Few travel and meeting expense management "deficiencies"
or policy violations are exposed in Congressional hearings such as those last
month on a U.S. General Services Administration event held in Las Vegas. Nor
are they typically detailed in inspector general reports such as the one
released in March on Federal Deposit Insurance Corp. conference spending.
Within corporations, travel and meeting expense violations typically emerge in
audits, both automated and human-powered.
Amid rising travel costs, more than half of 168 travel buyers surveyed from December 2011 to February 2012 by Business Travel News said their organizations had increased expense
report auditing, and 43 percent said they had integrated auditing with expense
systems. Meanwhile, Citi Commercial cards in March introduced a web-based audit tool.
[PULL_1]80/20 Rule In Audit
Risk
Baseline auditing is "automated policy testing to make
sure you're testing policy exceptions and that certain flags trigger,"
said Infor expense management specialist Patrick Doyle. "Typically, 80
percent of audit risk is coming from 20 percent of expense reports."
Corporations' challenge is "how to focus on that 20
percent to get the high-impact areas," he said. "In the old days of
doing 100 percent audit," that manual process often cost more than the
potential savings from violations.
"Best practitioners have an audit function within the
organization rather than rely on managers who typically aren't trained to
identify problems," Doyle said. "You want people focused on audit, and
systems to focus their efforts" on where to look for problems.
"Infractions tend to come from miscellaneous expenses,
business meals and high-risk individuals," Doyle said. "One area
coming into focus recently is mileage reimbursement because, at more than 50
cents a mile, that becomes lucrative."
Reasons And Random
Triggers
Expense reports warrant an audit due either to a specific
reason or as part of random selection, Doyle added. Corporations often use
automated "smart audit functions" to identify reports with
miscellaneous expenses, excessive amounts (perhaps $5,000), all executive or
board member filings or all from those previously identified as "troublemakers."
The flags serve to "focus the auditor to make sure they understand why a
report is coming in for an audit. That helps them spend their time more
effectively and capture what they can."
The vast majority of corporations—80 percent to 90 percent,
Doyle estimated—also use "back-end analysis and reporting" to
identify spending trends, negotiating opportunities, potential policy changes
and "the top spenders of fuzzy areas. For example, the top four submitters
of mileage." Periodic analysis across all reports also is used to identify
more "cowboys" to add to a watchlist.
Such analysis also can reveal ways to streamline expense
policies or audit practices so auditors "don't waste time on low-value
items."
While some companies might rely on two or three layers of
auditing processes, Doyle estimated that "maybe 25 percent to 40 percent
of expense reports" are audited. Typically, 20 percent to 25 percent of
reports end up in audit based on specific criteria and the rest as part of a
random sample "so people know that someone is paying attention."
Audit percentages have historically been closely guarded secrets in
corporations.
Government Audits
In Washington, "GSA's excessive, wasteful and in some
instances impermissible" spending on an $822,751 meeting outside Las Vegas
in 2010, according to an audit, resulted in four Congressional hearings,
resignations, terminations and a new office of administrative services to
provide "greater oversight and accountability" of meeting
contracting, budgeting and procurement.
Independent government agency FDIC, funded by the banking
industry and not subject to standard federal directives, in September asked its
inspector general to "review policies and controls" associated with
the $3.9 million in fiscal-year 2011 conference costs. The audit found two
compliance exceptions: The agency spent $5,801 more than policy allowed for one
dinner and reception and $5,200 on unpermitted entertainment at another.
FDIC implemented a new conference policy in March that
incorporated all seven auditor recommendations to "further strengthen
exiting controls and reduce conference expenses," including provisions to
ensure that all expenses are captured in the closeout and evaluation process.
This report
originally appeared in the May 2012 issue of Travel Procurement.