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T&E Spend Analysis Report

Volume 1 Volume 1 Fall 2014

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Executive Summary
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. 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 program.

Fraudulent 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 spending.
We like to think of T&E as the “window into the soul” of a company. 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 programs.

The 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:

10% use Oracle (iExpense)

68% use Concur
10% use SAP

6% use IBM

6% - Other

Over 90% of the surveyed clients analyze transactions on a monthly basis

with the remaining 10% analyzing data daily or quarterly.
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 Fraud and
by the Global Business Travel Association, business travel expenses are
expected to rise 7.2% in 2014, to over $288.8 billion.[i]
misuse are
the two biggest
When expenses rise, so does card use and out-of-pocket spending.
With increased spending comes greater vulnerability to the two biggest
problems facing
problems facing T&E programs today: fraud and misuse. It has been T&E programs
proven that the longer fraudulent activity lasts, the more financial damage today.
they cause. [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 possible.
To 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.

The Oversight T&E Spend Analysis Report – Volume 1 • Page 3

Exceptions to corporate travel policy
happen every day, for a myriad of
reasons: by accident, necessity, or fraud.
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
Only 5% 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. travelers in an
Meaning within each organization there are only a handful of “bad actors”.
made 82% of the
T&E fraud is often one of the largest indicators that fraudulent activity is purchases flagged
happening elsewhere within the company. From a similar study conducted
as fraudulent.
by the ACFE, they reported that in 75.6% 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

What are the ways in which
these “bad actors” can defraud
Suspicious Out of Pocket Expenses
Of the 10 million transactions analyzed for this report, 2.8% 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 purchases.

16,000 travelers in our report, or

10% had a suspicious out of pocket
expense on their report. 99

Example: A traveler submits an unusual number of “out-of-pocket” expenses .99
just under the $25 receipt limit, meaning they did not need proof whether
the purchase occurred. 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 INVOICE FO
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 travelers. CARD
1234 5678 9098

Duplicate Expenses
Duplicate submissions are also an area of incredible vulnerability for non-
compliant spending and fraud. In our data, 0.75% of expense transactions
alone were duplicate submissions; instances where the same item was
expensed on more than one expense report.

10% of the travelers analyzed for

this report had at least one duplicate
expense on their expense report.

The Oversight T&E Spend Analysis Report – Volume 1 • Page 5

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 $3.8 million in duplicate expenses across the
160,000 travelers in this report.

75,000 X $50+
duplicate transactions per duplicate
That is a
amount of
$3,750,000+ wasted money.
total in duplicate expenses

Issues 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 alone.
20% of the 160,000 travelers in this sample had at least 1 non-compliant
purchase. This is lower than surveys where 25% of travelers admitted to
submitting out-of-compliance expense reports. [iii] With only 5% of our
travelers potentially attempting to defraud the company, this means that
the other 15% aren’t “bad actors,” but they also aren’t being as cognizant of
spending as they could be.
Travelers attempting
Compliant Non-Compliant
to defraud the company
Travelers Travelers


15% Travelers that aren’t
being as cognizant of

75% 25%
Travelers that admitted to
submitting out-of-compliance
Detecting non-compliant spending isn’t just about catching fraudsters. expense reports

It’s about shaping policy so that travelers and company leadership can
both feel comfortable about where their money is going and reducing
leaks in the spending. The lower level of fraud among the travelers in our
report (1%) is likely due to the Hawthorne Effect, wherein people respond
differently when they know they’re being watched. This falls in line with
the ACFE 2014 findings that organizations with proactive monitoring Error
and analysis consistently identify fraud schemes in half the time of those Detected
Policy Misuse
without analysis. [ii] !

Nearly 18,000 travelers in our analysis, (11%) had an expense on their Henderson Steakhouse $176.32

report flagged as policy misuse.

The Oversight T&E Spend Analysis Report – Volume 1 • Page 6

Where does the money go?
Since travelers are spending significant company dollars on non-compliant
goods and services, where exactly are they spending this money?

The 5 most popular merchant category codes for non-compliant spending are:

Electronics stores Computer Software Stores

Management, consulting, Sports & Athletic Clubs, Country

and public relations firms Clubs and Golf Courses

Theatrical Producers
(Non motion-picture)

In most T&E programs companies across the board spend the largest
amounts of money on airfare, hotel, and restaurants. Surprisingly, we also
found these four categories where customers spend large:

Conferences Office Theater & Storage

& Training Supplies Entertainment Facilities



Unsurprisingly, two of these four categories also had the highest number of
instances of non-compliant spending:



Special Office Theater & Computer &

Events Supplies Entertainment Electronics

The Oversight T&E Spend Analysis Report – Volume 1 • Page 7

The Good News
•• While fraud is certainly a hot button issue, it isn’t a rampant
problem when organizations leverage proactive monitoring
and analysis. Only 1% of transactions in this study were 10 Million
flagged as potentially fraudulent.
•• The same goes for policy misuse, suspicious out-of-pocket,
and duplicate expenses: each only accounts for less than 5%
of the 10 million transactions we analyzed.

•• The experiences of our customers indicate that monthly

monitoring and related actions and communications helps to 1% Potential Fraud

promote appropriate behavior among employees. These companies

have seen improvements in compliance reflected in the decrease of Policy misuse, suspicious
out-of-compliance activities by as much as 70%. 5% out-of-pocket, & duplicate

Only 35% of the organizations in the ACFE report [ii] had an effective anti-
fraud, transaction monitoring solution, and automated, on-demand analysis is
the solution to many of the issues highlighted in this study. Oversight Insights
On Demand™ makes it easier than ever to analyze 100% of transactions at
the frequency your organization desires.

[i] Iwamoto, K. (2014, July 14). GBTA Report: 2014 Business Travel Spend to Rise Nearly 7%. Retrieved
from http://www.lanyon.com/resources/gbta-report%3A-2014-business-travel-spend-to-rise-nearly-7

[ii] ACFE. (2014) Report to the Nations on Occupational Fraud and Abuse 2014 Global Fraud Study.
Retrieved from http://www.acfe.com/rttn/docs/2014-report-to-nations.pdf

[iii] http://www.cipd.co.uk/pm/peoplemanagement/b/weblog/archive/2014/08/29/one-in-four-staff-

About Oversight
Oversight’s mission is to deliver analysis that helps companies make smarter business decisions. Oversight
Insights On Demand™ is a new web based application designed to assist travel and purchase card managers
in uncovering possible misuse, fraud, and compliance violations. With the software, customers address
operational data analysis requirements and leverage analytics to change employee corporate spending
behavior. A Concur, Oracle, SAP and TSYS partner, Oversight has over 10 years of experience analyzing $1.8
trillion in expenditures annually at Fortune Global 5000 companies and government agencies.
Visit www.oversightsystems.com for more information.