00 Ahold ANNUAL REPORT 2002 27
BOARD GOVERNANCE HIGHLIGHTS OPERATING REVIEW FINANCIAL INVESTOR REL AT IONS
The task force will oversee the development and implementation of modifications, improvements and other required
changes to address weaknesses identified and to strengthen our internal controls. Certain regional task forces have also been
formed that have been and will be assisting in this process. We intend to implement many of the required changes to our
internal controls that we believe are critical by the end of fiscal 2003 and to implement remaining changes in fiscal 2004.
In addition, the reporting line for Ahold's internal audit department has been changed. The internal audit department now
reports directly to Ahold's Chief Executive Officer and to the Audit Committee, instead of solely to Ahold's Chief Executive
Officer, as previously was the case. We also intend to implement a plan to redesign the function of the internal audit
throughout the group of operating and real estate companies to centralize it within the Ahold parent company.
Ahold has taken steps to compensate for the internal control weaknesses in preparing the fiscal 2002 financial statements
by, among other things, implementing the following measures:
- Ahold conducted an extensive review of accounting documentation and processes, particularly in the areas where
accounting errors were made. This review involved the controlling department at the Ahold parent company, together
with the internal audit department, the Ahold parent and regional task forces and accounting personnel at the various
operating companies.
- Ahold reviewed areas where controls were found to be weak and performed additional accounting or review work where
considered needed.
We have also been focusing on improving the tracking of vendor allowances, especially at USF. We are continuing our
efforts to implement the Supplier Incentive System ("SIS"), a vendor allowance tracking system used by Alliant when it
was acquired by USF in November 2001, for vendor allowance tracking for all of USF. USF is in the process of building
the appropriate links among its computer systems required to track rebate-related activities across all company operating
systems. In order to achieve this goal all vendor information, corporate vendor allowance program details, customer details
and all product reference codes needed to be documented and cross-referenced and related computer programming
needed to be completed. This effort was sufficiently completed for the largest USF operating system in July 2003 to allow
testing of the system. This testing is expected to be completed by the end of fiscal 2003. In fiscal 2004, additional SIS
enhancements are expected to include computer links among the approximately 15 USF locations operating on
independent computer systems and USF intends to continue efforts to track additional vendor program types, to enhance
vendor and customer information and to improve customer and product tracking systems. In addition, while the SIS vendor
allowance tracking system is under development and testing, USF has initiated a manual vendor allowance tracking
system. This manual system aggregates information including a detailed review of vendor purchasing contracts, reporting
provided by vendors on purchases made, information developed within USF on purchasing activities, cash collections of
purchase allowances, and regular reconciliations of the information with vendors. USF's purchasing department,
accounting department and its senior management regularly review this information.
Numerous personnel changes also have been made. As a consequence of the events announced on February 24, 2003,
Ahold's then Chief Executive Officer, Cees van der Hoeven, and Ahold's then Chief Financial Officer, Michiel Meurs,
resigned effective March 10, 2003. Henny de Ruiter, the Chairman of the Ahold Supervisory Board, was designated by the
Supervisory Board to be responsible for the daily supervision of the conduct of Ahold's Corporate Executive Board and the
business affairs of the Company until a new Chief Executive Officer was appointed. In addition, on March 11, 2003, Ahold
appointed Dudley Eustace as interim Chief Financial Officer.
In May 2003, Jim Miller, then President and Chief Executive Officer of USF and a member of Ahold's Corporate Executive
Board, Michael Resnick, USF's then Chief Financial Officer, and David Abramson, USF's then Executive Vice President
and General Counsel, resigned their management positions and ceased to be employed by USF effective October 1, 2003.
Robert G. Tobin, a member of Ahold's Supervisory Board, was designated by the Supervisory Board to serve as interim
Chief Executive Officer of USF.
Numerous other management and personnel changes were made, including at USF, Disco, Tops and the Ahold parent
company. Management and the Audit Committee continue to review the results of the investigations, including findings as
to the role of the personnel in the accounting irregularities, errors and issues identified. Once this review is complete,
Ahold will determine what other personnel actions may be necessary.
Ahold also has taken significant steps to rebuild its executive management team. On May 2, 2003, Ahold announced its
proposal to nominate Anders Moberg as its President and Chief Executive Officer and as a member of Ahold's Corporate
