Effective Compliance and the Importance of Accounts Payable Function
As the compliance function has matured, Chief Compliance Officers have built important relationships with related functions that are critical to the compliance function. Over the last few years, we have seen the Justice Department and the SEC focus on company invoice to payment functions as a key area of concern when assessing the effectiveness of a compliance program.
Last week, I had the honor of speaking at a national conference of Account Payable professionals sponsored by the Institute for Financial Management. (Here). I was impressed by the professional concern among account payable professionals relating to compliance programs and efforts to ensure that any payments to vendors/suppliers, as well as reimbursement payments for gifts, meals and entertainment expenses were properly authorized and in conformance with company compliance policies.
The evolution of the compliance relationship between CCOs and accounts payable professionals is a welcome development but more work needs to be done in this area. CCOs have to recognize that accounts payable professionals are natural allies who can assist on the front lines in enforcing compliance policies and procedures, identifying potential red flags and escalating issues internally for further scrutiny.
As an example, let’s review how accounts payable professionals can be easily integrated into the review of third party payments. If a company has engaged a third party representative (e.g. agent, distributor) and included specific contractual requirements to provide detailed invoices, the accounts payable function (which I am assuming includes review and approval of such invoices) plays an important role in reviewing the third party invoice, identifying unexplained fees or charges and approving the payment of such invoices. This invoice review function is important and account payable professionals should be authorized to raise potential concerns and issues with compliance and other appropriate functions.
In reviewing gifts, meals and entertainment expenses, account payable professionals are able to flag expense patterns, raise questions about questionable expenditures and enforce policy limitations. Again, as in third party payments, the accounts payable professional plays an important role in promoting the compliance function.
In recognition of this important role, CCOs have recognized the need to increase coordination with accounts payable professionals and specifically to provide important training and education to accounts payable staff. Such specialized and targeted training is consistent with DOJ and SEC expectations that companies implement risk-based training programs tailored to specific audiences within the corporate governance structure.
Importantly, accounts payable professionals are embracing their new or enhanced role as a key compliance program partner. Accounts payable professionals recognize the need for learning new roles and responsibilities, and are willing to enforce compliance policies and procedures, as appropriate. Of course, they also recognize that increased resources may be required to fulfill this new responsibility.
CCOs have to explain the importance of this relationship to a company’s Chief Financial Officer and seek his/her agreement to include this important partnership as part of overall coordination between the compliance and financial functions in a company.
CCOs have many important relationships within a company, and the compliance coordination with accounts payable professionals has to be elevated as a key relationship and compliance operation.