The contract to invoice to payment process may seem like a small part of a larger process, but it's at the core of many enforcement issues, particularly when it comes to the FCPA. In fact, we've seen some important cases that have highlighted the critical nature of this process, including the Oracle case from last year. This episode of Crime, Corruption and Compliance is not just a review of the FCPA, but rather an in-depth exploration of how companies can implement effective internal controls around their financial operations, and avoid potential problems that can arise from breakdowns in this process. I dive into the details of this important topic so you can learn how to build an effective control environment for your company's financial operations.

These are some key ideas I discuss in this episode:

• Internal controls are critical to preventing fraud and corruption and must be established and maintained to ensure the proper use of corporate assets.
• The accounting provisions of the FCPA include the books and records provision and the internal controls provision, which require issuers to keep accurate and detailed records of their transactions and maintain a system of internal accounting controls.
• The contract to invoice to payment process is a key area where breakdowns in internal controls can occur, leading to illegal payments and bribery risks.
• A robust due diligence process is required to confirm the ownership, legal compliance, reputation, and other important factors of potential vendors and suppliers.
• Accounts payable and accounts receivable personnel are critical frontline actors in the procurement to pay process and should be trained in compliance to mitigate risks and elevate red flags when necessary.
• The coordination and communication between finance, procurement, and compliance functions is crucial to establishing effective controls and preventing potential high-risk situations.
• Contract and purchase order management systems should be established to link the contracting and purchasing process with invoicing and payment, ensuring proper review and verification of invoices and payments.
• Invoicing and payment processes should be closely monitored and authorized in accordance with contractual and purchase order terms to avoid unauthorized use of corporate assets and reduce bribery risks.
• Compliance programs should include a monitoring program and transaction testing program to regularly review and test the effectiveness of internal controls in the procurement to pay process.

KEY QUOTES:

“Compliance has to push their way into the environment here and start to take some responsibility for transaction testing, for monitoring, for partnerships related to high value or high-risk third parties, to make sure that we're monitoring and addressing that risk.” - Michael Volkov

“One of the things that has to go along with your third party due diligence program is what I would call a contract management system.” - Michael Volkov

“Accounts payable personnel should always be relied on in terms of natural allies and open communications. Having them elevate red flags to the business and the compliance functions has to be a key priority here because they are on the front lines.” - Michael Volkov

Resources

Michael Volkov on LinkedIn | Twitter

The Volkov Law Group