Recovery Audit for Multiple Industries
Recovery audit identifies amounts owing from suppliers of goods and services that would otherwise remain undetected and lost forever. All entities experience payment error. ATG provides recovery audit services for organizations with annual non-payroll spend greater than $1 billion. ATG is adept at customizing audit programs to meet the unique needs of each client. All industries benefit from identification of vendor open credits, duplicate payments and missed cash discounts and allowances. As part of our no cost analysis we will also evaluate your procure to pay environment to determine if contract compliance reviews, escheatment, taxes paid on exempt items are warranted. We customize the audit to your unique business environment.
Our cloud based systems provide clients on-demand access to a variety of procure to pay error and other analytics including:
- Duplicate Vendor
- Inactive Vendor
- One Time Vendors
- Grief vendors – Credits of Transactions
- Grief vendors – Days to pay and Payments outside terms
- Vendor address variances
- Inactive Employee on AP File
- OFAC Reports
- Fraudulent Vendors (this could be a bunch of different reports but it does generate a lot of false positives)*
- Exception Amounts (10 X Median Invoice)
- Key Entry Errors
- Cash Discount Optimization
- Compliance Reporting *
- Escheatment – Open Check Report
- P-Card candidates – High transaction low dollar
- Historical reports by month/year/day for transactions, checks, by location, by clerk
Contract Compliance Review Recovery Examples
When a contract compliance review is included in audit scope, information resources are expanded to include review of contracts with suppliers of goods and services. Examples of the kinds of errors identified follow:
The Client’s fleet was managed by a third party provider, but client negotiated vehicle cost directly with a car manufacturer. Contract with car manufacturer included a rebate if more than the target number of cars were purchased during the three year contract. Target was met, but rebate was not received. Recovery was approx. $1.6 million.
Law Firms and Marketing Firms:
Rebates were negotiated by the client with several of their larger vendors. The rebates were based on annual billings, excluding expense and pass through costs, but there was no system in place for tracking or collecting the rebates. After auditing, rebates unpaid or short paid were identified. Recoveries were over $600,000.
Index Based Pricing – Contracts with tiered pricing including monthly change with a published index were reviewed. Prices were recalculated for each month based on the index resulting in identified price discrepancies. Recovery was $16,000.
Volume based Pricing-Prices in the second year of a contract were reduced if purchases during first year met a certain target. Target was met, but prices were not reduced. Recovery was about $42,000.
Meetings and Events:
Budgets are created for each event/project and agreed to by both the client and the supplier. Many of these types of contracts are set up with installment billing provisions. Typically with 1/3 at signing and 1/3 at some mile post and 1/3 at completion. Meetings that were cancelled without initial payments returned were identified and funds recovered. In other cases, the project is completed, but at less cost than the budget and supplier never issued credits for the difference. Recovery $67,000.
National rebate agreement in place for all purchases from Supplier yet other office locations were not utilizing specified account number so the Supplier did not include purchases from these locations. Calculation of consolidated purchases resulted in $213,000 rebate claim.
Recurring payments on expired and terminated leases resulted in recovery of $352,000. When a contract compliance review is included in audit scope, information resources are expanded to include review of contracts with suppliers of goods and services. Examples of the kinds of errors identified follow:
State, Federal and Local Government entities are not immune for payables errors and in fact are significant beneficiaries of recovery audit services. Government agencies first began benefiting from recovery auditing subsequent to the Waste Corrections Act of 1999. Below is the content of the Congressional Hearing on the Waste Corrections Act of 1999 that required recovery audits for Federal Agencies including the expert witness testimony by Paul Dinkins, ATG’s Chief Marketing Officer.