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Expenses Abuse: What Is The Cost Of A $4 Beer?

Blog: Enterprise Decision Management Blog

Expenses Abuse

Expenses Abuse Gets Media and Tax Payers In A Froth

Recent news articles out of Ohio ($4 beer dings Butler County Visitors Bureau in state audit) highlights the reputational risks that can impact an organization when it fails to monitor spending for non-compliance or expenses abuse.  The audit uncovered a single $4 Beer which was part of a payment for $11,554. While the applicable statues clearly prohibit this purchase from being reimbursed, it is important to put this in perspective. This was a single $4 purchase and it represents 0.035% of the total amount.

There are many ways this reimbursement request could have been identified. If the expense request had been stopped because a supervisor had noticed the purchase during the approval process, or an automated system had identified the non-compliant item then the requestor would simply have removed the item, and the remaining amount would have been reimbursed.  In this case, no audit finding would have been recorded, no blemish on the organization’s reputation would have occurred, and no news articles would have been written.

Expenses Abuse – Analytics Needed to Deal With Complexity in Large Organizations

However, for most jurisdictions, there are not enough resources available review all purchases, especially low dollar purchases. That is why automated analytics are needed. Unfortunately, most ERP, procurement and expense systems don’t contain all of the capabilities needed to identify improper payments. Whereas the technology to provide analytics to truly evaluate and interpret expenses is available to enhance an organization, lower cost and protect their reputation.

Analytics can also be tied to optical character recognition (OCR) that scans receipts, invoices and contracts. These analytics can score transactions for risk, fraud, or abuse, but they can also identify transactions that carry risk, or transactions, where the price paid, was too high. These analytics can supplement standard approvals, even scoring transactions prior to the approval to help streamline that process.  (I have discussed this in more detail in a previous post “Expenses Fraud or Honest Mistake? Predictive Analytics Will Tell” if you are interested in reading more.)

Without these analytics, jurisdictions leave themselves vulnerable to audit findings, damage to their reputation and surprises (and none of us like these types of surprises!).

As we think back to the original story and the initial question, it would be interesting to define the full “cost” of this $4 error.  In this case, it is quite significant, especially for a large organization when you look at the long-term impact.

Expenses Abuse – The Hidden Cost

As you can see the cost of this $4 Beer was likely significant, costing staff time and energy in the short term, resulting in additional efforts to process routine transactions indefinitely, and hurting the reputation of the organization, resulting in other potential losses (taxes, fees, donations, etc.)  This was a truly expensive $4 Beer.

The post Expenses Abuse: What Is The Cost Of A $4 Beer? appeared first on FICO.

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