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Continuous Transaction Monitoring

Continuous Transaction Monitoring. Introductions. Oversight Systems Patrick Taylor, CEO Mark Converse, Director, Sales/Business Development Stephen Barbarisi, Regional Sales Director. Internal Audit Trends. 2009. 2010. Cost of Compliance Focus Resource reductions (25%)

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Continuous Transaction Monitoring

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  1. Continuous Transaction Monitoring

  2. Introductions Oversight Systems Patrick Taylor, CEO Mark Converse, Director, Sales/Business Development Stephen Barbarisi, Regional Sales Director

  3. Internal Audit Trends 2009 2010 • Cost of Compliance Focus • Resource reductions (25%) • Outsourcing considered • Technology leverage considered… delayed • Value Creation/ • Continuous Improvement • Internal Audit: Fact-based, data-driven • IA: Advise the “business” • IA: “Enable” the business • Increased Board Activity • Overall risk exposure • Specific risk “initiatives” • Automate “Low Value” Tasks • “More with less…” • Focus on high value, bottom line results • Leverage advanced technology

  4. Why Continuous Transaction Monitoring? • Compliance Benefits/ • Risk Improvement • “In-process, real-time” controls • Extend existingsystem controls • Replace, automate post transaction audits • Gain visibility/accuracyinto business • Policies • Stakeholder behaviors • Process improvement • Financial accuracy • Audit Automation • Expanded use of data analytics • Detect fraud early • OperationalBenefits • Deliver bottom-line results • Automate “lower value” tasks • Auditing/QA • Account reconciliations • Real-time continuous improvements • Detect issues early • Errors • Bottom-line/cash flow improvement opportunities • Waste, abuse • Establish a “detection adjudication/resolution” capability

  5. Fraud Statistics Typical organization loses 5% of revenues to fraud • 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

  6. Other Relevant Statistics 1.6% of vendor payments have errors • 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 • Leads to other issues: fraud, duplicate payments, missed discounts Duplicate payments are still a problem • Approx 20% of companies report duplicate payment rate > 0.1% 39% of companies had check fraud in past two years • 70% in large companies (> 5000 employees) • % is growing Source: IOMA 2007 Benchmark Study

  7. What Value Does Oversight Deliver?

  8. What Value Does Oversight Deliver? • Regulations • SOX • Best practices • COSO • GRC Program • Internal policies/ procedures • Audit Automation • Improper payment- real-time error prevention • Errors • Fraud/misuse • Un-recovered payments • Cost of capital • (Margin optimization) • Resource optimization • Error correction • Audit fees • Internal audit efficiency • 100% transaction review • Fraud • Employee • Vendor • Policy/procedures • Procurement • T&E • Corporate cards • Reporting reliability • Decision support • Automated testing/reporting • Transaction-level analytics • Process improvement

  9. CCM-T Application Components Example Transaction Process: Revenue Cycle Disparate Source Systems CASH RECEIPT CUSTOMER MAINTENANCE SALES ORDER CASH APPLICATION RECEIVING INVOICE RMA/RETURNS Legacy SAP SAP HR Data CCM-T Application Data Extraction • Monitors Controls • Embeds Audit Best Practices in Process • Risk Ranking Libraries of Data Analytics Analytics Engine UI and Workflow Exception Identification Exception Resolution Documentation Insights/ Reporting Reporting

  10. Representative Monitoring Value Propositions Compliance/Risk Financial Process Hard ROI • Financial Reporting Accuracy • Inappropriate Employee Behavior • G&A Cost Efficiency • Audit Cost Reduction General Ledger • Policy Compliance • Error Reduction • Operational Controls/Visibility • Margin Improvement • G&A Efficiency Orderto Cash • Policy Compliance • Error reduction • Operational Controls/Visibility • Inappropriate Employee Behavior • Prevent Cash Leakage • G&A Efficiency Procureto Pay • Policy Compliance • PR Risks • Operational Controls/Visibility • Inappropriate Employee Behavior • Prevent Cash Leakage • G&A Efficiency P-Card/T&E

  11. Introduction to Oversight Systems • The Company • Leader in continuous transaction monitoring • Software company • Headquartered inAtlanta, Georgia USA • Recognized by Forbes, “Big 4” and industrytrade associations • Best practices focusand approach • Continuous Transaction Monitoring • Automated, in-process • 100% transaction review & prioritization • Extracted from multiple data sources • 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

  12. Continuous Monitoring: Emerging Best Practice Oversight Clients:Monitoring $500B+ Transactions

  13. Continuous Monitoring Adoption Finance & Accounting Functions

  14. Procure-to-Pay Monitoring • Payment for 0 • Payment w/o Voucher • Payment Payee Differsfrom Vendor • Payment to Ghost Vendor • Payment to Employee • Payment Detail Mismatch • Payment/PO SOD • 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 • Invalid Vendor • Duplicate Vendor • Ghost Vendor • Vendor Change/Change-back • Vendor Maintenance SOD • Receipt/PO SOD • 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 • Invalid PO • PO to Inactive Vendor • PO to Invalid Vendor • PO to Ghost Vendor • Duplicate PO • PO/Vendor SOD

  15. Cash Leakage: Procure to Pay Process • Accepted RiskBuilt into Design • Less than ideal segregationof duty to facilitate doing business • Quantity & pricing tolerances • Manual over-ride of controls • Subjective RFP process • Unintended Design Gaps • 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/inaccuratemaster data • Fraud • Collusion • Single individual capitalizingon system weakness • Single individual manipulating data to mislead decision makers • Check theft / manual check • Errors and Inefficiencies • Lost payment terms discounts • Higher delivery costs • Catalog pricing not current • Manual processes • Multiple touches/parked invoices • Research

  16. Card Program Monitoring • 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 • Transaction Employee Invalid • Transaction Series • Cardholder Status Change • Cardholder Invalid • Cardholder Change • Cardholder Employee Invalid • Payment without Approval • Payment to Ghost Merchant • Payment to Employee • Merchant Distribution Mismatch • Distribution Timing Error • Transaction without Approval • Approval Override • Cardholder Multiple Cards • Card Limit Change • Card Excessive Limit • Card Invalid • Recon SOD • Transaction without Recon • Transaction withoutSubstantiation

  17. T&E and Cards Programs: Monitoring Objectives • Accepted RiskBuilt into Design • Less than ideal segregation of duty to facilitate doing business • Quantity & pricing tolerances • Manual over-ride of controls • Subjective RFP process • Unintended Design Gaps • 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/inaccuratemaster data • Fraud • Collusion • Single individual capitalizingon system weakness • Single individual manipulating data to mislead decision makers • Check theft / manual check • Errors and Inefficiencies • Lost payment terms discounts • Higher delivery costs • Catalog pricing not current • Manual processes • Multiple touches/parked invoices • Research

  18. Profit Leakage: Order to Cash Process • Accepted RiskBuilt into Design • Price overrides • Approval tolerances • Unintended Design Gaps • Pricing errors • Credit terms • Unit of measure • Free shipping not in contract • Wrong tax codes • Rebates • Incomplete/inaccuratemaster data • Fraud • Collusion • Single individual capitalizingon system weakness • Single individual manipulating data to mislead decision makers • Errors and Inefficiencies • Returns • Deductions • Authorized promotion deductions • Chargebacks • Penalties • Short shipments • Late payments • Write-offs • Slow dispute resolution

  19. General Ledger: Accuracy, Risk and Compliance • Access Controls • Unintended configuration gaps • Super-user access • Material transaction approval • Incomplete/Inaccurate Master Data • Period open – period close • Process Controls • Intercompany reconciliation • Month end close monitoring • Improve close efficiency accuracy • Fraud • Revenue manipulation • Overcapitalization • Understatement of liabilities • Super-user access • Errors and Inefficiencies • Duplicate entries • Entries posted “backwards” • Account code misclassification • Keying errors • Manual entry review • Internal/external audit preparation • Multiple touches required for multiple “customers”

  20. Oversight Overview

  21. Oversight Solution Overview

  22. CTM: People, Process and Technology Corporate Finance Operations Internal Audit BU3 BU4 CFO Office Audit Committee Finance Finance Operations BU1 Procurement BU2 VP Finance Operations VP Operations Finance BU1 Procurement BU2 Operations Finance Procurement Operations

  23. Oversight Product Capabilities • Reporting Capabilities • Oversight DashboardOversight Workbench • Exception Handling Capabilities • Discovery: Exception Detection • Workflow • Collaboration • Communication • Advanced Analytical Capabilities

  24. Oversight: Macro Trends Generated Automatically

  25. Oversight: “Exception” Reporting

  26. Oversight: “Exception” Reporting

  27. Oversight: “Exception” Detail

  28. Oversight: Transaction Detail Provided

  29. Why Industry Leaders Choose Oversight Key Attributes Key Value • Multiple, diverse, systems • Normalize data into common model • No data volume limitation • Low impact on client system/network Superior Data Acquisition • Large, diverse data volume • Minimize IT on-going support • Streamlines advanced analytics • Reasoning beyond rules • Statistical, Behavioral, Temporal, Symbolic • Correction detection integrated with workflow • Pre-defined + user defined analytics Advanced Analytics • Higher ROI faster • Discover “what I don’t know” Practical Workbench and Dashboard • 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 • 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 • Operationalizing continuous improvement • Quick time-to-value • Quick, efficient, effective • Leverage F500 client experience Proven Experience and Results • Client base Best Practices Group • The most successful implementations • Diversity in team expertise • Proven customer satisfaction

  30. Find It.Inspect every transaction. Fix It.Resolve every exception. Prove It.Substantiate every resolution.

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