IFTA AUDIT COMMITTEE

IFTA AUDIT COMMITTEE AUDIT PROCEDURES SUBCOMMITTEE SURVEY RESULTS

SURVEY RESULTS • # OF RESPONDING JURISDICTIONS 51

SURVEY RESULTS • RESPONDENTS • IFTA Commissioner/Asst. Commissioner 25 • Audit Manager/Supervisor 24 • Other 2

SECTION #1 JURISDICTIONAL COMPLIANCE Questions 1 through 25

QUESTION #1 • Section A310 of the Agreement sets forth the base requirements for performing audits. This is the requirement to complete audits at an average of 3% per year for the subject program compliance review period. Is this requirement, in your opinion: • Too high: 14 • Too low: 1 • Appropriate: 35

QUESTION #1 • NORTHEAST • APPROPRIATE 11 • TOO HIGH 3 • SOUTHEAST • APPROPRIATE 6 • TOO HIGH 3 • TOO LOW 1

QUESTION #1 • MIDWEST • APPROPRIATE 9 • TOO HIGH 5 • WEST • APPROPRIATE 9 • TOO HIGH 3

QUESTION #1 • REVENUE • APPROPRIATE 21 • TOO HIGH 10 • TRANSPORTATON • APPROPRIATE 14 • TOO HIGH 5 • TOO LOW 1

QUESTION #2 • COMMENTS • Reaching 3% is not and has not been a problem • Established long ago and is still valid • % is reasonable • 3% is a far greater % than in any other tax program • Should be based on other criteria other than numbers (i.e. fleet sizes, total distance, etc.) • Substantial numbers of jurs. don’t meet the 3% • We have always planned for resources to meet the 3% • Too much documentation required per the Agreement

QUESTION #3 • Would you support a change to the 3% requirement? • Yes 25 • No 25

QUESTION #3 • NORTHEAST • YES 8 • NO 6 • SOUTHEAST • YES 7 • NO 3 • MIDWEST • YES 5 • NO 9 • WEST • YES 5 • NO 7

QUESTION #3 • REVENUE • YES 15 • NO 16 • TRANSPORTATION • YES 10 • NO 9

QUESTION #4 • COMMENTS (Recommendation on audit requirement) • Lower to 2% • Based on activity (i.e. total distance) • Vehicles and distance • 1% • Somewhere between 2% and 2.5% • In line w/IRP (4 qtrs=1 audit)

QUESTION #5 • Based on your jurisdiction’s IFTA audit program and your Program Compliance Reviews, (regardless of whether you met the 3% requirement) has your jurisdiction encountered difficulty in meeting the 3% requirement? • Yes 32 • No 18

QUESTION #6 • If “yes” to question #5, these are the deterrents to meeting the 3%: • Lack and/or loss of personnel • Poor or absent carrier records • Other reasons: • Inefficient use of resources • Lack of carrier cooperation • Lacking resources • Change in administration • Multiple duties

QUESTION #7 • Are there any other audit or enforcement functions performed by your jurisdiction which you feel should be included in determining the annual audit requirement? • No 35 • Yes 9 • No answer 7

QUESTION #7 • COMMENTS • Roadside enforcement activities • Desk audits • Include IRP audit numbers • Compliance reviews • Educational efforts • BIA’s

QUESTION #8 • Section A320 addresses the Selection of Audits (stratification). There is a mandate to meet at least 15% of your annual audit requirement in the “low distance” strata and to complete at least 25% of your annual audit requirement in the “high distance strata”. Should this requirement be changed? • Yes 19 • No 30

QUESTION #9 • COMMENTS (if “yes” to question #8) • Changed in concert with reduction of the 3% • Change to 20% for high and low • Change to 25% high and low • Reduce high distance requirement • Reduce low distance requirement • A simple mandate to audit the largest • Emphasis on problem carriers • Based on total distance; 10% high, 10% low, 80% medium • Include a category for “mega carriers” • Change the definition of high and low • Institute multiple count for larger audits

QUESTION #10 • There has been considerable discussion about the so-called “mega carriers” that far exceed (in total operations) the average operations for the typical “high distance” carrier. Should a separate stratification be developed to include the “mega carriers”? • Yes 32 • No 18

QUESTION #10 • NORTHEAST • YES 9 • NO 5 • SOUTHEAST • YES 6 • NO 4

QUESTION #10 • MIDWEST • YES 10 • NO 4 • WEST • YES 7 • NO 5

QUESTION #10 • REVENUE • YES 20 • NO 11 • TRANSPORTATION • YES 12 • NO 6

QUESTION #11 • COMMENTS (to question #10) • Don’t change the strata, just give more count • Don’t add another requirement • Have the IFTA Audit Committee schedule, arrange, and monitor mega carrier audits • Relax the 3% for doing mega carrier audits • The strata would help encourage the auditing of these accounts, may help free up resources • One year audited = one audit per jurisdiction

QUESTION #12 • Which of the following criteria would meet the definition of what you believe a “mega carrier” is? (Please circle all that apply) • Total distance in the top 1% of each jurisdiction’s account base: 17 • Total distance in the top 1% of the entire membership’s aggregate account base: 15 • Top 100 carriers in the US and Canada (per trades): 0

QUESTION #12 (CONT’D) • Top 50 carriers in the US and Canada (per trades): 0 • Top 100 carriers in the US and Canada based on # of fleet vehicles: 0 • Top 50 carriers in the US and Canada based on # of fleet vehicles: 2 • Top 100 carriers in the US and Canada based on the total distance reported for the first 3 quarters: 7 • Top 50 carriers in the US and Canada based on the total distance reported for the first 3 quarters: 5 • Other: 5

QUESTION #13 • There has been considerable talk over the years and several ballot proposals offered relative to “multiple count” for the audit of “mega carriers”. Should the audit count for the examination of a “mega carrier”: (Please circle all that apply): • Be greater than one (1) for the base jurisdiction: 8 • Be greater than one (1) for each jurisdiction participating in a joint audit: 28 • Be limited to one (1) for each jurisdiction participating in a joint audit: 7 • One (1) audit for the base jurisdiction only: 4 • Other: 1

QUESTION #14 • COMMENTS (to the answers given in question #13): • Limit the number of “mega” audits annually • Define “mega” carrier first • Base jurisdiction has more responsibility; therefore count should be higher for the base • Large carriers may not be as difficult • Look at the average time for other IFTA audits (i.e. 1 week for the average) • Mega carrier audits are time consuming • Keep it to one per jurisdiction; further strata becomes too cumbersome • Reward “count” based on resource commitment • Multiple count for all gives incentive to audit the mega carriers

QUESTION #15 • Article 1370 of the Agreement addresses Joint Audits. The IFTA Audit Committee is exploring how joint audits should proceed. Considerable discussion has been held relative to the auditing of the “mega carriers” and the desire to do so under the auspices of Article 1370. Should participation in a joint audit be: • Voluntary 37 • Mandatory 13

QUESTION #16 • COMMENTS (to the answer given in question #15): • Mandating gets you nowhere • Base jurisdiction reaps benefits from having the mega carrier in their base • Time spent auditing mega carriers is a waste of resources • Conflict with statutes • Start as voluntary • Should be mandatory otherwise the same jurs will always participate • Travel expense limitations • Will tend to guarantee that the majors are audited • Would not want an “unwilling” jurisdiction to be forced into participation • Mandatory based on certain conditions (distance) • Decision should be left up to the affected member

QUESTION #17 • Will your jurisdiction participate in joint audits if requested by the base jurisdiction? • Yes 39 • No 6

QUESTION #18 • Article 1370 does not detail the process by which a joint audit is conducted (i.e. rights and responsibilities of the parties). Should the Agreement outline in detail how joint audits are to be conducted? • Yes 36 • No 14

QUESTION #19 • COMMENTS (to the answers given for #18) • Base jurisdiction authority • Costs • Audit count • Member jurisdiction responsibility • Would take too long to pass a ballot with guidelines • To promote uniformity, there should be guidelines • Procedures determined by the auditors • Detail should be in the Audit Manual • Guidelines should be reviewed by the PCRC • Needs to be some general rules, perhaps sign off by all participants, method to record objections

QUESTION #20 • There has been considerable discussion over the years about sampling and the application of error rates. The Agreement is not overly detailed in addressing how samples are selected, how much sampling is required, and how error rates are developed and applied. We are seeking assistance from the membership in understanding what, if anything, needs to be done to address sampling and error rates. Which of the following (circle all that apply) do you believe should be considered in developing language to address sampling and error rates?

QUESTION #20 • ANSWERS (By rank) • Representative nature of sample periods • Auditor judgment • Sample size • Jurisdictional coverage • Immaterial errors • Recurring errors • Non-recurring errors

QUESTION #20 • Use of standard sampling procedures (i.e. random, block, etc.) • Licensee input • Fleet operations (line haul vs local) • Employees vs. Owner operators • Fleet composition (tractors vs straight trucks)

QUESTION #21 • Auditor independence is critical to maintaining an unbiased approach to auditing. Section A210.200 of the Agreement addresses this concept. Should these General Standards be expanded and amended to reflect what standards exist for organizations such as the GAO (General Accounting Office)? • Yes 15 • No 35

QUESTION #22 • COMMENTS (to the answers given for question #21) • Will provide additional guidance • Jurisdictions already have codes of ethics, etc. • Would mirror the standards for other governmental organizations

QUESTION #23 • There has been some concern and confusion as to what the minimum period for audit is under the Agreement as it relates to the granting of a “count” for program compliance review purposes. Section A310 says, “Such audits shall cover at least one registration year.” In your opinion, does this mean: • At least four quarters 38 • Any period within a year 11

QUESTION #24 • Should the concept of a Minimum Audit Period be addressed? • Yes 23 • No 27

QUESTION #25 • COMMENTS (based on answers to question #24) • Is this a problem? • It should be four consecutive quarters • It should be defined • It should be left up to auditor discretion • If it’s a problem account (i.e. delinquent, law enforcement lead), why shouldn’t I get credit? • The current language seems obvious • It will clarify the minimum standards

SECTION #2 LICENSEE COMPLIANCE Questions 26 through 37

QUESTION #26 • There has been discussion relative to the terminology used in determining whether or not a licensee’s records conform to the Agreement standards, jurisdictional statute, regulation, or policy. The terminology used is “Adequate/Inadequate” to describe the condition of the records. It has been opined that these terms are interpretive and not necessarily objective in nature. It has been suggested that the terminology and the criteria be based on the concept of compliance or non-compliance. Should the governing documents be amended to define and include terms such as “Compliant or Non-Compliant” in dealing with the licensee’s records?

QUESTION #26 • Yes 35 • No 15

QUESTION #27 • COMMENTS TO QUESTION #26: • Comments were posted, no results could be extracted. • Show of hands: Should the governing documents be amended to define and include terms such as Compliant or Non-Compliant? • Perhaps a third category? i.e. “Minimally acceptable” • Concern about a licensee that is compliant in some areas, but not others

QUESTION #28 • Sections P500 and P600 of the Agreement outline the various recordkeeping requirements imposed upon an IFTA licensee. Two of those requirements (Route of Travel, Beginning and Ending Odometer or Hubodometer Readings of the Trip) may be waived by the base jurisdiction. Please answer the following questions based on how your jurisdiction audits motor carriers subject to the IFTA.

QUESTION #28a • Does your jurisdiction waive the requirement for a carrier to maintain route of travel per trip? • Yes 14 • No 36

QUESTION #28b • COMMENTS IF THE ANSWER WAS “YES” TO QUESTION 28a: • Use fuel receipts • Pickup and delivery information • Use drivers’ log entries • Use toll receipts • Other stops (meals, breaks, etc.) • Mileage software routing per the carrier • Standard routing guide • Jurisdictional line odometers • Load tickets

QUESTION #28c • Does your jurisdiction waive the requirement for a carrier to maintain beginning and ending odometer or hubodometer readings per trip? • Yes 11 • No 39

QUESTION 28d • COMMENTS if you answered “yes” to Question 28c; what do you use to verify total distance? • Most used a variety of: • Distance software • Trip continuity • Date continuity • Odometers from another document • Total Fuel x a reasonable MPG • Drivers’ logs • Fuel analysis

IFTA AUDIT COMMITTEE