Case Studies

Issue: A well-known consumer products manufacturer had not audited accounts payable disbursements covering a number of North American plant and corporate locations.

Findings: Connolly found a great deal of variability within the accounts payable system controls. The system also lacked adequate safeguards. The vendor master file contained major duplication and inaccuracies, and the escheatment policy exposed the manufacturer to unnecessary unclaimed property risk.

Financial Impact: Total spend value of contracted scope was approximately $16 billion. Significant recoveries resulted, totaling roughly $12 million.

Solution: System controls were verified and system conversion safeguards were improved. Connolly flagged errors in the vendor master file and rewrote the escheatment avoidance policy. As a result, duplicate payments were significantly reduced, as was outstanding escheatment liability. Also, fraud risk decreased due to improved vendor master controls.

Issue: A large equipment rental company wanted to maximize freight payables recoveries and identify opportunities for process improvement

Findings: These findings were the result of identifying and recovering invalid freight charges on vendor invoices. According to the contract, these freight charges should have been paid by the vendor and not passed along to the client. A thorough data analysis of accounts payable history was performed using Connolly’s industry leading Decipher® audit software. Inconsistencies were identified and flagged for audit review. Specific exception items by vendor and date were detailed. Even more important than electronic exception reporting was the detailed review by experienced audit professionals of source documents (invoices, purchase orders and receivables) as well as vendor program sheets.

Financial Impact: Connolly’s root cause analysis identified a freight recovery opportunity which generated $280,000 in net recoveries for the annual period under review.

Solution: As a result of the claim findings and best practice recommendations published in the post-audit management reports, the client has an opportunity to significantly reduce future freight expenses.

Issue: On behalf of our client, Connolly’s root cause analysis identified a process breakdown in the area of vendor allowances, including rebates, co-operative allowances and discounts.

Findings: Using data mining techniques, Connolly analyzed over 900 equipment, tool and parts suppliers with annual spend of at least $75,000 and identified a number of valid claim areas. The audit team applied these conceptual claim areas across our client’s entire supplier base, using effective analytical and communication skills to identify similar opportunities.

Financial Impact: $1.2 million was recovered for the calendar fiscal year under review.

Solution: As a result of Connolly’s findings and best practice recommendations shared during the audit and documented in management reports, the client implemented significant process improvements to better control and account for vendor allowances.

Issue: Connolly had been auditing a large, $15 billion client for several years. Based on our work to uncover the true root cause of payment errors, Connolly identified significant problems with vendor returns and went on to identify and recover millions of dollars in returns, credits, and pricing claims. This also resulted in a reduction of vendor returns.

Findings: One of the significant findings was in the area of returned goods, where Connolly was able to reconstruct the client’s database and identify those items for which vendors had not provided a full and complete refund. Additionally, Connolly identified and recovered significant dollars related to pricing issues where the client was overcharged for product by its vendors.

Financial Impact: During a 2½-year period, Connolly identified and collected over $33 million in recoveries.

Solution: Connolly's identification of significant problems with the client's payment terms and discount policies led to a proactive initiative to improve and correct current processes and policies.  Connolly's industry benchmark studies helped to guide the client to reassess and revise its payment terms and discount policy, resulting in significant cash flow savings. We further assisted the client in their efforts to improve terminal equipment and perpetual inventory system controls by successfully integrating two large systems to generate the data required for pricing analysis.  This resulted in corrected pricing information, and improved accuracy of monthly management reports.

Issue: P-card programs offer increased purchasing flexibility and convenience, but can be difficult to control and are subject to abuse.

Findings: In this audit of P-card transactions covering several plant and corporate locations, the client had recently converted to a new P-card system. P-card charges and invoice disbursements had not been reviewed for duplicate and erroneous payments, and the P-card administration policy was in need of recalibration.

Financial Impact: Total spend value of P-card contracted audit scope was $380 million, resulting in significant dollar recoveries.

Solution: Connolly reviewed the conversion to a new P-card system, compared charges and invoice disbursements for accuracy, and wrote a new P-card administration policy. This resulted in the recovery of overpayments, a significant reduction in duplicate payments going forward, and decreased risk of fraud due to improved vendor master file controls.

Issue: Connolly's audit discovered that a midwestern state maintained a reimbursement program for expenses resulting from the maintenance of the wireless 911 network. This program required each cellular customer to pay a 911 fee to fund both the 911 call centers and the administration of the reimbursement program. Cellular providers were required to submit detailed monthly expense reporting to the state to receive reimbursement.

Findings: Our client invoiced the midwestern state for reimbursement of expenses for the period in question but did not receive payment.

Financial Impact: Due to Connolly's efforts, our client received reimbursement of almost $11 million.

Solution: After further research, Connolly learned that the 'lost' funds were not reimbursed due to our client's failure to properly report cellular subscriber zip codes and reimbursement invoice documentation errors. Following two years of meetings and follow-up, our client and the state resolved all outstanding issues. Due to Connolly's persistence in pursuing the claim, our client received reimbursement of almost $11 million and corrected a key processing breakdown related to the 911 reimbursement program.