| History of A/P Audits |
Virtually every publicly traded or privately held company in the United States
has commissioned a contingency-based audit of their prior year’s paid invoices
(A/P audit). This concept started over 30 years ago and has spread through most
of the European countries and throughout the Pacific Rim. Manufacturers and
retailers, operating on razor-thin margins, were quick to grasp the concept of
having a group of highly trained and motivated experts identify and collect
overpayments to their suppliers and service providers. With no “up front” costs
and commissions paid only after the overpayments are collected, it’s a win-win
situation with the net recoveries going directly to their bottom line.
Overpayments for large organizations have averaged between 1/10th and 3/10ths
of a percent of sales. While no one can fault an A/P operation correctly
processing 99.7% to 99.9% of transactions, a CFO of a $10 billion a year
corporation sees the benefit of recovering the lost $10 million to $30 million,
with a zero budget project without any additional headcount.
Departments of the federal, state, county and municipal government, like all
other large organizations, function with a high volume of suppliers,
transactions and budget dollars. Therefore, in the last decade, forward
thinking executives in the public sector have utilized the A/P audit not only
for the budget relief of the recovery dollars, but for the expert analysis of
A/P systems. The core strength of Horn & Associates is in our ability to
measure the effectiveness of their internal systems, recover lost dollars and
benchmark any and all facets of the procurement process.
The federal government has recognized the recovery audit savings by public
companies, which resulted in the Section 831 being added to the Defense
Authorization Act for Fiscal Year 2002. This section added a new subchapter to
the U.S. Code (31USC 3561-3567) that requires federal agencies that enter into
contracts exceeding $500,000,000 in a fiscal year to carry out a cost-effective
program for identifying any errors made in paying the contractors and for
recovering any amounts erroneously paid to the contractors.
With the audit mandate in place, the challenge for the federal agencies is to
select the audit firm with the greatest strength and experience that fits their
need. Horn & Associates 30 plus years experience in the audit industry, in
combination with our technology and value added services, puts us ahead of the
competition in every audit.
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