Conducting The Field Audit The Field Audit Conducting IFTA / IRP 2005 Annual Audit Workshop Workshop IFTA / IRP 2005 Annual Audit Wayne Brown Mark Byrne Joel Foreman Russ Jakes Rick LaRose 1/20/2005 1
Introduction REVIEW OF RECORD KEEPING REQUIREMENTS. SELECTION OF TEST PERIODS. TESTING DISTANCE. TESTING FUEL. ERROR RATES. AUDITED MPG’S. ELECTRONIC AUDITS. 1/20/2005 2
� Licensee / registrant record keeping responsibilities: IFTA and IRP require that the licensee/registrant (trucking company) have an acceptable distance recording system. This means that the trucking company needs to account for all miles/kilometers traveled for each unit in these programs. For IFTA, distance traveled shall be noted as taxable or non-taxable. Both programs require some type of trip documentation for each individual vehicle. The following information is required to be included on the trip sheet to be considered acceptable: Date of trip, Trip origin and destination, Route of Travel, (can be waived) Beginning and ending Odometer readings by Trip, Total Trip Distance, Distance by Jurisdiction, Unit Number, And the name of licensee/company. 1/20/2005 3
Additionally, both programs list route of travel and beginning and ending odometer/hub meter readings. IFTA allows both of these items (route and odometer/hub meter readings) to be waived by the base jurisdiction, but IRP only allows one to be waived by the base jurisdiction. Capturing this information either manually or electronically is acceptable. Both IFTA and IRP require that trip information to either be summarized in monthly or quarterly summaries. 1/20/2005 4
IFTA requires that the licensee maintain complete records of all fuel purchased, received and used in the conduct of its business (P550). It further requires that both retail and bulk purchases be accounted for separately. Supporting documentation for retail purchases is typically a receipt. Information required to be on the receipt includes: Date of purchase, seller’s name and address, number of gallons/liters, fuel type, price per gallon/liter, unit number, purchaser’s name. In order to receive credit from bulk fuel withdrawals, the licensee needs to record the date of withdrawal, number of gallons/liters, fuel type, and the unit number that it went into. Further, it is also required that a bulk fuel inventory reconciliation be maintained and records kept to substantiate that tax was paid on the bulk fuel purchase. 1/20/2005 5
The trucking company has the option of using onboard recording devices. These devices are not required by either IRP or IFTA. If the licensee chooses to use one of these devices, the recording system would have to meet the requirements of both IFTA and IRP. 1/20/2005 6
Do you understand sampling? 1/20/2005 7
Selection of Test Periods A) Covering jurisdictions B) Selection of units to test. 1/20/2005 8
Selection of Test Periods when conducting an IFTA/IRP audit: � Covering Jurisdictions If the licensee has adequate summaries by month � which can be reconciled to the reported distance and fuel, it will be possible to select test months. Select 1 test quarter or month from each registration year. Select test months or quarters representing as many of the jurisdictions with activity as possible. The auditor should determine the nature of the licensee’s operation, i.e. seasonal activity, major changes in the reporting system, increase or decrease in fleet size. The auditor will want to examine test months or quarters that are representative of the licensee’s entire operations. 1/20/2005 9
Selection of Units to Test Selection of Units to Test When auditing a medium or large carrier, the auditor � will need to select test units. Units should be selected that are representative of the licensee’s entire operations (varying registered weights, jurisdictions traveled, total distance traveled, etc). In order to select test units, a licensee must have unit summaries, or they will need to be created, either monthly or quarterly, that can be reconciled to the reported distance and fuel. An example for selecting the number of sample units to test are: 1/20/2005 10
Fleet size Sample size (per test period) 1 - 3 units All units 4 - 10 units 2 - 3 units 11 - 20 4 - 5 21 - 50 6 - 7 51- 100 8 - 12 Over 100 units ? Considering the individual licensee’s operation, what is reasonable? What is an acceptable sample percentage? If the auditor is examining test months, the number of test units may need to be increased. 1/20/2005 11
Total vs. Taxable Distance 1/20/2005 12
Some jurisdictions have non-taxable (exempt) distance for IFTA. This distance must be included in total audited distance for MPG/KPL purposes, but not included in that jurisdiction’s audited taxable distance. Note there is no exempt distance under IRP. Examples of non-taxable distance may include distance driven on a toll road, distance driven on logging roads, and distance operated under a fuel trip permit. If the carrier reported non-taxable distance in a jurisdiction, the distance records must reflect the amount of taxable vs. non-taxable distance in that jurisdiction for each affected trip. The auditor should verify the non-taxable status of this distance with the affected jurisdiction before allowing the exemption for audit. 1/20/2005 13
Distance Software Systems Most jurisdictions use some type of distance software system to verify the accuracy of the carrier’s reported distance per jurisdiction on a trip basis. When comparing the carrier’s distance per jurisdiction with a software system, the auditor should only test the distance for reasonableness. For example, it would generally not be necessary to change a jurisdiction’s distance from 15 to 17, or vice versa, based on a distance software system. 1/20/2005 14
Documenting Distance The audited distance per jurisdiction for each trip in the test period should be documented in the audit work papers. The audited distance should be compared to the reported distance to calculate error percents for each jurisdiction. These work papers should be included in the audit file even if there are no changes to reported distance. The audit procedures used to calculate the audited distance and the explanation of any differences between audited and reported distance should be noted in the auditor’s interjurisdictional audit report. 1/20/2005 15
IFTA vs. IRP � How do you get to your IRP distance – Add IFTA quarters together or apply an error rate to the reported IRP distance? � Credits created based on inadequate records shall not be included in the fees netted… (The Plan 1704). Any questions? How can you tell what the carrier did for sure without records? 1/20/2005 16
1/20/2005 17
Over-the-Road Fuel � Tax-paid credit can only be given for over- the-road fuel purchases if the information required in the IFTA Procedures Manual is listed on the fuel receipt (date, vendor name, amount of fuel, type of fuel, unit number, or identification, etc.). Although a fuel receipt may not have the actual unit number recorded, if the unit can be identified through other means (fuel purchase recorded on a unit specific trip report or some other type of unit identification is recorded on the fuel receipt), tax-paid credit could still be allowed. 1/20/2005 18
Bulk Fuel � If the carrier maintained a bulk fuel tank that was used by one or more of the IFTA units, tax-paid credit can only be given for this fuel if bulk withdrawal records were prepared detailing the unit, date, and amount of fuel for each bulk withdrawal. Bulk fuel inventory records must also be maintained documenting that the bulk fuel withdrawn was indeed tax-paid. 1/20/2005 19
� In the absence of bulk withdrawal logs, the auditor may still choose to allow tax- paid credit for part or all of the tax-paid bulk fuel located and purchased in the base jurisdiction. This should only occur if the auditor can determine the portion of the tax-paid bulk fuel that was used by the IFTA unit(s) versus the non-IFTA units through other means. However, the auditor should not make this decision for tax-paid bulk fuel located and/or purchased in another jurisdiction, without the consent of that other jurisdiction. 1/20/2005 20
Bulk Fuel Analysis Meter Readings Meter Readings Meter Quarter Pump# 3 used Pump# 4 used Total Used 1,644,495 2,416,873 1Q02 1,689,944 45,449 2,545,527 128,654 174,103 2Q02 1,746,091 56,147 2,644,138 98,611 154,758 3Q02 1,804,216 58,125 2,744,710 100,572 158,697 4Q02 1,861,933 57,717 2,842,712 98,002 155,719 1Q03 1,920,210 58,277 2,946,901 104,189 162,466 2Q03 1,984,449 64,239 3,042,524 95,623 159,862 3Q03 2,046,171 61,722 3,134,286 91,762 153,484 4Q03 2,114,427 68,256 3,218,933 84,647 152,903 Total 1,271,992 1/20/2005 21
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