Conducting The Field Audit The Field Audit Conducting IFTA / IRP - - PowerPoint PPT Presentation
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
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Wayne Brown Mark Byrne Joel Foreman Russ Jakes Rick LaRose
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REVIEW OF RECORD KEEPING REQUIREMENTS. SELECTION OF TEST PERIODS. TESTING DISTANCE. TESTING FUEL. ERROR RATES. AUDITED MPG’S. ELECTRONIC AUDITS.
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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.
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Additionally, both programs list route of travel and beginning and ending odometer/hub meter
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.
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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
licensee needs to record the date of withdrawal, number
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.
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The trucking company has the option of using onboard recording devices. These devices are not required by either IRP
system would have to meet the requirements of both IFTA and IRP.
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Selection of Test Periods when conducting an IFTA/IRP audit:
Covering Jurisdictions
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.
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will need to select test units. Units should be selected that are representative of the licensee’s entire
traveled, total distance traveled, etc). In order to select test units, a licensee must have unit summaries,
quarterly, that can be reconciled to the reported distance and fuel. An example for selecting the number of sample units to test are:
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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.
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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.
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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.
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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
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.
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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?
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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.
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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.
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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
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.
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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
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Book Gauge Variances Beg Inv Purchases Ending Inv Ending Inv Variances % Total used 1Q02 12,721.4 171,018.0 9,636.4 14,346.1 4,709.7 0.027 2Q02 14,346.1 149,020.0 8,608.1 13,338.3 4,730.2 0.031 3Q02 13,338.3 156,030.0 10,671.3 15,321.0 4,649.7 0.029 4Q02 15,321.0 150,511.0 10,113.0 14,246.7 4,133.7 0.027 1Q03 14,246.7 150,058.0 1,838.7 6,230.8 4,392.1 0.027 2Q03 6,230.8 161,516.0 7,884.8 12,514.0 4,629.2 0.029 3Q03 12,514.0 152,018.0 11,048.0 15,510.9 4,462.9 0.029 4Q03 15,510.9 150,520.0 13,127.9 17,046.4 3,918.5 0.026 Total 35,626 0.028
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If the carrier maintained bulk fuel storage, audit work papers should be prepared to show the bulk fuel withdrawn from the bulk tank was tax-paid
bulk fuel inventory analysis, showing there was sufficient tax-paid fuel available to support the total audited withdrawals of all units – IFTA and non-IFTA. If total audited bulk withdrawals exceed total tax-paid fuel available, tax-paid credit can only be given for bulk withdrawals equal to the total tax-paid fuel available. The audit procedures used to document the bulk fuel inventory analysis should be noted in the auditor’s interjurisdictional audit report.
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The base jurisdiction may choose to use more discretion in allowing tax-paid credit for fuel purchased in the base jurisdiction, but should not allow tax-paid credit for fuel receipts from other jurisdictions that do not meet the IFTA requirements. The base jurisdiction may choose to use more discretion in allowing tax-paid credit for fuel purchased in the base jurisdiction, but should not allow tax-paid credit for fuel receipts from other jurisdictions that do not meet the IFTA requirements.
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When creating error rates, you will need to take into account the makeup of the IFTA and IRP fleets. Are they the same or not? Can your audit package allow you to pick units, periods, for the creation of error rates? Additional things to take into account are, changes in bookkeeping, personnel and operations.
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If multiple IRP registration years are being audited, should a error rate for each registration year be created, OR--- Is it acceptable to add the IFTA quarters together after applying error rates to them?
Combined error rate of the 2Q-02 & 3Q-02 and apply it to both IRP mileage years?
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Juris Aud Tot Mls Rep Tot Mls Variance Error Rate CT 12,964 12,639 325 1.026 DE MA 90,867 90,870 (3) 1.000 MD ME 41,369 41,569 (200) 0.995 NH 29,276 29,046 230 1.008 NJ NY RI 2,420 2,460 (40) 0.984 VA VT 4,712 4,852 (140) 0.971
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APPLICATION OF ERROR RATES
IRP Error Fee Juris. Reported Rates Audited Changes CT 910,525 1.0260 934,199 $336.74 DE 15 1.0000 15 MA 7,240,252 1.0000 7,240,252 ($57.24) MD 228 1.0000 228 ME 3,153,336 0.9950 3,137,569 ($145.62) NH 2,570,290 1.0080 2,590,852 $127.88 NJ 259 1.0000 259 NY 45 1.0000 45 RI 172,832 0.9840 170,067 ($29.27) VA 91 1.0000 91 VT 537,913 0.9710 522,314 ($263.07) Tot: 14,585,786 4,595,891 ($30.58)
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Audited IFTA miles from combined error rates of the 2rd & 3rd quarters of 2002.
IRP Fee Juris. 3Q01 4Q01 1Q02 2Q02 Audited Changes CT 210,582 207,857 240,297 264,363 923,099 $179.03 DE 15 15 MA 1,747,470 1,844,225 1,878,424 1,791,927 7,262,046 $225.60 MD 228 22 ME 818,933 768,336 784,057 773,372 3,144,698 ($78.14) NH 746,856 621,958 611,664 590,530 2,571,008 ($1.00) NJ 259 259 NY 45 45 RI 38,730 43,510 45,041 42,914 170,195 ($26.34) VA 91 91 VT 163,393 118,863 117,264 119,056 518,576 ($323.40) Tot 3,725,964 3,604,749 3,676,747 3,582,800 14,590,260 ($24.25)
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Distance Year 7/1/02-6/30/03 3rd quarter 2002 tested distance for error rate calculation
Juris. Aud Total Rep Total Variance Error Rates CT 15,912 15,970 (58) 0.996 MA 81,450 80,709 741 1.009 ME 41,695 41,649 46 1.001 NH 27,699 28,031 (332) 0.988 RI 2,868 2,906 (38) 0.987 VT 6,141 6,425 (284) 0.956
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APPLICATION OF ERROR RATES
IRP Error Fees Juris. Reported Rates Audited Changes CT 993,260 0.9960 989,287 ($73.17) MA 6,963,648 1.0090 7,026,321 $657.55 ME 3,048,930 1.0010 3,051,979 $2.26 NH 2,280,916 0.9880 2,253,545 ($203.29) RI 175,590 0.9870 173,307 ($25.42) VT 442,153 0.9560 422,698 ($332.83) Totals 13,904,497 13,917,137 $25.10
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Audited IFTA miles from combined error rates of the 2nd & 3rd quarters 2002.
IRP Fee Juris. 3Q02 4Q02 1Q03 2Q03 Audited Changes CT 264,200 249,290 238,710 246,551 998,751 $75.26 MA 1,768,457 1,790,464 1,765,443 1,675,880 7,000,244 $379.92 ME 787,175 752,613 750,111 755,329 3,045,228 ($45.29) NH 565,770 569,182 553,820 581,866 2,270,638 ($79.97) RI 43,600 41,614 47,253 40,577 173,044 ($26.83) VT 103,505 102,132 100,247 118,818 424,702 ($295.59) Tot 3,532,707 3,505,295 3,455,584 3,419,021 13,912,607 $7.50
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2nd & 3rd Quarters 2002 tested distance for error rate calculation.
Rep Total Variance Error Rate CT 28,876 28,609 267 1.009 MA 172,317 171,579 738 1.004 ME 83,064 83,218 (154) 0.998 NH 56,975 57,077 (102) 0.998 RI 5,288 5,366 (78) 0.985 VT 10,853 11,277 (424) 0.962
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Comparison an error rate applied to each distance year vs. one combined error rate applied to four IFTA quarters.
4 IFTA Error Rate Quarters Juris. 01/02 01/02 Variance CT $336.74 $179.03 $157.71 MA ($57.24) $225.60 ($282.84) ME ($145.62) ($78.14) ($67.48) NH $127.88 ($1.00) $128.88 RI ($29.27) ($26.34) ($2.93) VT ($263.07) ($323.40) $60.33 Totals ($30.58) ($24.25) ($6.33)
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Comparison of error rates applied to each distance year vs. one combined error rate applied to four IFTA quarters.
4 IFTA Error rate Quarters Juris. 02/03 02/03 Variance CT ($73.17) $75.26 ($148.43) MA $657.55 $379.92 $277.63 ME $2.26 ($45.29) $47.55 NH ($203.29) ($79.97) ($123.32) RI ($25.42) ($26.83) $1.41 VT ($332.83) ($295.59) ($37.24) Totals $25.10 $7.50 $17.60
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Net effect over the two years:
4 IFTA Juris. Error Rate Quarters Variance CT $263.57 $254.29 $9.28 MA $600.31 $605.52 ($5.21) ME ($143.36) ($123.43) ($19.93) NH ($75.41) ($80.97) $5.56 RI ($54.69) ($53.17) ($1.52) VT ($595.90) ($618.99) $23.09 Totals ($5.48) ($16.75) $11.27
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Now that you’ve done all this work to get to an
error rate, that doesn’t mean that it’s acceptable. An evaluation of the error rate and its consequence at a jurisdictional level when applied, should be completed.
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AZ CO KS NM OK TX TOTAL Reported Distance:
152,568 76,284 152,568 381,419 381,419 381,419 1,525,677
Reported % of 10% 5% 10% 25% 25% 25% Total Reported:
Reported Dist Tested: 18,308 4,577 22,885 45,770 15,257 45,770 152,567 Tested % of Tot Tested: 12% 3% 15% 30% 10% 30%
Tested Audited Distance: 17,942 9,154 24,029 4,577 7,629 50,347
Error Rate: 98% 200% 105% 10% 50% 110%
Question: Is there a problem with applying the error rate for jurisdictional distance? IF no, why? IF yes, why?
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AZ - The error rate should be acceptable to be applied. CO - Perhaps more testing should be done for this jurisdiction. KS - The error rate should be acceptable to be applied. NM - Additional analysis of the trips tested should be done. Was there a one time error of entering 40,000 instead of 4,000? OK - Perhaps more testing should be done for this
jurisdictional distance by 50% and with only 10%
compared to a reported percentage of 25%, It appears that additional testing is appropriate. TX - The error rate should be acceptable to be applied.
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Is the information used to create the error
rates adequate? If an error rate would double the tax paid fuel or distance in a jurisdiction, is the information used in the error rates adequate?
What if it decreased distance dramatically? In
have on jurisdictions?
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If you’re not confident all distance traveled is accounted for, why reduce a jurisdictions distance? Think about it…
A decision needs to be made when applying error rates as to which error rate should be applied to which quarter and/or distance year. Can you use information outside a distance year for an error rate?
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After calculating the quarterly audited MPG/KPL, an analysis for acceptability needs to be done.
High
MPG’s/KPL’s can be adjusted to the average of the acceptable ones, OR- the use
Low
MPG’s/KPL’s – Should you adjust these? If you do, how? Do you adjust the distance
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If you adjust the total fuel down to get a higher MPG/KPL, you may end up creating a credit return. If you adjust the total distance up, you’ll need to distribute this increase among the other
increased MPG/KPL, the fuel used in each jurisdiction stays the same; you have not changed the financial side of the return.
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Total Distance: 20,670 Total Fuel: 7,950 Audited MPG/KPL: 2.6 JURS Audited Distance MPG/KPL Fuel Used MA 5,750 2.6 2,212 ME 12,500 2.6 4,808 NB 670 2.6 258 NH 500 2.6 192 PQ 1,250 2.6 481 Total: 20,670 Average reasonable or industry standard MPG/KPL: 5.50 Total Fuel: 7,950 Audited Total Distance: 43,725 Increase: 23,055
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Jur, Audited Dist, % New Audited MPG Fuel Used Distance MA 5,750 0.2782 = 6,414 12,164 5.5 2,212 ME 12,500 0.6047 = 13,941 26,441 5.5 4,807 NB 670 0.0324 = 747 1,417 5.5 258 NH 500 0.0242 = 558 1,058 5.5 192 PQ 1,250 0.0605 = 1,395 2,645 5.5 481 Totals 20,670 23,055 43,725
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Last year there were several recommendations to include electronic audits in this year’s
paperless audits to electronic documentation for audits. The IRP Audit committee discussed these at length and could not determine clearly what was intended, so we decided to present what we could on this subject.
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There are two ways to look at electronic audits:
use to conduct an audit.
and related software. We will focus this discussion on the various ways carriers can keep their records.
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Some systems that have been encountered: 1) Manual trip reports – Excel (spreadsheet) used to compile – probably the most common. 2) Manual trip reports - Access (data base) used to compile. 3) On board recording devices 4) Global positioning systems 5) Fuel info from supplier in Excel or some data format via e-mail or download 6) Bulk fuel information that is derived from a computer based key system. What have you seen?
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When you run into an electronic system there are several things you need to know about it. a) What does the driver do? b) Are there any reviews or checks by office staff? c) How does the information get into the system? At what point? Reviews or checks before entry? d) Does their system do any automated checks? e) If odometers are entered, does the system check
distance?
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f) If fuel is also entered, do they look for an acceptable mpg/kpl? g) If yes, who set the acceptable? And how are they determined to be acceptable? h) What types of reports can their system produce? i) Can you get specific information? i.e. on a test unit for a test month j) What do they do with a trip, distance and fuel, if it comes in after the cut off date for that quarter? k) What are the key dates for their system?
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On-Board recording device can function in different ways. Here are the steps followed by a licensee/registrant:
computer system. Drivers insert a memory card into the system at the start of their trip. The system records the following information on the memory card: Starting odometer,
ending locations, and pickup and delivery points. It also records driver DOT log information and information used by the company to evaluate driver efficiency. The driver is required to input location information and indicate when he exits a jurisdiction and what jurisdiction he is entering. After the driver’s trip is completed, he downloads the memory card at the
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Weekly reports are run that give total miles for each jurisdiction and miles not assigned to a jurisdiction. Office personnel use these reports to insure all miles are reported on the IFTA return. Any adjustments to mileage are entered
a
monthly totals. The three months making up the quarter are added together for the IFTA return. Drivers also enter fuel information into CardSys.
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Potential problems with this system include:
1) The driver not inserting the card into the computer, located in the unit. (This can happen when he/she is close to going over their scheduled hours). a) Driver forgets to insert the card. b) If a mechanic moves the unit without recording. 2) The printed report will give only, the information recorded on the card. a) This can include multiple units. b) Error in inputting fuel quantity. c) Not entering fuel.
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3) The weekly report will only include trips downloaded during the week. It was discovered that a driver didn’t want to wait in line to download the card information. When he came back from vacation two weeks later, he ran his normal week and then downloaded and printed a report that included the previous worked week. This occurred between two quarters.
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The licensee changed over from old CardSys to a CardSys GPS, a global positioning system during the audit scope. When entering a jurisdiction, the system beeps for the driver to acknowledge and touch the screen. After the driver touches the screen, it starts recording mileage for the new
unit comes within range of a download antenna. The weekly review of mileage to insure all are accounted for is still preformed under CardSys GPS.
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No card, but the driver needs to log into the unit in the truck. If driver doesn’t login, the system will record the distance driving as unassigned. The new CardSys will account for all distance traveled but may not allocate it to the right jurisdiction.
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1) You have the licensee/registrant run a new report for your test period. The report run does not equal the report run at the time of the filing. What are some of the reasons for this?
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a) Fuel being entered after the filing report was run, changing tax paid fuel and the MPG/KPL calculation. b) Distance being entered after the filing report was run, changing mpg and taxable distance. c) Whole trips, distance and fuel, being entered after the filing report was run. d) Trips being reversed out of the system after the filing report was run.
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2) What type of potential problems can occur if fuel comes from an electronic file sent from a fuel card service company on a monthly basis (5/1/xx-5/31/xx) and mileage is keyed in for all IVDR’s received for the quarter to a cut off date (7/15/xx)?
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Please refer to this worksheet in your manual! An example of a report from an On-Board system
Right Hand Trans Drivers 1 Wayne Road Buffalo, NY 0424 Activity Report For Thom Thum / 12345B / Time Zone: EDT Start Date: 04/01/2002 Time: xx:xx Trip #:100-1 End Date: 04/04/2002 Time: xx:xx
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Please refer to this worksheet in your manual! Example of Fuel Tax Audit Report (end of trip or week )
Right Hand Trans Drivers 1 Wayne Road Buffalo, NY 0424 Fuel Tax Audit Report For Thom Thum / 12345B / Time Zone: EDT Start Date: 04/01/2002 Time: 6:43 Trip #s:100-1 End Date: 04/04/2002 Time: 12:55 Total Hours: 6:12 Total Miles: 1550 Vehicle Ids: 100 Trailer Ids: 1
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Who says I need to keep records?
You should see my trailer……….. *Courtesy of W. Brown’s Trucking Inc. You call, we maul!
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