U.S.-based businesses have improved the thoroughness of their auditing procedures since the introduction of Sarbanes-Oxley requirements, although receipt management policies have changed little in the past three years.
For the first time, according to Business Travel News' third annual Expense/Payment Manager Survey, companies now are auditing on average more than half of their expense reports. This year, companies are auditing an average of 56 percent of reports, compared with 44 percent in 2005 and 48 percent in 2004. At the same time, the number of companies auditing 100 percent of reports has increased to 37 percent compared with 25 percent in 2004, and the number of companies not auditing any reports has decreased to 11 percent, compared with about 15 percent in 2004.
Reports from suppliers support these numbers. Redmond, Wash.-based Concur Technologies recently added an auditing service to its offerings
(BTN, Oct. 9). Eden Prairie, Minn.-based Gelco Expense Management's vice president of marketing Troy Thibodeau said that while he has seen about a 30 percent increase in customers for its expense management services, Gelco's auditing services customer base has grown by more than 60 percent.
Bill Davidson, corporate travel and meetings services manager for Austin, Texas-based International Sematech, said the 100 percent audit was the standard for his company. Patricia Carlin, manager for purchasing and global card and travel programs for Dublin, Calif.-based Sybase, reported the same procedure.
Both have automated expense reporting, which greatly eases auditing, Concur CEO Steve Singh said. "One of the great things about technology is that you can do a 100 percent audit at costs that are cheaper than the manual fashion," Singh said. "It costs you more in a manual fashion to do a 5 percent audit than to do a 100 percent audit in a fully automated service."
Automated audit systems, however, remain the exception among U.S.-based businesses. This raises a question about the quality of the audits being conducted.
"When I go out to my clients, the number-one response on what's their Sarbanes technology is Microsoft Excel," Scott Rosenfelder, a national practice leader with Deloitte & Touche, earlier this year said at the National Business Travel Association's convention in Chicago.
"It's the top application, which is pretty scary, because there are entire organizations being run on Excel."
Even with better technology, 100 percent audits are not considered a best practice any more than forsaking audits. It works fine in small companies that process only 10 expense reports each month, but there are more cost-effective ways to do it, said Bob Langsfeld, a consultant with the Incline Village, Nev.-based Corporate Solutions Group.
Langsfeld's suggestion for an auditing practice falls into line with Chicago-based BDO Seidman's program, as outlined by director of procurement and travel management Cynthia Gillen at an educational session during the NBTA convention. Seidman began with a 100 percent audit to get a sense of its program, but later moved to a more targeted auditing, she said.
"Rules would require that you audit the board of directors or senior officers, but putting that aside, the best practice would never be 100 percent," said David Hillman, principal of Deerfield, Ill.-based Consulting Strategies. "You're assuming the manager has already approved the expense report, so it's not as if nobody is looking at it."
Technology has assisted with targeting audits. Sematech's Davidson said his system has the means to flag reports that fall out of certain parameters and require special attention, even though there is a 100 percent audit in place. Ralph Randle, travel manager for Logitech, said his company's auditing procedures are designed to audit all international expense reports to review the use of multiple currencies.
Even with more auditing activity, fraud has not waned since 2004. In 2006, 28 percent of companies said they have caught an employee trying to commit expense fraud, the same amount as in the 2004 survey.
Receipt practices also have not become any more standardized. Rules vary widely by company, but companies most frequently either require all receipts—46 percent of companies—or for some threshold below $21 to $30—26 percent of companies. Companies requiring all receipts, however, have decreased from a slight majority to a slight minority since 2005.
Companies that have automated their expense reporting and integrated it with their corporate card are able to cut down on receipt requirements. With the exception of hotel and car rental receipts, card data is able to replace the need for receipts, and Gelco's Thibodeau said he's seen more clients applying for IRS rulings to allow card statements as documentation.
Methods of receipt storage have changed little in three years of conducting BTN's survey. Hard copies remain the dominant method, used by 66 percent of respondents, while 23 percent store receipts electronically and 10 percent use automated imaging. Suppliers, however, report an increased interest in imaging.
"Virtually 100 percent of the new business we sign is deployed using an imaging service," said Craig Fearon, senior product director with expense solution provider Necho, a division of CyberShift. "Very rarely do we come across an organization that wants to do paper receipts, except with high levels of international travel, where they want it for value-added tax recovery."
Hormel Foods, for example, recently moved to a paperless process with 100 percent of receipts imaged through Gelco. Its target was to cut down the 500 boxes of T&E paperwork accumulated each year.
Outside of the improvement in auditing abilities, receipt imaging also is a cost-saver, Gillen said. The process cut down on Seidman's mail volume, she said.
"That was a 17 percent reduction that first year," Gillen said. "A lot of people don't realize these receipts are tracking people all the way down with FedEx and overnights, because everything is an emergency."