Martindale takes a risk-based approach to vendor audits, starting with an evaluation of your MSAs, rate sheets, and billing detail to gain an understanding of the potential risk areas. This process is followed by stakeholder interviews with key company employees to gain a better understanding of what services or goods the vendor provides, as well as any potential relationship issues.
We review vendor agreements in detail to ensure all terms, pricing structures, and obligations are being followed as intended. Our team identifies inconsistencies, billing errors, and missed contractual benefits, helping you enforce compliance and protect your bottom line.
We evaluate vendor credibility, pricing structures, and compliance history to ensure you’re working with reliable partners. This proactive approach reduces risk and supports smarter, more strategic vendor selection.
Our team assesses your internal controls related to vendor management and payment processes, identifying gaps and vulnerabilities. We then provide clear recommendations to strengthen oversight, improve accuracy, and reduce the risk of future errors.
Through a comprehensive audit of accounts payable activity, we uncover duplicate payments, overcharges, and missed credits. Our recovery-focused approach ensures you reclaim funds that may have otherwise gone unnoticed, delivering immediate financial impact.
Beyond identifying issues, we provide actionable recommendations to strengthen your contracts and internal workflows. By refining language, standardizing processes, and eliminating inefficiencies, we help prevent future discrepancies and improve operational performance.
We manage the recovery process from start to finish, working directly with suppliers to resolve discrepancies in a professional and efficient manner. Our goal is to secure favorable outcomes while preserving your vendor relationships.
The oil and gas industry relies heavily on third-party vendors to support drilling, completions, production, transportation, field operations, and infrastructure development. Because these services are often performed remotely and across multiple operational environments, companies face increased financial and operational risk related to billing accuracy, contract compliance, and internal controls.
A vendor audit, sometimes referred to as a supplier audit or contract compliance audit, is a structured review of a vendor’s books, records, invoices, pricing agreements, and supporting documentation to determine whether charges comply with governing agreements such as:
Vendor audits help companies evaluate whether billed services accurately reflect work performed, materials delivered, pricing terms negotiated, and internal controls required by the governing agreements.
Are services billed reflective of actual work performed?
We evaluate labor charges, overtime, travel time, equipment usage, and supporting documentation to determine whether billed services align with operational activity and contractual requirements.
Were materials billed at delivered quantities?
Our team validates delivered materials, return credits, inventory support, and related documentation to ensure companies only pay for what was actually received.
Are vendor prices compliant with pricing agreements?
We compare billed rates to negotiated pricing schedules, rate sheets, and contract provisions to identify overbilling or non-compliant pricing application.
Are shared costs allocated appropriately?
We review allocation methodologies and cost-sharing structures to identify unsupported or inaccurate cost distribution practices.
Are internal controls sufficient?
Vendor audits often identify weaknesses in billing controls, approval workflows, supporting documentation, and operational oversight.”
Vendor audits frequently uncover billing discrepancies, compliance issues, and operational weaknesses that can create unnecessary financial exposure for oil and gas companies. Many of these findings stem from inconsistent billing practices, weak internal controls, or misunderstandings related to contract terms and pricing agreements.
Duplicate Billing
Duplicate billing occurs when the same service, labor charge, material, or invoice is billed more than once. These issues are common in high-volume operational environments where multiple systems, field tickets, or invoice revisions are involved.
Unsupported Labor Charges
Vendor audits often identify labor charges that lack sufficient supporting documentation, including missing timesheets, field tickets, or work records. Without proper support, it can be difficult to verify whether billed labor hours accurately reflect work performed.
Improper Overtime Application
Overtime discrepancies may occur when overtime rates are applied outside approved contract terms or when overtime charges are billed without appropriate authorization or operational justification.
Equipment Overcharges
Equipment billing issues can include inflated usage hours, duplicate equipment charges, standby time discrepancies, or rates that do not align with negotiated pricing agreements or approved rate schedules.
Incorrect Pricing Structures
Audits may reveal pricing inconsistencies where vendors bill outside established contract pricing, apply outdated rate sheets, or use pricing methodologies not permitted under the governing agreement.
Material Markup Discrepancies
Material markup issues arise when vendors apply unauthorized markups, incorrectly calculate percentages, or bill materials at rates inconsistent with contractual pricing provisions or procurement documentation.
Improper Allocations
Allocation errors occur when costs are distributed improperly across wells, projects, business units, or operating partners. These discrepancies can create inaccurate cost sharing and financial reporting concerns.
Insufficient Documentation
Incomplete or missing supporting documentation can limit visibility into the validity of charges and make it difficult to verify compliance with contract requirements, operational activity, or approval procedures.
Operator-Owned Equipment Charges
In some cases, vendors may bill for equipment that is actually owned or supplied by the operator, resulting in unnecessary or unsupported charges that should not have been invoiced.
Overhead Calculation Errors
Overhead discrepancies may result from incorrect formulas, unsupported administrative charges, or billing practices that exceed agreed-upon overhead provisions outlined in contracts or COPAS guidelines.
Unapproved Subcontractor Usage
Vendor audits may identify subcontractors performing work without proper approval, documentation, insurance compliance, or contractual authorization, potentially increasing operational and liability risk exposure.
Many of these issues are preventable through stronger internal controls, proactive invoice review processes, clearly defined contract terms, and periodic vendor compliance evaluations.
Martindale works with oil and gas companies to evaluate a wide range of third-party vendors operating across upstream, midstream, and field service environments. Our experience includes reviewing billing practices, contract compliance, pricing structures, and operational controls for vendors supporting drilling, production, transportation, infrastructure, and day-to-day field operations. Common vendor categories we audit include:
Cody Deckard, CFE, is an Audit Manager at Martindale Consultants with more than 13 years of experience in upstream oil and gas accounting and auditing. His expertise includes joint interest audits, vendor compliance, contract compliance, fraud examination, and cost recovery for domestic and international energy operations. Cody also leads client engagements, mentors audit teams, and serves in leadership positions with COPAS and the Association of Certified Fraud Examiners.
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