4 December 2014 IDEA Scottish User Group 1

Duplicate Invoice Payments

David MacleodInternal AuditorFalkirk Council

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Outline of Presentation

• Background• Risk• Data• Use of IDEA• Findings

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• Around 7,000 employees across the Chief Executive’s Office and four Services:

– Corporate & Neighbourhood; – Development; – Education; and– Social Work

• Supports Falkirk Community Trust

The 2014/15 budgets for the Council are as follows:• Revenue Budget = £329,354,000• General Capital Programme = £21,170,000• Housing Revenue Budget = £54,434,000• Housing Capital Investment = £36,533,000• (The council has a housing stock of approximately 16,000 properties.)

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Background

• Integra Finance System– Used by Falkirk Council since 2005– 800+ users throughout the Council and Falkirk

Community Trust– Users have different permissions (e.g. read only, data

entry, approval)– Various integrated modules including ledger,

purchasing and creditors– Payment files are generated via the creditors module– Payment runs every Monday, Wednesday and Friday

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Extract from Falkirk Council Financial Regulations (Section 15.5)

The Officer certifying an invoice or other payment must be satisfied that:

• The goods or services have been received and are of the agreed quantity and quality;

• The invoice price matches the agreed price;

• The arithmetic is correct including discounts, credits, and VAT;

• Appropriate entries have been made in inventories or stock records;

• The invoice has not previously been authorised for payment ;

• The invoice is in the name of Falkirk Council (or an integral part of it); and

• The invoice is a proper liability of the Council.

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Extract from Falkirk Council Financial Regulations (Section 15.6)

• “Care must be taken not to make duplicate payments, especially if the invoice is a fax, copy invoice, or photocopied invoice. Payments must not be made on the basis of supplier’s statements.”

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Risk

• Reasons for duplicate creditor payments

– Paid to incorrect suppliers • e.g. Emergency Planning College instead of Emergency

Planning Society; or• Scottish Power instead of Scottish Gas.

– Payments made on copy invoices or delivery notes

– Paid to the same (correct) supplier twice

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Examples of Non -Exact Invoice Numbers

• VP69181270M12101 and VP69181270M12101NK

• 3360416025 and 3360416025-12.08.13

• C4053534 and 4053534

• S671 and S671A

• OP/IO69386 and OP/1069386

• 90005973 and 90005973-

• 313 and 3113

• 36100000617 and 3610000617

• 31025. and 31025

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How it was known that duplicate payments were occurring

• Contact (and reimbursement) from suppliers

• Checks by Creditors team on exact matches

This resulted in:• Concern that some duplicate payments were not

being detected

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Payments File Report

• Creditor Reference• Supplier Reference• Internal Number• Location• Invoice Date• Due Date• Payment Date• Gross• VAT• Payment Method• Payment Reference• Narrative

• Supplier code on Integra• Invoice number• Unique reference• Section / establishment

• Total amount of invoice• VAT amount • BACS or Cheque

• Details of invoice

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Data

• 10,000+ active suppliers on supplier database

• Annual volume of payments via Integra = 170,000

• Annual net value of payments via Integra = £278 million

• A rolling 12 month period is reviewed each month

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Use of IDEA

• Run payments file report on Integra

• Import to IDEA using Report Reader

• Join payment file with Active Suppliers to identify supplier name

• Join combined file with Locations to determine location description

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IDEA – Duplicate Key Detection

• Apply the duplicate key detection function based on:– Invoice date and gross amount

[approximately 60,000 results];

– Supplier reference and gross amount[approximately 1,500 results]; and

– Supplier reference (as numeric format) and gross amount[approximately 58,000 results].

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IDEA – Duplicate Key Detection

• Review results and copy any potential duplicates to a spreadsheet.

• Split the file into various value ranges by applying a criterion of Gross amount is greater than x and is less than y.

• Look for duplicates where at least one payment is in the most recent month.

• To convert supplier reference field to numeric format use field manipulation to append a column and apply the formula @Val (Supplier Reference). Apply the duplicate key detection using this appended column and gross amount.

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Value Ranges

• £0.00 to £100;• £100 to £200;• £200 to £300;• £300 to £400;• £400 to £500;• £500 to £1,000;• £1,000 to £2,000;• £2,000 to £3,000;• £3,000 to £4,000;• £4,000 to £5,000;• £5,000 to £10,000;• £10,000 to £20,000;• £20,000 to £50,000; and • Over £50,000

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Duplicate Invoices

• Check the identified duplicates to Integra for credit notes or refunds.

• Obtain copies of the invoices from the Creditors section for the remaining duplicates.

• Review the invoices to determine if the payments are, in fact, duplicates.

• Check with the Creditors team whether they are aware of any of the remaining duplicates and are in the process of recovering them.

• Report the remaining duplicates to Finance.

• Provide copies of the relevant invoices to the Creditors team to enable recovery action.

• Record the details of all reported duplicates on a spreadsheet and check to ensure that these duplicates are being recovered. Recovery is normally via credit note or by refund.

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Findings

• Since October 2010, a total of 283duplicates (to October 2014) have been identified.

• Cumulative gross value = £211,057

• For 2014/15 (to October 2014), a total of 50 duplicates have been identified.

• Cumulative gross value = £51,017

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Year Number of Duplicate Payments

Cumulative Gross Value

To 2010/11 14 £42,804.53

2011/12 46 £33,038.48

2012/13 85 £41,304.17

2013/14 88 £42,892.80

2014/15 50 £51,017.03

Total 283 £211,057.01

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Duplicate Payments

• Almost all duplicates have been recovered.• As at 1 December 2014, only 11 recently

reported duplicates are still outstanding.

• If necessary, the Creditors team provide additional training to Integra users who have processed the duplicate payments.

• To avoid duplication, the Creditors team have stopped conducting their own checks.

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Duplicate Payments

• COSLA and the Scottish Government recently provided with details of the process followed at Falkirk Council.

• This is an example of an activity that can help to improve the detection of fraud and error at relatively low cost.

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Conclusion

• A value adding activity that has resulted in the recovery of more than £200,000 of expenditure that would otherwise have been lost to Falkirk Council.

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Thank you

and

Any Questions?