Detect and Prevent Overbilling and Fraud Before Payment With Audit Intelligence

Tags: , , , , , , , ,

Audit Intelligence focus on pre-payment prevention

Overbilling is a serious problem for North American operators, particularly in high volume, low value transactions like fluid hauling. Industry research shows overbilling can reach 25-30%, in certain cases. With hauling costs accounting for 5-8% of operational costs, E&P companies’ exposure can reach into the tens of millions annually.

In its 2018 annual report, the Association of Certified Fraud Examiners states that the energy industry experiences elevated levels of corruption relative to other industries. Some common miscalculations and examples of fraud in the oil & gas service sector include:

  • Falsification of ticket and billing information, such as driving hours, loads hauled, or number of workers
  • Inaccurate billing when an agreement exists
  • Providing and billing for work that was not ordered
  • Billing after incomplete or insufficient work
  • Illegal load collection or dumping
  • Forged signatures and stamps

Why does this problem continue? With so many tickets and invoices being processed, it is virtually impossible for each one to be reviewed thoroughly. Operators do not have time or resources to investigate all issues. This leads to overbilling, both unintentional and intentional.

Once suppliers are paid, it is extremely rare to recover the full amount of the overbilling. Recovery processes are time consuming, inefficient, and rarely recover more than 35% of what has been overpaid. The inability to manage this problem contributes to loss of capital, rising LOE costs, and increased cost per barrel to produce.

Introducing Audit Intelligence

To solve this complex industry problem, Enverus, in partnership with Concho Resources, created Audit Intelligence—a solution that identifies overbilling, empowering operators to prevent fraud and strengthen cost controls.

The solution automatically detects documents that create overbilling risk and optionally removes them from your workflow before they are approved and paid, eliminating the need for costly recovery efforts. Watch the video to see more.

Built by a team of fraud detection, audit, law enforcement, and oil & gas operations experts, this is the only solution in the industry focused on pre-payment prevention instead of post-payment recovery.

By discovering discrepancies before an invoice is paid, Audit Intelligence can increase the average cash recovery rate from 35% to 100%.

Concho Resources Recovers $1.4M of Overbilled Services in Five Months

The solution builds on a proprietary vendor auditing program developed by Enverus customer Concho Resources, using data created by OpenInvoice and OpenTicket. Fraud reduction and overbilling elimination was a prime value driver for the adoption of OpenTicket at Concho because it wanted to perform its own vendor audits through detailed analysis of digital hauling tickets.

The ticket adoption program was run by the security organization, not the accounts payable or operations group as is typical. OpenTicket adoption was limited to water haulers, focusing on extracting digital field ticket information and analyzing it by hand.

Over the course of the first two years, Concho security and accounts payable staff found that between 16 to 20% of invoices related to water hauling had some anomalies that indicated intentional overbilling. Concho staff recovered more than $500,000 because of the digital ticket review.

Seeing the value of internal audits of field tickets and looking to scale capabilities further, Concho engaged a third-party software consulting company to develop a system to automatically process the tickets and undertake the analysis “review process” done through the legacy Excel-based system. The new application undertook all the rules-based analysis, automated the review process that was previously done manually, and introduced a case management component to the process.

Through the ticket and invoice audit process, Concho recovered $1.4 million of overbilled services in a span of five months. In most cases, suppliers were presented with evidence of overbilling and settled directly with Concho.  In others, legal action was threatened or undertaken. In addition, by incorporating the solution directly into the OpenTicket and OpenInvoice approval workflows, suspect tickets could be taken out of the approval process before investigation. This would ensure overbilling instances would be dealt with before payment was made, not in an audit process after the fact.

Following the success of their audit initiative, Concho approached Enverus in 2019 to discuss jointly taking the technology to the commercial market. Concho recognized that overbilling was not unique to its operation, but is an issue impacting the broader industry. By introducing the solution to a wider set of operators, the chance of identifying and altering suspect behavior by a subset of suppliers would be much greater.  This would benefit both Concho and the entire industry.

The Enverus-Concho partnership was announced to the industry in January 2020.

Solving an Industry-Wide Issue

Concho’s ground-breaking work, combined with Enverus’ validation of overbillings in the examination of OpenTicket transactions, proves the ability to identify both unintentional billing errors and illicit activity can have significant financial benefit. There are thousands of businesses in the market today experiencing similar problems and in need of help to identify them. Audit Analytics builds on the wide market success of OpenInvoice and OpenTicket to address these opportunities quickly and efficiently, with tremendous value impact for our industry.

  • Reduce cost: Identify and dispute overbilled or fraudulent field tickets and invoices before they are paid to reduce the effort and cost of vendor audits, loss from overbilled invoices, and recovery efforts
  • Gain audit efficiency: Augment current audit methods with automation to analyze individual field tickets and invoices processed through OpenTicket and OpenInvoice instead of relying in labor-intensive manual audits
  • Understand supplier behavior: Rank suppliers from most likely to least likely to overbill for granular visibility into supplier behavior

With steep price drops and the drop in demand for oil due to the pandemic, operators must look inside their organizations for new ways to save money and operate efficiently. Audit Intelligence identifies and isolates overbilled or fraudulent field tickets and invoices before they are paid, reducing the time and cost of vendor audits, loss from overbilled invoices, and recovery efforts.

Learn more about Audit Intelligence here or email Enverus at