Continuous Transaction Monitoring

Report
Continuous Transaction Monitoring
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oversightsystems.com
Introductions
Oversight Systems
Patrick Taylor, CEO
Mark Converse, Director, Sales/Business Development
Stephen Barbarisi, Regional Sales Director
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Internal Audit Trends
2009
2010
Cost of Compliance Focus
Value Creation/
Continuous Improvement
•Resource reductions (25%)
•Outsourcing considered
•Technology leverage considered…
delayed
• Internal Audit: Fact-based, data-driven
• IA: Advise the “business”
• IA: “Enable” the business
Increased Board Activity
Automate “Low Value” Tasks
• Overall risk exposure
• “More with less…”
• Specific risk “initiatives”
• Focus on high value, bottom line results
• Leverage advanced technology
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Why Continuous Transaction Monitoring?
Compliance Benefits/
Risk Improvement
• “In-process, real-time” controls
• Extend existing
system controls
• Replace, automate post
transaction audits
• Deliver bottom-line results
• Gain visibility/accuracy
into business
• Policies
• Stakeholder behaviors
• Process improvement
• Financial accuracy
• Real-time continuous
improvements
• Audit Automation
• Expanded use of data
analytics
• Detect fraud early
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Operational
Benefits
• Automate “lower value” tasks
• Auditing/QA
• Account reconciliations
• Detect issues early
• Errors
• Bottom-line/cash flow
improvement opportunities
• Waste, abuse
• Establish a “detection
adjudication/resolution”
capability
oversightsystems.com
Fraud Statistics
Typical organization loses 5% of revenues to fraud
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Median loss $160K, 25% of loses >$1M
Significantly higher for financial statement fraud, median >$4M
Asset misappropriation the most common
Recovery is low, only 20% recover significant amounts of
losses
Controls work: organizations with more robust fraud controls
had lower losses
85% of perpetrators have never been charged before
13% of employees will steal if given the opportunity
Source: ACFE 2010 Report to the Nation
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Other Relevant Statistics
1.6% of vendor payments have errors
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Similar for companies with a high degree of automation
3.6% of vendor invoices contain errors
Companies average 1.1% error rates in T&E
Invoice input error rates – average 15.6%
43% of companies never clean Vendor Master File
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Leads to other issues: fraud, duplicate payments, missed discounts
Duplicate payments are still a problem
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Approx 20% of companies report duplicate payment rate > 0.1%
39% of companies had check fraud in past two years
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70% in large companies (> 5000 employees)
% is growing
Source: IOMA 2007 Benchmark Study
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What Value Does Oversight Deliver?
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What Value Does Oversight Deliver?
• Regulations
 SOX
• Best practices
 COSO
 GRC Program
• Internal policies/
procedures
• Audit Automation
• Improper paymentreal-time error
prevention
 Errors
 Fraud/misuse
• Un-recovered
payments
• Cost of capital
• (Margin
optimization)
• 100% transaction
review
• Fraud
 Employee
 Vendor
• Policy/procedures
 Procurement
 T&E
 Corporate cards
• Resource
optimization
• Error correction
• Audit fees
• Internal audit
efficiency
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• Reporting reliability
• Decision support
• Automated testing/reporting
oversightsystems.com
• Transaction-level analytics
• Process improvement
CCM-T Application Components
Example Transaction Process: Revenue Cycle
Disparate Source
Systems
CUSTOMER
MAINTENANCE
CCM-T Application
SAP
SALES ORDER
INVOICE
HR Data
RECEIVING
CASH
RECEIPT
CASH
APPLICATION
Legacy
RMA/RETURNS
SAP
Data Extraction
• Monitors Controls
Libraries of Data
Analytics
• Embeds Audit
Best Practices in
Process
Analytics Engine
• Risk Ranking
UI and Workflow
Reporting
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Exception
Identification
Exception
Resolution
Documentation
oversightsystems.com
Insights/
Reporting
Representative Monitoring Value Propositions
Compliance/Risk
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Financial Process
Hard ROI
Financial Reporting Accuracy
Inappropriate Employee Behavior
General
Ledger
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Policy Compliance
Error Reduction
Operational Controls/Visibility
Order
to Cash
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Policy Compliance
Error reduction
Operational Controls/Visibility
Inappropriate Employee Behavior
Procure
to Pay
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Policy Compliance
PR Risks
Operational Controls/Visibility
Inappropriate Employee Behavior
P-Card/T&E
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G&A Cost Efficiency
Audit Cost Reduction
Margin Improvement
G&A Efficiency
Prevent Cash Leakage
G&A Efficiency
Prevent Cash Leakage
G&A Efficiency
Introduction to Oversight Systems
The Company
Continuous Transaction Monitoring
• Leader in continuous
• Automated, in-process
transaction monitoring
•100% transaction review & prioritization
• Software company
• Extracted from multiple data sources
• Headquartered in
Atlanta, Georgia USA
• Recognized by Forbes,
“Big 4” and industry
trade associations
• Best practices focus
and approach
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• Pre-defined monitors
• Operational policy
• Policy adjudication workflow
• Financial transaction process monitoring
•General Ledger Order to Cash
•HR / Payroll
Procure to Pay
•PCard/T&E
Custom
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Continuous Monitoring: Emerging Best Practice
Oversight Clients:
Monitoring $500B+ Transactions
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Continuous Monitoring Adoption
Finance & Accounting Functions
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Procure-to-Pay Monitoring
• Invalid Vendor
• Duplicate Vendor
• Ghost Vendor
• Vendor Change/Changeback
• Vendor Maintenance SOD
Vendor
Master
Requisitions
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• Receipt/PO SOD
Invalid PO
PO to Inactive Vendor
PO to Invalid Vendor
PO to Ghost Vendor
Duplicate PO
PO/Vendor SOD
Purchase
and Receipts
• Payment for 0
• Payment w/o Voucher
• Payment Payee Differs
from Vendor
• Payment to Ghost
Vendor
• Payment to Employee
• Payment Detail
Mismatch
• Payment/PO SOD
Invoice
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Payment Duplicate
Payment Line Duplicate
Payment Line Exceed Voucher
Payment Line w/o Voucher
Payment Line/Voucher Mismatch
Payment Line for Duplicate Voucher
Payment/Voucher SOD
Voucher
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Invalid Voucher
Voucher for 0
Voucher to Invalid Vendor
Voucher to Duplicate PO
Voucher Duplicate Amount
Voucher Duplicate Invoice
Voucher/PO SOD
Voucher Line with no PO
Voucher Line/PO Mismatch
Voucher Line/Receipt SOD
Voucher Line/Receipt
Mismatch
oversightsystems.com
Payment
Recovery
Cash Leakage: Procure to Pay Process
Accepted Risk
Built into Design
Unintended Design Gaps
•Less than ideal segregation
of duty to facilitate doing
business
•Quantity & pricing tolerances
•Manual over-ride of controls
•Subjective RFP process
•Lost volume discounts/rebates
•Freight overpayments
•Duplicate vendor payments
•Approvals outside design
tolerance
•Over/under payment of S&U tax
•Start-up and/or new
configuration post go-live
•Orders by-pass procurement
•Incomplete/inaccurate
master data
Fraud
Errors and Inefficiencies
• Collusion
• Single individual capitalizing
on system weakness
• Single individual manipulating
data to mislead decision
makers
• Check theft / manual check
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Lost payment terms discounts
Higher delivery costs
Catalog pricing not current
Manual processes
Multiple touches/parked
invoices
• Research
oversightsystems.com
Card Program Monitoring
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Cardholder Status Change
Cardholder Invalid
Cardholder Change
Cardholder Employee Invalid
Cardholder
Maintenance
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Transaction Duplicate
Transaction Chain Individual
Transaction Chain Department/BU
Transaction Invalid
Transaction Merchant Unauthorized
Transaction Merchant Suspicious
Transaction Amount Suspicious
Transaction Timing Suspicious
Transaction Limit Violation
• Merchant Distribution
Transaction Employee Invalid
Mismatch
Transaction Series
• Distribution Timing Error
Card
Maintenance
Cardholder Multiple Cards
Card Limit Change
Card Excessive Limit
Card Invalid
Purchase
Substantiate
Reconcile
• Recon SOD
• Transaction without Recon
• Transaction without
Substantiation
oversightsystems.com
Accounting
• Payment without Approval
• Payment to Ghost Merchant
• Payment to Employee
Approval
• Transaction without
Approval
• Approval Override
Payment
T&E and Cards Programs: Monitoring Objectives
Accepted Risk
Built into Design
Unintended Design Gaps
•Less than ideal segregation of
duty to facilitate doing business
•Quantity & pricing tolerances
•Manual over-ride of controls
•Subjective RFP process
•Lost volume discounts/rebates
•Freight overpayments
•Duplicate vendor payments
•Approvals outside design
tolerance
•Over/under payment of S&U tax
•Start-up and/or new
configuration post go-live
•Orders by-pass procurement
•Incomplete/inaccurate
master data
Fraud
Errors and Inefficiencies
• Collusion
• Single individual capitalizing
on system weakness
• Single individual manipulating
data to mislead decision
makers
• Check theft / manual check
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Lost payment terms discounts
Higher delivery costs
Catalog pricing not current
Manual processes
Multiple touches/parked
invoices
• Research
oversightsystems.com
Profit Leakage: Order to Cash Process
Accepted Risk
Built into Design
Unintended Design Gaps
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• Price overrides
• Approval tolerances
Fraud
Errors and Inefficiencies
• Collusion
• Single individual capitalizing
on system weakness
• Single individual manipulating
data to mislead decision
makers
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Pricing errors
Credit terms
Unit of measure
Free shipping not in contract
Wrong tax codes
Rebates
Incomplete/inaccurate
master data
• Returns
• Deductions
• Authorized promotion
deductions
• Chargebacks
• Penalties
• Short shipments
• Late payments
• Write-offs
• Slow dispute resolution
oversightsystems.com
General Ledger: Accuracy, Risk and Compliance
Access Controls
Process Controls
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Unintended configuration gaps
Super-user access
Material transaction approval
Incomplete/Inaccurate Master
Data
• Period open – period close
• Intercompany reconciliation
• Month end close monitoring
• Improve close efficiency
accuracy
Fraud
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Errors and Inefficiencies
Revenue manipulation
Overcapitalization
Understatement of liabilities
Super-user access
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Duplicate entries
Entries posted “backwards”
Account code misclassification
Keying errors
Manual entry review
Internal/external audit
preparation
• Multiple touches required for
multiple “customers”
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Oversight Overview
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Oversight Solution Overview
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CTM: People, Process and Technology
Corporate
Finance
Operations
BU3
Internal Audit
CFOBU4
Office
Audit Committee
Finance
BU1
Finance Operations
Procurement
BU2
VP Finance
VPOperations
Operations
Finance
BU1
Procurement
BU2
Operations
Finance
Procurement
Operations
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Oversight Product Capabilities
Reporting Capabilities
Oversight Dashboard
Oversight Workbench
Exception Handling Capabilities
Discovery: Exception Detection
Workflow
Collaboration
Communication
Advanced Analytical Capabilities
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Oversight: Macro Trends Generated Automatically
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Oversight: “Exception” Reporting
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Oversight: “Exception” Reporting
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Oversight: “Exception” Detail
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Oversight: Transaction Detail Provided
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Why Industry Leaders Choose Oversight
Key Attributes
Key Value
Superior Data
Acquisition
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Multiple, diverse, systems
Normalize data into common model
No data volume limitation
Low impact on client system/network
• Large, diverse data volume
• Minimize IT on-going support
• Streamlines advanced analytics
Advanced
Analytics
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Reasoning beyond rules
Statistical, Behavioral, Temporal, Symbolic
Correction detection integrated with workflow
Pre-defined + user defined analytics
• Higher ROI faster
• Discover “what I don’t know”
Practical
Workbench and
Dashboard
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Workflow enabled resolution
Consistent across all business processes
Supporting documentation in one system
Drill-down, email, attachments, link analysis
• No technical skills required
• Assurance through visibility
Intuitive
Configurability
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User-defined view: workbench & dashboard
Ad-hoc reporting + “what if” analysis
Flexible deployment configurations
Web based administration and configuration
• Encourages user adoption
• Direct & pertinent to unique KPI
Proven
Experience and
Results
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Client base Best Practices Group
The most successful implementations
Diversity in team expertise
Proven customer satisfaction
• Operationalizing continuous
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improvement
• Quick time-to-value
• Quick, efficient, effective
• Leverage F500 client experience
Find It.
Inspect every transaction.
Fix It.
Resolve every exception.
Prove It.
Substantiate every resolution.
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