T&E Spend Analysis Report - Compliance Week

1 Volume 1 T&E Spend Analysis ReportVolume 1 Fall 2014 For this Report Oversight analyzed over 10 million transactions, a total of over $1 billion dollars in expenses. Even though overall fraud exceptions are low (only about 1% of the total expenses analyzed for this Report ), we found that 82% of fraudulent activity was made by only a handful of employees (5%.)Spending for items that are arranged through travel management companies (TMC), such as airfare, lodging, and automobile rentals rarely involve non-compliant behavior. Still, most organizations have T&E purchases that occur outside of TMC bookings: out-of-pocket expenses, travel emergencies and other items that go on corporate travel cards.

2 Purchases outside of airfare, lodging, and automobile rentals are the least controlled expenses and represent a grey area where advanced Analysis can identify opportunities to improve control of the travel and non-compliant spending costs organizations hundreds of thousands of dollars each year. Of the $1 billion in transactions analyzed for this Report 6% of transactions, representing 5% in transaction value, were out-of- Compliance with company policy. For an organization with an average of $10 million in travel Spend , this equates to roughly $500,000 in annual out-of-policy CARD1234 5678 9876 5432 Executive SummaryIntroductionWe like to think of T&E as the window into the soul of a company.

3 Where else do you get to see your employees habits and behaviors as clearly as you do in your travel and expense program? To help prospective and current customers alike, we ve compiled the Oversight T&E Spend Analysis Report to highlight the typical patterns of behavior we see within travel companies in the Report are primarily Fortune 500 companies with over $1 billion in revenue annually. These companies use a variety of T&E management systems including Concur, Oracle iExpense, and other solutions such as SAP. Of the customers in this Report :Over 90% of the surveyed clients analyze transactions on a monthly basis with the remaining 10% analyzing data daily or quarterly.

4 The use of corporate credit cards is on the rise, including everything from office supplies, to temporary employment services, to fuel, to telecommunications and travel expenses. According to a Report published by the Global Business Travel Association, business travel expenses are expected to rise in 2014, to over $ billion.[i]When expenses rise, so does card use and out-of-pocket spending. With increased spending comes greater vulnerability to the two biggest problems facing T&E programs today: fraud and misuse. It has been proven that the longer fraudulent activity lasts, the more financial damage they cause.

5 [ii] With 5% of any given organization committing 82% of the fraudulent actions, the solution isn t so much about detecting fraud and other non-compliant behavior, but detecting it better, faster, and sooner with as little inconvenience to the rest of the cardholders and travel program staff as explore and highlight potential problems associated with increased T&E Spend , we ve compiled the following statistics from data analyzed by the Oversight Insights On Demand product for T&E. 6% - Other10% use Oracle (iExpense)68% use Concur10% use SAP6% use IBMThe Oversight T&E Spend Analysis Report Volume 1 Page 3 Fraud and misuse are the two biggest problems facing T&E programs to corporate travel policy happen every day, for a myriad of reasons: by accident, necessity, or fraud.

6 From the Analysis of 10 million transactions, 6% were flagged as potential violations to policy. Was the misclassification a mistake or an attempt at stealing?Of the 160,000 travelers represented in the Analysis , 20% had at least one exception on their expense Report . Within our Analysis , 11%, or roughly 1 in 10 travelers triggered an exception multiple times. Why look for repeat offenders? Because most fraud, waste, and abuse committed in organizations is perpetrated by only a small handful of employees. From our data we determined that it was only 5% of travelers in an organization making over 80% of the purchases flagged as fraudulent.

7 Meaning within each organization there are only a handful of bad actors .T&E fraud is often one of the largest indicators that fraudulent activity is happening elsewhere within the company. From a similar study conducted by the ACFE, they reported that in of their cases involving expense reimbursement fraud, the perpetrator was also engaged in at least one additional form of occupational fraud. [ii]!!!!The Oversight T&E Spend Analysis Report Volume 1 Page 4 Only 5% of travelers in an organization made 82% of the purchases flagged as are the ways in which these bad actors can defraud companies?

8 Suspicious Out of Pocket ExpensesOf the 10 million transactions analyzed for this Report , were flagged for Suspicious Out of Pocket activity. This was the largest percentage of transactions for any one category, (out of duplicate submissions, suspicious out-of-pocket, and policy misuse) and more than the exceptions for both duplicates and potentially fraudulent purchases combined. This is not surprising since out of pocket expenses are the least controlled T&E : A traveler submits an unusual number of out-of-pocket expenses just under the $25 receipt limit, meaning they did not need proof whether the purchase occurred.

9 And there is a statistically unusual pattern of occurrences over the course of the past 90 days. Example: A traveler routinely puts a big-ticket item on their personal card (for the points) instead of on the corporate card, and then asks for a reimbursement. While this example isn t fraud, as he/she is traveling on behalf of the company, the misuse of policy creates a vulnerability that can be exploited by nefarious Expenses Duplicate submissions are also an area of incredible vulnerability for non-compliant spending and fraud. In our data, of expense transactions alone were duplicate submissions; instances where the same item was expensed on more than one expense Report .

10 The Oversight T&E Spend Analysis Report Volume 1 Page 516,000 travelers in our Report , or 10% had a suspicious out of pocket expense on their Report . 10% of the travelers analyzed for this Report had at least one duplicate expense on their expense Report .$ $ $ $ $ $ FOR ABC COMPANYPERSONAL CARD1234 5678 9098 From our set of 10 million transactions, over 75,000 are duplicates. This study had an average duplicate transaction value of more than $50 per duplicate. This means nearly $ million in duplicate expenses across the 160,000 travelers in this in T&E are often a good indicator of the need to review other activities to gauge risk, which is why it is especially important to monitor for all behaviors, not just fraud of the 160,000 travelers in this sample had at least 1 non-compliant purchase.