
Geothermal Incorporated

Select audit team. Assign audit team activities Audit plan. Check-lists Assemble working documents.

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Check-lists
GREEN CORE
Geothermal Incorporated

Aide memoire
Concise Avoid tick sheets or standard Should not take over audits Useful for new auditors Helps in time management Can update or add on during course of

audit Can evolve over time.

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Why Use Check-lists?

GREEN CORE
Geothermal Incorporated

Ensures continuity and depth of audit

Ensures all relevant aspects are covered Gives structure to interviews Provides help if stuck More professional.

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Inputs to Check-list Creation

GREEN CORE
Geothermal Incorporated

ISO 9001, ISO 14001 and OHSAS 18001

Standard Documented Integrated Management Systems (IMS) Regulatory requirements Known or classic problems Knowledge of area/system/process Previous check-lists
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GREEN CORE
Geothermal Incorporated

Process Approach to Checklist Creation

Consider the applicable requirements from the standards Look at:

Input Output Interface (i.e. supporting processes) The 4 basic questions from process analysis i.e. Who (responsibility & competency) What (resources) How (controls and methods) Why (objectives/goals & measures) Applicable regulatory requirements or code of practice.

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Typical Questions
GREEN CORE
Geothermal Incorporated

Who is the process owner? What is the purpose of your process? Why did you set this as your performance indicator? What are the inputs to your process? What are your process outputs?

What are the process parameters?

How do you control your process? What do you do with these measurements?
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Conducting the 9 On-site Audits

INTEGRATED MANAGEMENT SYSTEM PROCESS BASED INTERNAL AUDITING
GREEN CORE
Geothermal Incorporated

The Audit Triangle

GREEN CORE
Geothermal Incorporated

(Ask them what they do)

Question

(See what they actually do)

Observe

(Confirm evidence of conduct)

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Check

Asking Questions Filter Funnel

GREEN CORE
Geothermal Incorporated

Open questions

Encourage auditees to talk freely Use What, Where, When, Why, How and Who? Probing questions? Follow-up or focus on more precise details Closed questions Used where you want a clear Yes or No answer

Dont forget the Please Show Me!

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Key Points for Interview

GREEN CORE
Geothermal Incorporated

Who do we audit?

The person responsible for the activity to be audited

Ask the auditee to explain / describe the activity

How to begin?

When?

Normal working hours

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Audit Process
GREEN CORE
Geothermal Incorporated

Introduce yourself

Explain purpose of audit

Ask open question(s) Use probing questions for details

Follow audit triangle & look for evidence

Where nonconformities are detected, confirm with

auditee to ensure not mistaken Thank auditee & move on to next

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Auditors Should . . .
GREEN CORE
Geothermal Incorporated

Avoid nit-picking
Take good points into account Be punctual Avoid arguments Audit against specifications

Respect confidentiality
Audit the system not the individual
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Interviews
GREEN CORE
Geothermal Incorporated

Techniques Be courteous at all times (never act superior) Ask auditee to explain tasks Match questions to levels of responsibility - Management/ Executive Officer about policy, management structure, support, etc. - Operators about areas of operation, specific controls, tasks Use appropriate language for questioning (tone or level)

Interviews
GREEN CORE
Geothermal Incorporated

Techniques Listen carefully to what is said. Allow time for auditee to think Use open-ended questions. Avoid closed, direct or leading questions Follow a trail of questioning Validate (please show me)

Interviews
GREEN CORE
Geothermal Incorporated

Techniques Remember alternative situations (what happens if) Use the silent question where appropriate Be systematic (summarize to show understanding) Feedback results Thank the auditee

Types of Questioning
GREEN CORE
Geothermal Incorporated

Leading question [ I am sure that you have a procedure for operating your forklift? ] Closed question [ Do you have a procedure for operating your forklift? ] Open question [ Could you explain to me your procedure for operating the forklift? ]

Controlling the Audit

GREEN CORE
Geothermal Incorporated

Auditor Should Remain assertive Avoid lengthy discussion or observation Keep track of schedule not to be led or misled Be thorough and efficient Avoid becoming sidetracked or bogged down Do not antagonize or dictate

Controlling the Audit

GREEN CORE
Geothermal Incorporated

Basic Rules Establish that relevant documents are of correct issue Do not let only one person do all the talking Observe work progression when necessary Evaluate physical evidence and controls Make comprehensive notes Seek verification Do not assume people will lie but need to verify statement, if necessary

Audit 10 Reporting
INTEGRATED MANAGEMENT SYSTEM PROCESS BASED INTERNAL AUDITING
GREEN CORE
Geothermal Incorporated

Nonconformities Must Be
GREEN CORE
Geothermal Incorporated

Factual/objective Clear & concise Define the exact instance Give reference (to ISO 9001, ISO 14001 and OHSAS

18001/ documented IMS) Locatable Acknowledged

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Non-Conformance
GREEN CORE
Geothermal Incorporated

Definitions Audit findings No-conformance vs. Non-conformance Non-conformity

NC Requires Documented Request for Action Documented as Corrective/Preventive Action Request (CPAR) Non-conformance Report (NCR) Finding Statement

Non-Conformance
GREEN CORE
Geothermal Incorporated

Requirements Non-conformance should be raised clearly against audit criteria State clearly the nature of non-conformance - Absence of documentation - Inadequate documentation - Lack of implementation - Inadequate implementation - Lack of evidence

Non-Conformance
GREEN CORE
Geothermal Incorporated

Classification Major (System Breakdown) total failure to fulfill a specified requirement of the standard that is applicable to the organization
- Absence of documented procedure required by the standard - Non-implementation of the entire procedure - Absence of documentation to demonstrate conformance to the system requirements of the standard - Aggregation of minor non-conformances

Non-Conformance
GREEN CORE
Geothermal Incorporated

Classification Major - When a non-conformance is directly related to a significant and immediate hazard to the organizations ESH performance. - When a non-conformance is directly related to a failure to report a legal non-compliance to an enforcement authority where required to do so by a license condition, authorization, etc.

Non-Conformance
GREEN CORE
Geothermal Incorporated

Classification Major
- When a non-conformance is directly related to a failure to recognize and record when an objective or target is not met. - When a non-conformance has led to, or is a failure of a procedure to identify and/or evaluate a hazard or which is obviously and highly significant. - When a non-conformance is failure to act, either by means of setting of an objective or applying operational control, or monitoring related parameter in instances where ESH risks is identified and evaluated as highly significant.

Non-Conformance
GREEN CORE
Geothermal Incorporated

Classification Minor lapse in the system that has limited effect on the integrity of ESHMS - Part of a procedure not implemented
- Missing records, data, document

Observation potential source of a non-conformance - Trivial lapse in the system

- No direct evidence of failure - Suspect in terms of a long-term sustainability of the system - Action taken is not mandatory but encourage

Non-Conformance
GREEN CORE
Geothermal Incorporated

Documenting the Finding Should include - QESHMS documents or clause of the standard not being
complied - Area/ Function where the NC was found - Audit evidence - Classification (where applicable) - Name of auditor, date of audit and agreed close-out date

Non-Conformance
GREEN CORE
Geothermal Incorporated

CLEAR
CONCISE
SUPPORTED BY EVIDENCE BASED ON FACTS

Non-Conformance
GREEN CORE
Geothermal Incorporated

(Finding Statement)

Finding statement System-Based - The current method of handling, storage and disposing
hazardous wastes is inadequate against the requirements of DAO 29, as evidenced by: WTP sludge is not secured and labeled Contaminated materials are mixed and disposed with ordinary wastes, Storage area is accessible to everybody

GREEN CORE
Geothermal Incorporated

How To Get The Most Out Of Internal Audit

Must be a no-blame culture

Auditor and Auditee should work in partnership.

Encourage staff to reveal problem areas Both Auditor and Auditee should look for improvements

Audits must be seen as essential part of business

Positive terms can be used (e.g. finding not nonconformity) Findings or nonconformities should be seen as

opportunity to improve Must be adequate time and resources for Auditee/Auditor to perform audit
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GREEN CORE
Geothermal Incorporated

AUDIT ASSIGNMENTS
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end
INTEGRATED MANAGEMENT SYSTEM PROCESS BASED INTERNAL AUDITING
GREEN CORE
Geothermal Incorporated