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Data Monitoring Helps You Proactively Manage Your Company’s T&E Expense

09.29.2015

As Seen in BizTalk in the St. Louis Business JournalAfter payroll, travel and entertainment (T&E) is often a company’s next largest expense, accounting for 10 percent to 12 percent on average of an organization’s budget, according to a JP Morgan benchmarking survey. If there’s one area for management to be mindful of potential waste and abuse, it would be expense reporting.

According to the Association of Certified Fraud Examiners’ (ACFE) 2014 Global Fraud Study, T&E fraud accounts for 23 percent to 33 percent of fraud in the construction, education, health care and religious, charitable or social services sectors. And while there have been many headlines about major abuse of T&E, problems also arise because of ambiguities. Having good control over your T&E expenditures is a business imperative.

How do you find the problems in all the detail?

Proactive data analysis and monitoring is one of the most effective anti-fraud controls for limiting the duration and cost of fraud schemes, but many organizations overlook it, according to the ACFE study. Deploying data analysis correlates with frauds that are 60 percent less costly and 50 percent shorter in duration, yet only 35 percent of organizations use it.

Brown Smith Wallace has developed data analytic tools and techniques to help companies verify their policies are being followed and identify opportunities to strengthen controls and monitor T&E costs. During the past year, the firm has helped several Fortune 500 companies find opportunities to strengthen T&E expense reimbursement controls and identify potential waste and abuse. Looking for unusual relationships in the data is one place to start such an evaluation. For example:

  • Employees who were reimbursed for the same item — on one expense report as a credit card expense and on another expense report as a cash expense.
  • Expense report approvers who also attended a group meal.
  • Employees or activity rated as higher risk due to frequency and type of prior expense report issues. For example, an individual or expense type with frequent expense reporting infractions may receive greater scrutiny than an individual who once turned in a late expense report.
  • Expense detail includes suspicious key words, such as .com, gift, jewelry and liquor.

The results of these analytics can be powerful. As an example, one client was able to identify several hundred thousand dollars of inappropriate, duplicate T&E expenses, resulting in subsequent fraud investigations.

Others have used the information to identify and tighten up ambiguities in policy in order to reduce or further control certain costs. Brown Smith Wallace recently worked with a large pharmaceutical company to develop automated monthly monitoring of expense reports to identify, among other things, travelers who spent more money on average than others in their same department or the company. By comparing specifically with their department and the company overall, a picture was able to be drawn to identify departments and travelers who stay at more expensive hotels, consistently book flights last minute, and have higher meal expenses. There may be valid reasons for these variances, but by reviewing the data regularly, unusual activity can be identified quickly and acted upon if appropriate.

Get the whole picture

Reviewing your T&E reporting is likely to yield helpful information. Unfortunately, manual reviews don’t typically yield comprehensive results because they rely upon strategies where samples are used to make assessments about an entire population. Automated data analysis techniques can allow companies to review an entire population to present comprehensive, timely and relevant information that can help you realize greater control over this significant expense.

To learn about 10 ways data analytics can identify T&E issues, click here.

Kimberle K. Tolliver, ACDAContact Kim Tolliver, ACDA, Manager, Advisory Services, to discuss data analysis and monitoring for your organization.

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