Battling fraud and compliance issues in the public sector

The right technology solution can help ensure your organisation meets the highest levels of fiscal responsibility.

If you are in a public institution, you bear a unique responsibility when it comes to employee travel, expense, and invoicing. We know that in state and local government, transparency and accountability are paramount. With access to public funds comes a greater sense of obligation and a higher level of fiscal responsibility.

Officials in the public sector are challenged to fulfil that critical responsibility since they are often saddled with manual processes and siloed data. These outdated methods get in the way of travel, expense, and invoice risk and compliance management.

Innovative technology solutions, like those offered by SAP® Concur®, give public sector a way to tame this potentially hazardous situation. A modern travel, expense, and invoice platform should provide simplified tools and automation workflows so employees can accurately and efficiently keep track of their expenses. It helps them stay in compliance with relevant rules and regulations. At the same time, these systems offer administrators breathing room, giving granular insight into all spending activities, along with the means to assert an appropriate level of control.

Fragmented landscape

Take a look around at your travel, expense, and invoice management situation. In many institutions and agencies, you’ll see a fragmented landscape.

Is there siloed data? Even within a single organisation, spend information may flow to a variety of repositories and may be stored in any number of systems. This makes it hard for finance leaders to get a single, cohesive view of information — and this lack of transparency in turn invites error and impedes responsible oversight.

At the same time, spending itself is becoming increasingly decentralised. Are your employees empowered to make more and more spending decisions on their own? This kind of spending may take place outside of approved systems, leading to potentially problematic inconsistencies. “Unless your teams across the finance organisation are totally in sync, there is a strong likelihood mistakes will be made and costs will increase, with the potential for negative consequences,” explains Ralph Colunga, SAP Concur Thought Leadership, Travel and Expense Technology Solutions.

Other factors may also undermine effective travel, expense, and invoice management.

Public organisations may be saddled with manually-intensive reporting processes. These are inherently opaque and, with a lack of integration between systems, it can be almost impossible to track spending effectively, to manage regulatory compliance, or to enforce basic policies.

Cumbersome legacy systems compound the problem. They’re costly to maintain, update, and may not be robust enough to meet the complex reporting requirements necessary to ensure integrity within a government agency or academic institution. As a result, these systems may introduce opportunities for honest mistakes or fraud.

The ever-changing nature of regulatory and data security requirements necessitates complex policies with regular updates. Siloed data, legacy systems, and a lack of automation make it hard to implement these required adjustments, thus introducing additional risk of regulatory noncompliance.

All these factors pile up: 31 percent of managers say they lack adequate visibility into expenses and expense projections, while 30 percent of employees say entering expenses is time-consuming, error-prone, and reimbursement takes too long.¹

Even as public sector entities contend with these challenges, they simultaneously must manage travel, expense, and invoice processing with an exceptionally high level of diligence. We all understand that errors and misuse around taxpayer money are unacceptable, and a lack of compliance with regulatory and data security requirements can have profound negative consequences.

A 2018 report on occupational fraud concluded that “internal control weaknesses were responsible for nearly half of frauds.” For government and public administration, the median loss in cases of fraud was $125,000.²

“When agencies are publicly funded, their audits are made public too. When there are issues of noncompliance, you are going to see those in the headlines. You’ll see it in the news,” says Sam Van De Laarschot, Senior Product Marketing Manager at SAP Concur. No one in the public trust wants to draw negative media attention or risk tarnishing their reputation because of perceived fiscal laxity. In short: The stakes are too high to get this wrong.

A new vision

In the era of employee-initiated spend, managers must still capture spending across all channels. You need a platform that will centralise all types of spending happening across categories; consistently apply sourcing best practices; apply policies to ‘invisible’ or ‘maverick’ spending; and catch noncompliant spend through intelligent machine-learning features.

Manual systems lead to mistakes and the opportunity for fraud, while automation and innovation can help set things right. “For example, at one of my previous companies, we had a situation where in a month’s time, an employee’s mileage expense entry equated to circumnavigating the globe 10 times. The expense entry wouldn’t have been detected without sufficient technology and audit oversight to allow us to piece it all together,” says Greg Tennyson, Head of Global Corporate Services at VSP Global, a vision care health insurance company.

“It’s about transparency and it’s about automating discovery. With SAP Concur we can see exactly: You get descriptive words and exception reports for review, rather than having to look for a needle in a haystack.”

Seamless ... and smarter

Effective travel, expense, and invoice management starts with streamlined connections between the accounting system and your vendor network. By facilitating smooth data sharing, SAP Concur makes it easier for employees to align with reporting rules, bolstering compliance, while simultaneously reducing the likelihood of error.

“When the process is cumbersome for the employee, they either give up or they make a misstep. Fundamentally, technology has to make it easy for the individual to do their job,” says Tennyson. In this sense, SAP Concur fulfils a key front-end requirement for travel and expense reporting: It makes things simple for the employee.

On the back end, meanwhile, machine learning and artificial intelligence (AI) combine to support detection and auditing. Where a human auditor can only see so much, AI can dig deeper, faster. With the knowledge of millions of anonymised expense reports, as well as public web-based information, SAP Concur can rapidly and accurately assess factors too numerous and subtle to be spotted using manual means. In this way, SAP Concur can find and flag potential anomalies to help you generate higher compliance rates and free staff for more high-value activities.

Public sector organisations and academic institutions looking to leverage a higher degree of automation and implement a more transparent reporting system will want to take certain steps to prepare for the transition. Employees hold travel and expense as deeply personal experiences, and so modernisation in this area will require not just a technological shift, but also a cultural one.

You need a scalable solution that can grow with your institution or organisation, simplify back office processes, eliminate waste, and adapt to the ever-changing regulatory environment. By automating and integrating travel, expense, and invoice processing, you gain a single source of centralised data and the tools to eliminate costly mistakes, audit expenses efficiently, and put payment controls in place to improve tax and regulatory compliance.

^{1 Forrester Consulting, The Journey to Better Travel, Expense, and Invoice Management: A Spotlight on IT, May 2018
2 Report to the Nations, 2018 Global Study on Occupational Fraud and Abuse}

Image: Getty Images/dareknie