In early 2013, the NAPCP conducted a panel discussion on travel auditing with Virginia Pope, Program Manager, Silver Spring Networks and Toni Waters, Credit Card Manager, FIS. The following top ten tips resulted from that discussion. Additional content is contributed by Lynn Larson, CPCP, Education Manager for the NAPCP.
Are you tasked with managing Travel Card/Corporate Card transactions? Even if your policies and procedures manual is exhaustive, it’s not always easy to manage travelers who know how to work the system, the cash and the receipts. Our panelists say, “We’re on to you…” The following Letterman-style Top Ten list offers solid practices for auditing travel card transactions. (Can you imagine what Letterman’s expense reports look like?)
10. Tip: Managers and approvers are a key control; get them to pay attention
Reason: Your first line of defense is the manager who approves a traveler’s expense report, ensuring that all transactions have a clear and justifiable business purpose. Help approving managers understand that simply rubber-stamping expense reports without looking at the details tempts employees and opens the organization up to fraud. “Many approving managers still request and review all receipts. It’s ok to let your managers set and enforce stricter policy, too.” (See also tip #4)
9. Tip: Look for spend on weekends and around holidays
Reason: We all know that Sunday is a big travel day for businesspeople who need to travel cross country for a Monday meeting. Maybe that’s why our mavericks try to slip in personal charges on weekends and the days surrounding holidays. Our panelists targeted the day before Thanksgiving and Black Friday, looking for misuse.
8. Tip: Track and graph the biggest spenders
Reason: Maybe the big guns think it’s harder to find a needle in a larger haystack. So our panelists recommend you sort on biggest spenders, graphing expenses over time, looking for spikes in spend. Was it a one-time jump? Perhaps an overseas trip? Use your data reporting tools to review month-over-month patterns and make sure the spikes make sense.
7. Tip: Review merchant name, including your card issuer
Reason: Our panelists put on their detective hats every day, looking for suspicious merchants: upscale clothing stores, hardware stores, utility companies, online retailers, consumer electronics. Justification is key. “Encourage approving managers to review the merchant name and make sure the item/service aligns with the merchant.” Most organizations have no annual fees associated with their programs, so you should never see the issuer as the merchant. “We don’t pay late fees, finance charges or fees for membership rewards programs, so there’s no reason to see a line item on an expense report with your provider’s name on it.” If a cardholder is participating in a rewards program with an associated fee, this becomes a personal expense.
6. Tip: Sort by MCC category
Reason: When looking for exceptions, sort by MCC, taking a look at codes outside hotels and restaurants (the largest categories). You can do a quick once-over, looking through retail and other categories for merchants that are unlikely to be legit. Although our panelists say, “Look at the funny ones, they will jump out at you…” they remind us that there is a lot of grey area, too.
Target? Walmart? Clothing? “Yes, you can get meals at these places. And clothing could be legitimate if someone loses their luggage.”
5. Tip: Require flight receipts
Reason: Some travelers wonder why this is mandatory, especially when booking through a company-sanctioned travel company. “We require a flight receipt to make sure the flight is not in someone else’s name — a spouse, for instance. There could be instances where an employee is going on a business trip and they charge the spouse’s ticket to a company card. It’s easy to sneak through if they do a lot of travel. We also want to track flights for contractors, clients and individuals flying in for a job interview.”
4. Tip: Keep an eye on your cash
Reason: Requesting cash reimbursement without a receipt presents a huge opportunity for falsifying expenses, especially with the new IRS guidance that stipulates, Documentary evidence is not needed if your expense, other than lodging, is less than $75.* Our panelists report that cash expenses are inching up and are often very close to this new dollar amount ($68 meals?). Pull a cash report and look solely at those transactions; it’s likely that most should be on card. Our panelists recommend:
3. Tip: Look for oddities and duplicate payments using the “same, same, same” test**
Reason: P-Card auditors will be familiar with this concept, as they have been looking for duplicate/split transactions that fall just under card transaction limits for years. “In addition to duplicate payments, we’re essentially looking for odd transactions that are happening too often. Like transactions that end in $0.99. Those should be rare as they are common with consumer pricing.” Panelists also recommend watching individual cardholders. “Spiking. Double 9s. Think to yourself, ‘That’s happening too often for this one person.'”
2. Tip: Watch for a heavy hand with cash tipping
Reason: This category goes hand-in-hand with cash reimbursement policy as a red flag. “There is no reason someone should be tipping $10/day for hotel housekeeping. It’s unlikely the cash is really being left for a tip.” This is where T&E policy can really make an impact. “Travel policy can include a guideline stating, ‘the organization won’t reimburse more than $n for [type of] tip.'” Our panelists also recommend running a report on average tips per employee. Why? “We want to see who has a heavy hand. If one employee reports 26 tips for an average of $4.30, and we see another employee with three tips for $11 each, we’re going to delve a little deeper.”
1. Tip: Look for padding in automobile mileage expense reports
Reason: It’s easy for a traveler to throw a few extra miles on a mileage expense report, so it’s a good idea to include detailed travel logs as part of your travel policy. “Where did you go? What was the purpose? It’s common to cover a personal vehicle from house to airport to parking to airport to home. You can’t just say, ‘I drove 200 miles.'” When it comes to auto travel, our panelists recommend that individuals “choose the most cost-effective option for the organization. For example, if a vehicle needs to be driven more than 300 miles, a rental car is usually the cheaper option. But if you work in a rural area and have to drive 50 miles to a rental car location, maybe not.”
Stay on top of your game… and theirs
Stay on top of new technology, automation tools, surveys and benchmarks that demonstrate what others are doing well. Take time to understand different types of liability and what makes sense for your organization. Our panelists have experience with individual, corporate and joint-and-several liability. “With individual liability, the cardholder has some skin in the game; otherwise, there isn’t as much motivation to create expense reports,” they say. If cardholders don’t pay a bill, it affects their personal credit and, if a delinquency exceeds 180 days, the status could impact potential rebate. “In most cases, the organization pays a delinquent bill, and then demands payment from the cardholder. We watch these accounts very carefully.”
What to do with repeat offenders
It’s interesting that corporate culture can play a role in the level of discipline that’s meted out for misuse. In the name of keeping employees happy, some organizations employ stricter measures, like card cancellation, only as a last resort. “So we often disseminate group statistics: There are this many instances of people using their cards for personal expenses this month. So stop it.” Try these steps with your cardholders:
1. Take action immediately if you conclude that fraud has occurred. Follow through on your organization’s policy/consequences for dealing with fraud. Make it known to the organization that fraud has occurred.
2. Remind cardholders (if applicable): This is not a personal card and it can be taken away
3. Make them acknowledge policy: Inappropriate expenses are never allowed on the card and could be grounds for cancellation, without notice.
4. Store reprimands in a human resources file, warning 1… warning 2… so you have a record of steps taken.
*Source: http://www.irs.gov/publications/p463/ch05.html
**The “same, same, same” test is from Chapter 12 of Dr. Mark Nigrini’s book, “Forensic Analytics: Methods and Techniques for Forensic Accounting Investigations.” http://www.nigrini.com
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