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Dispelling The Myths About

Contract Compliance Audits

88

Presenter Information

Visit: www.scandh.com

Phone: (800) 921-8490

Email: sch_group@scandh.com

G. Tyson GischelSenior Manager Business Development

(410) 403-1636

tgischel@scandh.com

Jeffrey M. Klima, CPA, CIA Director

(410) 785-3547

jklima@scandh.com

99

SC&H Group Overview

*Securities offered through Stout Causey Capital Corporation, Member FINRA/SIPC.

**Securities offered through Triad Advisors, Inc. Member FINRA, SIPC. Investment Advisory Services offered through SC&H Financial Advisors, Inc. SC&H Financial

Advisors, Inc. and Triad Advisors, Inc. are unaffiliated entities.

1010

Agenda

• Why Perform Contract Compliance Audits

• When to Perform Contract Compliance Audits

• Common Myths vs. The Realities

1111

Why Perform Contract Compliance Audits

Major Benefits:

1. Increases transparency while promoting trust and accountability

within the third party relationships.

2. Improve and enhance existing processes, controls, and

communication – both inside and outside of the organization.

3. Protect negotiated savings.

4. Mitigate third party risks.

1212

When To Perform Contract Compliance Audits

• You’re making a major spend or investment

• Your contract terms are complex

• Your organizational structure is decentralized

• You’re thinking about changing suppliers

• You’re experiencing personnel changes

• You’ve undergone a merger or acquisition

• Your supplier has operational challenges

• Your supplier is owned or managed by former employees

• You have large transactions with a small company

• You are the supplier’s biggest client

1313

What department owns and/or manages your

organization’s contract compliance audit program?

A. Procurement/Sourcing

B. Internal Audit

C. Combination of Procurement and Internal Audit

D. We don’t have a formalized audit program

E. Other

Polling Question #1

1414

Polling results

Polling Question #1

1515

Separate Fact from Fiction to Improve

Transparency, Efficiency, and Earnings

1616

Myth 1 – Auditing a Supplier will Harm the

Relationship

1717

Myth 1 – Auditing a Supplier will Harm the

Relationship – FALSE

1818

Myth 2 – An Audit will Disrupt Supplier

Operations

1919

Myth 2 – An Audit will Disrupt Supplier

Operations - FALSE

2020

Myth 3 – Audits take Significant Time and

Support from Company Stakeholders

2121

Myth 3 – Audits take Significant Time and

Support from Company Stakeholders - FALSE

2222

Myth 4 – Audits can be Performed only if the

Contract Contains an Audit Clause

2323

Myth 4 – Audits can be Performed only if the

Contract Contains an Audit Clause - FALSE

2424

Myth 5 – Most Billing Errors are Intentional

2525

Myth 5 – Most Billing Errors are Intentional -

FALSE

2626

What types of contract structures do you believe

are the most difficult to control with 3-way matches,

contract management solutions, and/or automated

controls?

A. Unit Pricing

B. Cost Plus

C. Hourly Rates

D. Prepaid Services

E. Milestones

Polling Question #2

2727

Polling results

Polling Question #2

2828

Myth 6 – Resolving Audit Findings Requires Legal

Action

2929

Myth 6 – Resolving Audit Findings Requires Legal

Action - FALSE

3030

Myth 7 – Audits Must be Performed by Third-Party

Auditors

3131

Myth 7 – Audits Must be Performed by Third-Party

Auditors - FALSE

3232

Summarizing the Reality

1. Contract compliance audits increase transparency.

2. Day-to-day supplier operations are not interrupted.

3. An experienced auditor should require minimal stakeholder support.

4. You don’t need an audit clause to perform an audit – make the ask.

5. Most audit exceptions are the result of oversights, not fraud.

6. Most audit exceptions are remediated timely by the parties.

7. Contract audits can performed successfully by a variety of resources.

3333

3434

Questions

3535

Thank you!

Visit: www.scandh.com

Phone: (800) 921-8490

Email: sch_group@scandh.com

G. Tyson GischelSenior Manager Business Development

(410) 403-1636

tgischel@scandh.com

Jeffrey M. Klima, CPA, CIA Director

(410) 785-3547

jklima@scandh.com