Program Compliance Review Committee

1. 2015 Annual IFTA Business Meeting August 12-13, 2015 San Antonio, Texas Presented by Richard Wagner, Chair and Tim Ford, Vice Chair Program Compliance Review Committee

3. PCRC Charter AUTHORITY AND PURPOSE:The PCRC is established by the IFTA Articles of Agreement pursuant to Article R1810.200.040. The PCRC is responsible for ensuring the uniformity and integrity of the program compliance review process.

4. PCRC Charter COMMITTEE RESPONSIBILITIES: The PCRC has the responsibility of maintaining the IFTA Program Compliance Review Guide, reviewing all program compliance review reports to determine any needs for follow up or reassessment, to make findings of compliance or non-compliance, and such other responsibilities as specified in the IFTA or assigned to them by the International Fuel Tax Association, Inc. (IFTA, Inc.) Board of Trustees (Board). Additionally the PCRC is responsible for: • seeking input from other committees formed pursuant to the IFTA, • reviewing and commenting on ballot proposals as appropriate, • developing ballot proposals as appropriate, • recruiting members and maintaining a list of potential committee members, • making recommendations to the Board to fill committee vacancies

5. Ballot Discussion • Two Full Track Ballots • One Short Track Ballot • Review Guide Update • Review Stratifications

6. FTPBP #07-2015 Requiring an Interest Charged Thru date on Licensee and Interjurisdictional Audit Report • During PCR’s the review team has found many jurisdictions without interest thru dates. • Requires much more work to complete. • If we can’t determine, how can others?

7. FTPBP #07-2015 • Currently not required in the licensee or interjurisdictional audit report. • According to R1230.300.100: “…interest shall accrue monthly…until paid.”

8. FTPBP #07-2015 Most jurisdictions already include date in billing. • Will help provide clearer information to customers. • Could be anywhere on Audit Report packet. • Shouldn’t require programing as it could be added to narrative.

9. FTPBP #07-2015 Positive Results • Better Compliance with interest thru date. • Less time to determine accuracy.

10. FTPBP #07-2015 Questions?

11. FTPBP #06-2015 The Intent of this ballot is to add R1310 to the list of disputable items found in R1555 Compliance Matters.

12. FTPBP #06-2015 History: In 2009 the membership amended the IFTA Articles of Agreement to require the PCRC to recommend to membership that a dispute be initiated against a member jurisdiction that has been issued a Final Determination Finding of Non-Compliance during a PCR.

13. FTPBP #06-2015 Currently the Following are Disputable items: R970 – Late Filing R1210 – Assessment R1230 – Interest R1260 – Waiver of Penalties and Interest R1270 – Revocation of License

14. FTPBP #06-2015 Disputable items continued: P1040 – Monthly Transmittals A310 – Number of Audits A320 – Selection of Audits A690 – Communication of Audit Findings

15. FTPBP #06-2015 None of the disputable items has to deal with the quality of an audit or if audit decisions are made in the best interest of all jurisdictions.

16. FTPBP #06-2015 The PCRC determined that adding R1310 - Licensee Audits to the list of disputable items it would help to better meet IFTA, Inc.’s Mission Statement and Goals.

17. FTPBP #06-2015 R1310 would help in monitoring one of the core beliefs of IFTA: a carrier is compliant with not only the base jurisdiction’s tax reporting requirements, but for all jurisdictions they operated in.

18. FTPBP #06-2015 What does all this mean when passed? • The PCRC gathers information and facts during a review. • The PCRC has multiple steps to attempt to gain compliance of a jurisdiction. • The PCRC doesn’t make the final decision.

19. FTPBP #06-2015 The PCRC is not the Judge and Jury! The PCRC is more of a Grand Jury who listens to the evidence and moves a case forward if it feels the evidence is strong.

20. FTPBP #06-2015 What sort of findings would the PCRC consider to be non-compliant with R1310? • Unilateral Decisions favoring the Base Jurisdiction. • Allowance of Tax Paid Credits when no proof was provided.

21. FTPBP #06-2015 Potential non-compliant example: During an audit, jurisdiction X finds 10,000 gap miles on a truck that operates in all member jurisdictions. The 10,000 miles were added to X without any proof that shows all that distance was accrued only in that jurisdiction. This event was found in the review of multiple audits.

22. FTPBP #06-2015 Potential non-compliant continued: During an audit, jurisdiction Y finds no verification of tax paid credits of any source. Tax paid credits were still allowed in the audit. It was learned this is the jurisdiction’s policy because they don’t want to double bill.

23. FTPBP #06-2015 Potential non-compliant continued: During the PCR, it was noted that all audits completed involved only base jurisdiction and three surrounding jurisdictions. No audits were completed on carriers that traveled across all jurisdictions even though 25% of carrier do travel in all jurisdictions.

24. FTPBP #06-2015 Questions?

25. STPBP #8-2015 This Ballot updates P1200 – Program Compliance Review to require that reviews to be completed electronically except for a member that has completed their first year of IFTA. It does still allow for on-site presentation on findings in certain circumstances.

26. STPBP #8-2015 ***Please note*** Line 5 of the ballot proposal shows: R1200 Program Compliance Reviews It should be: P1200 Program Compliance Reviews

27. STPBP #8-2015 History: With the Clearinghouse (CH) and ability to transmit data electronically, transmittals and netting now take place with the push of a button. The PRCR realized the CH could be used for uploading required documents for the review. The CH is safe and secure.

28. STPBP #8-2015 History continued: In the last two years, all reviews except for one have been completed electronically. The savings to membership has been over $50,000 annually.

29. STPBP #8-2015 Intent: The intent of this ballot is to update the Procedures Manual to require electronic reviews using the secure Clearinghouse.

30. STPBP #8-2015 New Members of IFTA will still undergo a full scope review.

31. STPBP #8-2015 Questions?

32. STPBP #8-2015 Mr. President, I present this Short Track Ballot to Membership for a formal vote.

33. Review Guide IFTA has now been around for decades. All jurisdictions have now gone thru multiple Program Compliance Reviews. Non-compliance findings from number of audits to the size of the letters on IFTA decals have been recorded.

34. Review Guide Background: In 2013 the IFTA, Inc. Board of Trustees charged the PCRC to complete a comprehensive review of processes and procedures and make recommendations for changes. Hence the recent ballots and this, the updated Review Guide for consideration.

35. Review Guide Background continued: A subcommittee formed and met to discuss the processes, what works or doesn’t work, and the complete review process. The subcommittee determined the most important part of the review process is R1555.

36. Review Guide Background continued: By focusing on the items found in R1555, the PCRC can better serve membership by focusing on those key factors that membership has determined are the most important.

37. Review Guide The review guide has been updated to reflect only items that are disputable in R1555. Generally these items cover licensing, financial, and audits.

38. Review Guide What does that mean for all other requirements found in the Governing Documents? They are still requirements.

39. Review Guide Self-policing has worked. PCR’s only come around every five years. Jurisdictions solve discrepancies amongst themselves and work with IFTA staff. If not, Dispute Resolution Process to solve disputes between member jurisdictions.

40. Review Guide A new concept has been introduced in the modernized Review Guide: Stratification

41. Stratification Background: Currently during all reviews 30 licensing files and 30 audits are selected for the review. That number has been consistent and a requirement no matter what the licensing base of the jurisdiction is.

42. Stratification Background continued: If a jurisdiction has 500 or 10,000 licensees registered the 30 figure has always been used. As part of the modernization discussion, the PCRC determined the sample size of the review should be reflected more on the licensee base.

43. Stratification The Review Guide now has stratified the jurisdictions into tiers based on their number of licensees: Tier 1: More than 10,000 licensees Tier 2: 5,000 – 9,999 licensees Tier 3: 2,500 – 4,999 licensees Tier 4: 1,000 – 2,499 licensees Tier 5: Less tan 1,000 licensees

44. Stratification Based on the Tier, the number of accounts and audits that will be reviewed are: Tier 1: Between 45 and 55 Tier 2: Between 35 and 45 Tier 3: Between 25 and 35 Tier 4: Between 15 and 25 Tier 5: Less than 15

45. Stratification • All sample accounts and audits will be reviewed • Prior to September each year the PCRC will calculate the stratification • Same calculation used by jurisdictions to determine their audit requirements • Tier assignments will be posted to website

46. Stratification The PCRC, in conjunction with IFTA, Inc., will determine the staffing level of the reviews. Tier 1 and Tier 2 reviews will have a larger review team so the amount of work on team members will not become a larger burden.

47. Review Guide Mr. President, I present this Review Guide to Membership for Ratification and a formal vote.