HOCHTIEF Aktiengesellschaft (HOCHTIEF) is one of Germany’s largest construction companies and operates globally, ranking as one of the largest general construction companies in the United States through its Turner subsidiary, and in Australia through its holdings in CIMIC Group. With over 22 billion euros in revenue (2017) and 54,000 employees, HOCHTIEF is involved in many types of projects including building infrastructure and providing mining services.
In the late nineties, the HOCHTIEF group of companies began its digitization strategy where it migrated from Lotus 123 to Microsoft Excel and implemented SAP. During that time, HOCHTIEF also began using a tax software system, which helped the company move away from manually entering information into tax declaration forms.
However, this system was not able for the electronic submission of tax declarations to the tax authority. This meant that staff at HOCHTIEF still had to draw up the tax balance sheet in Excel, print the forms and attachments and mail all documentation. There was also the issue of calculating the current and deferred taxes hence HOCHTIEF had to use another software system to calculate.
The growth of the company combined with evolving tax regulations, the risk of digital errors when transferring data from one system to another and the increasing volume of manual work was enough for the company to decide that it was time to take their tax compliance management system to the next level.
Working with Audicon GmbH, HOCHTIEF decided to implement Alessa’s continuous controls monitoring solution to help automate their tax compliance. The solution extracts financial transaction data from SAP and reviews tax information.
The solution also checks for the following:
- Invoices subjected to professional services to ensure that they are not fraudulent or a bribe
- Invoices of export deliveries with specific VAT codes and alerts whether they should be exempt from taxes with appropriate proof.
- Past due invoices or liabilities
- Account payables to foreign companies to ensure that they are not incorrectly posted with domestic sales codes and vice versa
- Invoice numbers with short or empty invoice numbers that are out of compliance or may be concealing booking issues
- Banks account numbers of creditors to ensure none are in common, which could be an indication of fraud
- Invoices from suppliers who are not residents in an EU member state and have incorrectly charged VAT
- Gifts exceeding an annual sum of 35 euros that should be marked as non-deductible business expenses. Also alerts for any transactions that are listed as gifts but are not posted to the correct account
- That the correct tax is charged for intra-company acquisitions with domestic (German) suppliers.
- Non-deductible operating expenses in order to comply with the Income Tax Act
- Transactions to foreign creditors and debtors for sanctions compliance
- Transactions for customer and operational events that have not been booked on dedicated accounts
- Deposits to hidden or suspicious accounts that may be indicative of fraud
Any transaction that does not pass any of the above checks is directed to the person in charge via workflows for further investigation and resolution.
In addition to the checks, the solution is configured to display a dashboard of how many new alerts have been created, how many are open, how many are overdue and groups alerts by risk levels. These dashboards are frequently reviewed by personnel at HOCHTIEF and allow them to measure the performance of the compliance program and ensure that all alerts are resolved.
The implementation of this tax compliance solution has helped HOCHTIEF to further increase its compliance to complex national and international tax regulations and reduce the risk of fines and penalties for non-compliance.
It also reduces the risk of damage to their reputation like what happened to the engineering firm Siemens, when it was revealed that hundreds of employees had been billing millions of Euros for consultants’ contracts. These were false bills paid to shell firms to pay massive bribes to win contracts.
All the above benefits were achieved without adding dedicated staff to monitor tax compliance.
In addition to tax compliance, the solution can be used for many financial controls. In the case for HOCHTIEF, the company is using the software to check for duplicate payments but the solution can be configured to also detect the following:
- Missing journal entries
- Out-of-balance journal entries
- Journal entries with rounded or large amounts
- Journal entries with specific comments
- Duplicate journal entries
- Journal entries posted on weekends
- Debtors with balances greater than the credit limit
- Debtors with net credit balances
- Invoices without purchase order numbers and much more
Contact us today to learn how Alessa can help you with fraud management and AML compliance.