Contract Compliance Services (CCS) focuses on the exercise of contractual audit rights in business agreements. In exercising these audit rights, the parties introduce KPMG as an independent party whose objective is to obtain evidence of compliance, or otherwise, by the contracted party with specified terms of the agreement. A contract compliance audit is a mechanism to inspect our client’s vendor business practices and evaluate its reliability, quality and integrity. The review is carried out with the objective to protect our client’s interests and recover funds due to them whilst aiming to improve underlying business relationships.
Relying on third parties to report revenue accurately and completely or report proper charging of expenses create a significant risk of understating revenue earned or overstating expenses incurred.
Several questions that could assist companies in identifying their contract compliance requirements, specifically in establishing a contract management framework include:
- Management structure: Managing the relationships with the service providers
- What contractual relationships do you have, and what is the total amount of funds under these relationships?
- Performance and value: Establishing KPIs, qualitative and quantitative measurement mechanisms
- What type of controls have been included in the agreements to provide your organization with oversight on the performance of these relationships?
- Are there other control mechanisms that would support the adequacy of information provided by the third party vendors?
- Risks: Inclusion of potential risk areas and corrective actions in the event of any unfavorable incidents
- Do the agreements require the vendors to rectify any non-compliances with terms and conditions of the contract and compensate for the understatement of revenue or recover the expenses overcharged (if required)?
- Visibility: Specifying reporting and audit requirements
- Do you carry out audits of the financial and operational aspects of these relationships on a regular basis?
How we can help
KPMG's CCS professionals have deep industry experience in assisting clients across a wide range of industries in areas such as royalties, licensing, distribution agreements, advertising, digital content and more. We understand the complexities and nuances of a range of business contracts, processes and procedures and have been able to help companies recover revenue misstated in self-reporting statements while maintaining and improving relationships with their business partners.
Our approach reflects our leading practices and enables us to adopt detailed work plans that focus on the specific environment and under-reporting or over-claiming evaluation.
We have assisted numerous clients to achieve:
- Enhanced return on investment, cost optimization and financial recoveries
- More effective financial reporting controls
- Improved relationships with key business partners through better communications and understanding of the complexities of contracts
- Enhanced contract language
- Stronger corporate governance
- Better protection of intellectual property
- Mitigating and managing risks within the extended enterprise
- Increased confidence in vendor’s contract compliance process
Our services include:
- Royalty Compliance - aims to recover fees, help strengthen licensing relationships and identify opportunities for mitigating risk.
- Software End-user License Review — monitors license compliance for software vendors, leading to increased current and future licensing and maintenance revenue.
- Vendor Contracts - advises on management of vendor relationships.
- Ad Agency Contract Compliance - aims to identify significant cost recoveries or other improvement opportunities.
- Reseller and Distributor Review - assists with the enforcement of contracts with channel partners.
- Digital Distribution - assists digital content owners in assessing the completeness and accuracy of self-reporting of content distribution.
- Software Asset Management (SAM) — can include a review of people, process and technology areas against industry standards.
- Intellectual Property (IP) Audit - assistance in assessing and optimizing processes of the IP governance throughout different stages of the IP lifecycle.
- Joint Venture Audit – audit to ensure that Operator and Non-Operator JV partner’s expenses are correctly charged to the Joint Account and are in compliance with the Joint Operating Agreement (JOA) by reviewing the charges made to the Joint Account over a period of time.
More on our capabilities and success stories.