Best Practices When Creating Policies


Best Practices when Creating Policies



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Full transcript available below:

Hello everyone and welcome to todays webinar, hosted by me Joe Boyhan and John Kearney of MyComplianceOffice and compliance expert Michael Volkov. 


Let's go on and now talk about what I see as the big issue, which is the pre-approval issue, and go to the next slide if we could. Pre-approval versus reimbursement. When we design policies and want to get at the risk, ideally, and I'm just saying this ideally, we want to have an easy way to pre-approve as many as we can. Sort of the history, in terms of requiring pre-approval, because everybody assumed this was done on paper. That you had to go to a supervisor, and then if it was really a lot, or troublesome, then you'd have to go to legal or compliance to get the ultimate approval.


In these situations, the old way of thinking about this, to me, was we're operating more in a reactive way. We were more or less trying to design a threshold above which we required pre-approval, but a lot of the activity was occurring below the threshold. Below that threshold then we didn't have pre-approval. People had the authority to make the expense and make a payment, and then they sought reimbursement.


People get confused and sort of say, "Oh well we have controls over this because we have a reimbursement policy." To me, your controls are deficient if you're just doing everything on reimbursement. Because the FCPA guidance from the Justice Department and from the SEC requires you to have some level of pre-approval at some level, and some protocol for that. But we were ... That was usually very limited. Compliance started to get into oversight, in terms of the pre-approval part, and we started to see finance benefits obviously, because the expense reimbursement process used to be set up, and there would be sort of a routine that would go with this, where managers would get to see more or less with pre-approval, would get to see more of the products and get to see ... I mean not of the products, of the requests and exactly doing this.


We also started to look at aggregate expense tracking needs, traditional tracking methods, and we would start to track. People were starting to track, particularly in the pre-approval context, who are you having meals with? Who are you giving gifts to? What's the reason? Why are we paying for this person's travel? In advance, we need to see a justification. That's the benefit of pre-approval. Pre-approval gets you to be proactive and gets you real time monitoring.


If we can figure out an easy way to do pre-approval, if we can make it work for the business where it's a win/win, we always look for win/wins. In other words, situations where the business is going to buy in. We make their life easier, and compliance benefits at the same time. Let's take a look at some of the controls a little bit more, and the costs and benefits. Let's go to the next slide.


My way of looking at this is, you've got to know what your risks are. What are your risks? Then you design your policies to align with those risks, and you look at, what is the cost benefit of doing so? In other words, I don't want to ladle all these controls over people, such that they can't do business. I don't want to look at five dollar expenditures for pens or pencils or whatever. I don't want to have that necessarily, unless we can do it in a real time, easy way, where I get visibility into everything. We've got to always look at the cost benefit analysis and how we're going to take a look at that.


Let's look at some more of the basics if we can. Go to the next slide. We always want to know, in other words, what amount was spent? What was the reasonable amount? Was it reasonable? We always want to know where, when, how much, and we want documentation. Always documentation. Photographs. People are even sending in, from their phones, photographs that they attended an event, or for example, that they were there and what occurred and who was there. Frankly, it's getting easier and easier with technology. A lot of times historically this was all the companies would collect. What I'm trying to tell you is, because of technology, and being reactive, the push now is that this is not enough, but we want to see proactive strategies as well. Let's go to the next and talk about some of the other issues.


Who's receiving the gift, meal, or entertainment expense? Is this the same person? If it's the same government official, for the fifth time of the year, and we're taking them out for a $200 meal, okay, and let's say we're rotating it among sales people. Why are we doing it that way? We want to know who from our side is going out with these people and why? We also want to make sure that the reporting and the receipts and all of that is honest. We saw, for example, in one of the cases, the Around the World Tour case, with the two guys from FLIR Systems, who took two individuals around the world, giving them Rolexes and then trying to create documentation to support the gifts and meals and entertainment and travel expenditures. Well, they got caught eventually because they were trying to be dishonest about what they were doing.


But now look at what software can do. Software and technology solutions, and we're going to talk about that later in this presentation, about what My Compliance can do, is you can have, number one, you can have first to make sure we have the names right. We can have selection boxes obviously for employees, and obviously for people that we know they're going to take out, in that sense as well. We can automatically track, right in advance, over time and create alerts when, for example, somebody's requesting to exceed a threshold.


Let's say we have a threshold which is, you can't take any one government official out for more than $500 a year. If you take them out, two, three times, whatever. All of a sudden we get a request for the $600, another expenditure that's going to take them over that threshold, we get a real time advance notice that allows us not to try to unscramble the eggs in a reimbursement context, where we get a form and we go, "Oh no, they exceeded the threshold." We get it real time in advance, that's called proactive compliance folks. This is what we're talking about. This is monitoring. This is how a system should work in today's world.


Let's go to the next slide if we can. Right now we would have a question in our platform that would say to somebody, "Okay, who are you taking out and are they a government official?" There's a box, and obviously that they would have to fill out with regard to that. They would be trained as to this system, obviously to reinforce the definitions. We're going to capture what the employee's knowledge was of the status of the recipient. Let's be honest, you could sit there, well could they game the system?


If somebody is in sales and has been, let's say doing this for three, four years, they're going to know who a government official is. If they sit there and put a name in there that we know is a government official, in prior reports or other reports, and they don't check who it is, we're going to catch that person in terms of their understanding of the recipient status. Again, this is a proactive control that's real time, and that is available to compliance staff and legal staff in terms of tracking what's going on with gifts, meals and entertainment expenses. Let's go to another one. Next slide.


We also get at, they have to provide information, what's the purpose of the expense? Again, we have a drop down box that gives the purposes. We can easily then track the types of purposes. We can flag expenses for what we consider high risk purposes. Then we categorize the expenses, again, according to these pre-approved categories, and again we're talking about real time monitoring, tracking, and the ability to make it a pre-approval type of situation. In other words, they're not authorized to make this expense, to take this expense, unless they get the approval and they provide the necessary information, and they make that request. Okay, so let's go on.


These are, again, all the benefits that we're talking about with automation. Compare this to the old system of reimbursement. Paperwork, unscrambling. This is going to be something that's on your computer screen, easy to work with as well. Pre-approval required. Now here is the guts of what I consider the most important part of the system. No longer is pre-approval going to be, get me a form, I've got to email it to my boss, I've got to fill it out. Then the boss has to print it out. Then the boss has to sign it. Then we have documentation, and then we've got to make sure we keep a paper record of it.


All this can be done now online, with a software service, where you can set the threshold wherever you want. If you want to pre-approve everything above five dollars, you can do that. If you want to pre-approve everything above $10, again, you can do your own cost benefit, risk profile for yourself, and your company, knowing what kind of expenditures you want to see. Then you set, again, elevation, additional managerial review. There may be, under $25 you may not want to see it. Let me tell you this, on the other hand, with this system, you're going to have the real tracking. You're going to track, in other words, even all of those expenditures, you could know each day how many expenditures occurred, even below the pre-approval requirement. This is a simplified procedure for giving you pre-approval.


Pre-approval is a best practice. The more that you pre-approve, the better it is. The more that you pre-approve, the better you are at mitigating your risk. Another benefit is communication and approval is easy when you do it online. You don't have to then write an email, "Okay, I approved this." After you've signed the form, and then submitted it into a record keeping system. You may keep it on SharePoint or something like that. This is all real time sort of processing that gives you extreme benefit. Let's go on.


This webinar was co-hosted with Michael Volkov of VolkovLaw.


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