Conflict Minerals Traceability Auditing

The Auditing RoundtableJanuary 2011San Diego, California

Lawrence Heim, CPEAThe ELM Consulting Group International LLC

Minerals mined in conditions of armed conflict and human rights abuses, notably in the Democratic Republic of the Congo (DRC) and adjacent countries.

Tin (Cassiterite) Tungsten (Wolframite) Tantalum (Coltan) Gold

The ELM Consulting Group International LLC

Tin – solder, sheet metals, alloys


Tungsten – tungsten carbide bits/tools, ammunition, electronics, jewelry


Tantalum – capacitors, aerospace components, medical devices


Gold – jewelry, electronics, dental, medical


SEC Legal Compliance Conflict Minerals Law under Dodd-

Frank Wall Street Reform Act (July 2010)

SEC Regulations proposed Dec. 15, 2010

International Trade Programs Organisation for Economic Co-

operation and Development (OECD)


Industry Initiatives Electronics, Jewelry

Reputation Funding systemic violence and corruption

Investor ActivismCustomer Demands


SEC Companies: Publicly traded, certain foreign

companies, any size Industries: Manufacturers, processors,

smelters, mining, scrap, certain retailers


OECD Companies: Any structure, domicile, size Industries: Manufacturers, processors,

smelters, mining, retailersTrade Associations

Specific industries, Members only Jewelers, electronics, components,

retailers, aerospace, automotive


SEC Intentionally undefined

OECD Representative sampling parameters Supplier financial interests and material

sources Review known mineral reserves On-site meetings with government, UN,

NGOs


Trade Association 100% sampling of transaction documents Comprehensive inventory review (e.g.,

inventory reconciliation, material balance, weighing lots, in-process tracing)

Scrap included/excluded

Each link in a supply chain must pass an audit in order for any single link to pass


Retailer

Product Manufacturer

Component Manufacturer

Mineral Processor

Ore Origin/Export


Retailer

Product Manufacturer

Mineral Processor

Ore Origin/Export

Component Manufacturer


Auditor Requirements Independent private sector auditor

mandated Competence, independence, attestation

Management System Details Procurement policy mandated Unannounced checks of suppliers Reporting to NGOs, third parties


Audit Process Challenges

Not traditional HSE audit scope - different process, different skills, different reportingRequirements for auditor competence, attestation, independence No standard processRepresentative sampling up to 100%All links must passPublic disclosure of report


Contact

Lawrence Heim, CPEATHE ELM CONSULTING GROUP INTERNATIONAL LLC678-200-5220 (office)678-200-3424 (cell)[email protected]

The Auditing RoundtableJanuary 2011San Diego, California

Lawrence Heim, CPEAThe ELM Consulting Group International LLC

Conflict Minerals Traceability Auditing

Documents

sec companies

oecd companies

california lawrence

audit process challenges

auditor competence

certain retailers

size industries

gold jewelry