Advancing its automated expense reporting, Coca-Cola early this year crafted a plan to automatically audit each of its more than 1 million travel expense transactions in North America. The goal is to provide Coke with "assurance of controls to policy and improve compliance," Coca-Cola TravelSmart manager Peter Pearson said at the Association of Corporate Travel Executives meeting here in May.
"Continuous controls monitoring is moving beyond expense reports; I like to say it's where CSI meets T&E," Pearson told attendees at an ACTE session on travel and expense fraud prevention, referring to the television series about crime scene investigators.
With a continuous controls monitoring process and software, a company could afford to audit every transaction to "identify the exceptions, anomalies and trends over time. The beauty is you don't need to hire 100,000 people to look at 1 million transactions a year. You've got a computer chugging away," Pearson said of the off-the-shelf software applications that multinationals, including most recently Siemens AG, have adopted during the past couple of years to prove compliance to policy, process and financial controls required by Sarbanes-Oxley. Siemens last month decided to implement ACL across its 1,300 corporate entities in 190 countries. Coke had requested bids from three such vendors: ACL Services, Approva and Oversight.
Beginning this year, Coke plans to have its CCM software take data feeds from its automated expense reporting platform, corporate T&E card, purchasing card, human resources system and vendor data. It also intends to provide the CCM software with a file that lists the number of pages of each expense report, as it found links between expense report page counts and identified problems. Pearson said he didn't intend to audit travel booking feeds, which is another part of his responsibilities as manager of TravelSmart, Coke's end-to-end travel process that includes corporate travel and purchasing cards, travel services and expense management.
In addition to monitoring for policy compliance, spending thresholds and fraud, Pearson said a company could look for trends by checking spending volume against employee departments or hierarchy. "If I'm an employee at a certain level, but spending at the executive level, that's a concern. There are a lot of kinds of tests you can put together," based on company objectives and trends, Pearson explained.
Other audits on Coke's list include top spenders, highest charges and cash transactions. "Companies don't like cash. When people are using cash, we're concerned about it. That's an area that is fraught with and ripe for fraud," Pearson said. Coke also planned to audit all transactions just below the $25 receipt requirement, unusual amounts ending in .00 or .99, repeat offenders from other tests, excessive tips/tolls, charges at restricted vendors and all retail spend.
"Fraudsters do things over time. The more you can look at trends and anomalies, the more you can identify people who are committing fraud," he added.
But Pearson also expects to use the software to generate spending per diems from employee transactions by city, with foreign destinations of special interest. "The system is smart enough to look at all those transactions in a city and basically give the average" and two deviations above it, he added.
Despite the benefits that Pearson expects from CCM, he warned others that "until you automate your expense reimbursement process, you can't do" what he described. Key to continuous controls monitoring, Pearson emphasized, is Coke's deployment of automated T&E. "It's the advent of automated expense management that has really turned the dial in terms of being able to leverage this data and to do analytics that we could never do before."
Coke implemented its automated expense reporting system in 2004, Pearson said. Previously it required 100 percent manager approval of all expense reports processed. Manual audits were performed at the expense report level and receipts were scanned.
Once automated expense reporting was implemented, Coke required receipts only for hotel folio and cash expenses. "If you were compliant with your spending, you would not need to get manager approval. So we went from 100 percent manager approval to about 50 percent of expense reports today actually going to managers for approval," Pearson said. "We still do audits based on different types of exceptions that we've identified, as well as random auditing."