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Who's more effective at screening T&E expense reports - managers or AI?

Manager Approval Process For T&E - Useless or Useful?

April 11, 2017 / in expense report audit, AI, Compliance / by Meena Chockalingam
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I once sat in an interview with a Manager who told us, step by step, his process to approve his team’s expense reports. His story went something like this: his team would place their completed expense reports in his desk drawer throughout the month. On the last weekday of each month, the Manager would take out the stack of expenses and gear up his ink pad and rubber stamp with his name. He created the rubber stamp process because he was tired of signing each and every expense report by hand. He would spend no more than 15 seconds reviewing and approving each expense report. Then, he would walk the expense reports to the Accounting Manager for reimbursement.

 

Sound familiar?

 

I can understand the need to have Manager approval from a compliance aspect, but what about blind Manager signoffs like the story above? Let’s take a look at the pros and cons of keeping the age old process of Manager approval for T&E expenses:  

 

Pro: Manager Approvals Should Always be Mandatory

  1. First set of eyes, sometimes second
    In companies that review only a sample of expense reports (60% of all companies according to PayStream Advisors), often times the Manager is the only set of eyes on an expense report. In companies where all expense reports are reviewed by Accounting / Finance / Compliance departments, Managers provide a second set of eyes for policy compliance and fraud detection.
  2. Business Reason Awareness
    Managers are aware of business justification for the expense - they should know what they’re approving, whereas Accounting / Finance / Compliance departments are only looking for expense compliance with internal policies.
  3. Budget
    The employee expense may fall within the Manager’s allotted budget, and thus the Manager should be part of the approvals process for their own awareness.

Cons: Manager Approval Process is a Waste of Time 

  1. Limited Time
    Managers don't have the bandwidth to thoroughly review expense documentation and are signing off purely as a compliance requirement. They usually approve at a high level (not looking at receipts, not checking for duplicates with prior reports, etc.), at month end, usually with multiple last minute approval requests. Having highly paid Managers spending time verifying receipts is probably not the most effective use of company resources.
  2. Lack of Training
    Managers are inadequately trained to identify policy violations and red flags. Even with training from the Accounting / Finance / Compliance departments, fraud detection isn’t most Managers’ area of expertise.
  3. Employee Trust
    Manager approval is often swayed by their trust in the employee submitting the report - who would question the expenses of your team’s best employee?
  4. Collusion
    With over 50% of fraud cases involving multiple perpetrators, an employee submitting fraudulent expense reports could easily be working with the approving Manager. Collusion circumvents anti-fraud controls like separation of duties and independent checks. 

Solution 

There are several factors to consider beyond just the pros and cons mentioned above. The best solution takes into account company culture, business, size and expense reimbursements process.


Using technology, Managers can remove themselves as the bottleneck in the expense reimbursement process. Consider using an artificial intelligence tool to reduce or even eliminate Manager approvals. AI enables improved expense policy compliance using machine learning capabilities - with the ability to catch fraud that even a Manager may overlook with the millions of other things on their mind.

 

About the Author

Meena is an expert in Forensic accounting, FCPA investigations, data analysis, compliance and fraud prevention with over 6 years of experience within PricewaterhouseCooper's Risk and Fraud Consulting Practice. You can reach her at meena@appzen.com

Tags: expense report audit, AI, Compliance

  

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