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As the sun rises in 2022, most of us are taking the time to reflect on 2021 and what we would like the New Year to bring us, or not bring us. Am I right? This is not so different than what finance teams are doing as last year’s books are closed and new goals are set for this year’s travel and spending budgets.
As someone who spent years living in the accounting world of journal entries, bank reconciliations, and estimated liabilities, I do not envy the grueling year-end-close tasks that finance teams are currently working through in a short period of time. To those who are reading what is my first ever blog - have you ever thought about the auditors and compliance teams who are looking at the data a bit differently? Their process may not be as black and white or as formal as financial close but investigating Q4 spend often brings some remarkably interesting insights that should not be ignored.
As a former customer of my current employer, I can remember the extravagant parties, questionable gifts and personal spend my team identified in Q1 as the last expense reports of the prior year trickled in. Six months of “out-of-pocket” meals just below that receipt requirement, or the hand-written “lost receipt” images that were often found. Not to mention the spa packages, Victoria’s Secret gift cards, or Michael Kors purses given as gifts to the wives of several employees, or the $15K party cruise that was paid for in installments over several months? Yes, if you are wondering, these were real purchases. The question is, would we have ever identified these transactions without Oversight’s data analytics bringing them to our attention?
Every business should have clearly written, black and white policies when it comes to overall purchasing, travel expenses, and emergency payments. If policies are gray or “open to interpretation,” it leaves the door wide open for risky spend, especially around the holidays. Sudden increases in overall card spend are not easily captured when small expense reports are submitted throughout the month, or even when only one is submitted. It is possible for risky spend to go on for months or years before being identified through a hotline call or random sample audit. The managers who approve expense reports often have too much on their plates to look at the details behind individual transactions.
Research shows that only five percent of employees engage in some form of fraudulent activity, 25 percent engage in wasteful spend or misuse of company assets, and 70 percent are fully compliant with company policies. How do you separate these three groups? Or rather, how do you separate them efficiently and effectively?
And it is not only the employees who commit fraud but also vendors and subcontractors. Is it possible to identify all the bad actors in one place?
I am what most of you would call a “rule-follower.” I have never snuck into that second movie without paying, never snuck out of my parents’ home, or had liquor in my high school dorm room. I have extreme paranoia of being caught doing something I am not supposed to be doing, so even if my friends got away with it every time, I was convinced that the first time I participated would be the one time they did not.
I first became interested in auditing when I was working for an urgent care company during college. I trained the front desk clerks how to check-in patients, verify insurance, count their drawers, and how to identify risky patients by behavior. I also did a short internship with the corporate office where they asked me to audit daily ledgers to ensure they matched their cash, check, and credit card deposits. I was able to identify theft of cash at one clinic through whited-out or blacked-out entries on the hand-written ledgers that occurred only when a specific clerk was working.
Every missing entry involved a cash-paying patient whose chart was conveniently “missing” when they came back for a follow-up visit. I took an entire weekend to do direct research where I was able to find said missing records, and the clerk was later arrested after she was caught handing an envelope filled with cash to her husband who sat in the waiting area while she closed her daily ledger.
What started as a mere interest has turned into my life-long passion - to identify those who are breaking the rules, cheating on expense reports, or stealing money from the company. I have seen employees be let go simply to reduce a headcount, thus reducing annual expenses. If everyone followed spend policies and did not waste all those company “dimes,” then maybe some innocent victims would still have jobs today.
As this New Year begins, may your audits find the rule-breakers who do not have the company’s best interest at heart when it comes to spend and risk management.
Next week we will take a look at what some of our customers identified. How can Oversight help you today? Subscribe and follow along with our Nothing Gets by You Now Blog Series or visit our website to learn more about how our AI platform can help you automate manual processes and empower you to See It All. Spot The Patterns. Steer The Future.