Managing for Compliance

1. Managing for Compliance IFTA/IRP Compliance/Peer Reviews Guide to Preparing for Reviews “What You Need to Know” Betsy McCabe (NV) Chester Cook (GA)

2. IFTA Compliance Review The IFTA Procedures Manual, P1220, provides, in part: “program compliance reviews shall be conducted in accordance with the procedures and specifications outlined in the IFTA Program Compliance Review Guide, . . . .” Therefore, knowledge of the contents of the Review Guide is essential prior to participating in a Review as a member of a Review Team or as a Jurisdiction being reviewed

3. IFTA Compliance Review • How Often? • Every five years on a Regional Basis • Schedule determined by Senior Director • Schedule can be found on IFTA’s website • Can be conducted via onsite review or remote review

4. IFTA Compliance Review • Jurisdiction contacted approximately 120 days prior to scheduled review dates to conduct a preliminary review • Preliminary information will be requested including lists of audits completed by year, sample audits, etc. • Administrator will select a sample of audits, which will be the basis for the review

5. IFTA Compliance Review • Once sample is selected, audit file documents will be uploaded to IFTA if remote review; sample audits may be e-mailed if on-site review. • Review team will conduct a preliminary review prior to start of review

6. IFTA Compliance Review • OVERVIEW: Opening Conference Closing Conference Report Process Reassessment

7. IFTA Compliance Review • The Review Itself – What you need to know • Worksheets are provided to ensure uniformity in the review process (i.e., “Worksheets A – P”) • The Worksheets are lettered and page numbered in accordance with the letter shown with the topic. Any areas of non-compliance or concern will be noted on the comment sheet attached to the applicable Worksheet.

8. IFTA Compliance Review Worksheet “J.1” • P910.150 – Jurisdiction’s licensee account records contain at least the following…. • Audit findings and work papers • A690.300 – jurisdiction notifies appropriate member jurisdictions of audit findings

9. IFTA Compliance Review Worksheet “J.1” continued • P1110.300.015, P1110.300.015 and P1110.00.030 • Communication with IFTA, Inc. Staff – i.e, jurisdiction’s annual report contains the number of audits completed, number of audits with assessments and reports any unusual activities within a member jurisdiction that could affect an audit

10. IFTA Compliance Review Worksheet “J.2” • Transmittals • A690.400 - Audit results are transmitted to member jurisdictions with monthly transmittals • P1060 - Jurisdiction properly transmits funds to other member jurisdictions according to the payment option chosen Option 1 or Option 2

11. IFTA Compliance Review Worksheet “K” - Auditors • A210.100 - IFTA auditors have adequate technical training and proficiency • A410.100 - Jurisdiction auditors meet the qualifications of the jurisdiction's personnel guidelines   • A410.200 - Jurisdiction's audit and audit support staffs are properly trained in audit planning and audit procedures   • A220.200 - Supervisory follow-up and review of the auditor's procedures exists  

12. IFTA Compliance Review Worksheet “K” – Auditors continued • A210.200 - In all matters relating to an audit assignment, an independence in mental attitude is maintained by the jurisdiction's auditors   • A210.300 - Due professional care is exercised in performing an audit and in preparing an audit report • A420.100 - All licensees are given equal consideration; no preferential treatment is given  

13. IFTA Compliance Review Worksheet “K” – Auditors continued • A420.300 - All licensees are audited under a uniform program unless special circumstances dictate otherwise • A420.200 - Each member jurisdiction is given equal consideration in an audit • A410.400 - Auditors are allowed to discuss any discrepancies with a licensee

14. IFTA Compliance Review Worksheet “M” – Audit Procedures • The audit was conducted on a sampling basis, unless a specific situation dictated otherwise A530 • Sample period(s) selected are representative of the licensee's operations A530.100 • Auditors, through inquiry and observation, determined the licensee's prescribed policies and procedures. (An auditor normally documents his understanding in his work papers by completing a questionnaire designed for this purpose, or by diagramming or describing the flow of transactions in flowchart or narrative form) A640.100 • The auditors reviewed the licensee's accounting system A640.100

15. IFTA Compliance Review Worksheet “M” – Audit Procedures • Auditors identified the records that the licensee keeps to support his returns A640.100.015 • Auditors determined if there had been changes in the licensee's accounting procedures or operations during the audit period A640.100.005 • Audit was conducted on behalf of all member jurisdictions R1310 • Receipts for tax-paid purchases that have been altered or indicate erasures are not accepted without demonstration from the licensee that the receipt is valid. P570.200 • If tax paid fuel documentation was unavailable, all claims for tax paid fuel were disallowed A550.200

16. IFTA Compliance Review Worksheet “M” – Audit Procedures • The auditor made any reasonable attempt to verify distance A540.300 • If the auditor was unable to determine any reasonable method to assign or allocate unreported miles/kilometers, unreported miles/kilometers were assigned to all jurisdictions on the basis of each jurisdiction’s audited percentage of total miles/kilometers. A520 • In the absence of adequate records, 4 m.p.g. was used unless substantial evidence exists to the contrary. A550.100 • Audit documentation accomplishes the following: A670 • Communicates the results of the audit, showing adjusted distance, fuel and monetary results A670.100

17. IFTA Compliance Review • Documents and justifies procedures conducted by the auditor A670.200 • Indicates source of audit results (for example, audited fuel determined from retail purchase receipts) A670.300 • Communicates suggestions and recommendations made to the licensee A670.400 • Clearly supports audit findings A670.500

18. IFTA Compliance Review • The audit file contains at least the following: A680 Schedules: A680.100 Summary schedules A680.100.005 Supplementary schedules A680.100.010 Support Documentation A680.200 Detail Information A680.200.005 Listing of Records Maintained A680.200.010 • A synopsis of opening and closing conference notes with licensee indicating date, and persons attending A680.200.015

19. IFTA Compliance Review • Licensee Audit Report contains at least the following information: Name and address of licensee A660.100.005 Account number A660.100.010 Audit period A660.100.015 Types of records audited A660.100.020 Description of audit techniques employed A660.100.025 Net distance adjustment A660.100.030 Net tax paid fuel purchases adjustment A660.100.035 MPG/KPL as reported A660.100.040 MPG as result of audit A660.100.045 Net fuel tax adjustment per jurisdiction A660.100.050 Remarks and recommendations A660.100.055 Signature of auditor or reviewing jurisdictional official and date A660.100.060

20. IFTA Compliance Review • Other Miscellaneous Worksheet M Items • In calculating audit interest, overpayments to any jurisdiction quarterly returns within the audit period were applied to any liability on subsequent quarterly returns on a jurisdictional basis within the audit period R1230.300.010 • In calculating audit interest, interest accrued on the net amount of tax due each jurisdiction within the period of time audited R1230.300.010 • Interest was calculated from the date the tax was due for each calendar month or fraction thereof. (A fraction of a month accrued a full month’s interest.) R1230.300.010

21. IFTA Compliance Review • Other Miscellaneous Worksheet M Items cont. • The auditor used the best information available to the jurisdiction in conducting the audit A540.200 • If a software distance program was used, it was used only as an audit tool A540.400 • Following the close-out conference and any review period, the licensee was furnished with the Licensee Audit Report and a customary notice of assessment, billing or other notification which would signify the beginning of the licensee’s appeal period A690.100 • Within 45 days of the providing the licensee with the Licensee Audit Report and its customary notification of assessment or billing, the Interjurisdictional Audit Report was prepared and the jurisdiction notified the affected member jurisdictions of the audit findings A690.200

22. IFTA Compliance Review • Other Miscellaneous Worksheet M Items cont. • The Interjurisdictional Audit Report contains at least the following information A660.200 Name of base jurisdiction A660.200.005 Name and address of licensee A660.200.010 FEIN or equivalent A660.200.015 Reported tax by jurisdiction A660.200.020 Audited tax by jurisdiction A660.200.025 Penalty A660.200.030 Interest by jurisdiction A660.200.035 Total by jurisdiction A660.200.040

23. Top 5 IFTA Findings #5 A320 SELECTIONS OF AUDITS You must when making your audit list yearly include 25% high distance accounts. 15% low distance accounts. There were 22 violations of this in the last five years. #4 A310 NUMBER OF AUDITS You are required to complete audits of an average of three percent per year of the number of IFTA accounts reported on the annual report. There were 28 violations of this in the last five years. #3 R1230 INTEREST The base jurisdiction, for itself and on behalf of the other jurisdictions, shall assess interest on all delinquent taxes due each jurisdiction except taxes collected directly by other jurisdictions in accordance with IFTA. There were 50 violations of this in the last five years.

24. Top 5 IFTA Findings #2 R940 TAX RETURN FORMAT The tax return must be furnished at no charge at least 30 days prior to the due date. Whether by standard, non-standard or electronic format. There were 64 violations of this in the last five years. Let’s talk about this one. What does furnished mean? #1 P1040 MONTHLY TRANSMITTALS Outgoing Transmittals, Incoming Billing Transmittals even with the clearinghouse there are still 87 issues with this yearly and with only to 10-15 jurisdictions being reviewed every year more than likely each of those jurisdictions are being hit by this violation.

25. IFTA Compliance Review • How should I respond to any findings? • What happens next?

26. IRP Peer Review

27. IRP Peer Review Peer Review Schedule • IRP Member Jurisdictions are reviewed once within a five-year peer review cycle. • The peer review period begins with the earliest un-reviewed calendar year and ends with the most recently completed calendar year. • The peer review schedule is managed by the staff liaison and is approved annually by the IRP Board of Directors.

28. IRP Peer Review • TWO OPTIONS for the Review • On-site Review • Remote Review A remote Peer Review is an alternate process to the traditional on-site Peer Review. Instead of reviewing documents on-site, the Jurisdiction being reviewed provides all requested documents and information electronically.

29. IRP Peer Review Preliminary Review • Within 120 days of the scheduled peer review, the staff liaison sends a letter to the jurisdiction’s contact person identifying information that will be required prior to and during the peer review (attachments 1, 2 and 3). The staff liaison sends copies of the information submitted by the jurisdiction to the review team. • Prior to the review of any documents, the review team will sign a confidentiality statement regarding the review/documents, etc. The registrant information included in the documents reviewed during the peer review process.

30. IRP Peer Review Preliminary Review cont. • The review team will contact the jurisdiction and identify any missing documents and reports any concerns with the report formats (60 days prior to scheduled review). If account/audit selections have been made, lists(s) are provided to the jurisdiction. If account/audit selections have not been made, the review team will provide the jurisdiction a date in which the selections will be sent to the jurisdiction.    • The review team will obtain missing documents and reports from the jurisdiction, identify new or additional contacts if necessary, and discuss any preliminary concerns with the staff liaison (30 days prior to the scheduled review). For audits, they generally will have reviewed some sample audits.

31. IRP Peer Review Preliminary Review cont. • The review will begin 3-30 days prior to the scheduled Peer Review.

32. IRP Peer Review Opening Conference • The review begins with an opening conference, at which time introductions are made and the jurisdiction’s staff and the review team discuss any areas of concern identified in the preliminary review, along with explaining the review process and answering any questions. Conference calls are used for Remote Reviews. • The information required for the peer review must be available to the review team at this time(for Remote Reviews, some information that may typically be provided on-site may need to be available before Opening Conference)

33. IRP Peer Review Closing Conference & Report Process • On the final day, the review team and staff liaison prepares a preliminary report, which includes all findings of compliance/non-compliance, and confirms with the jurisdiction the time for the Closing Conference. • The preliminary report and supporting documentation are provided at the Closing Conference. The review team discusses the findings with the jurisdiction, which may include verbal suggestions for the jurisdiction to consider. The jurisdiction’s IRP staff is encouraged to ask questions.

34. IRP Peer Review • At the end of an IRP Peer Review a closing conference will be held with the Jurisdiction. The purpose of the closing conference is to present preliminary findings of the Review to the jurisdiction. • Following the completion of a Review, a preliminary Report will be prepared based on the findings of the Team, and will be presented to the jurisdiction at the closing. The jurisdictions will be encouraged to provide a response on the review. • After 30 days, the preliminary report will become Final and posted on the IRP web site along with Jurisdiction responses to the review.

35. IRP Peer Review • For IRP there will be a Follow-up Peer Review for non-compliant Sections (Conference Call) • Approximately one year from the closing conference, a follow-up Peer Review call will be held with the Jurisdiction as part of the Committee’s monthly conference call. • Jurisdiction will be provided with Action Plan requesting required documents to determine compliance with Sections found out of compliance. • Jurisdiction staff members may participate in the conference call to explain the information provided. • Continued non-compliance issues will be referred to the Dispute Resolution Committee (DRC).

36. IRP Peer Review • The Review Itself – What you need to know

37. IRP Peer Review • Article X, Section 1065, Netting of Audit Adjustments • Verify the jurisdiction has procedures in place to properly collect and refund audit adjustments. • Ensure that the collection of any underpayment is transmitted within 30 days following the transmittal period during which such payment was received. • Article X, Section 1070, Audit Transmittals • Determine whether the jurisdiction is netting its audit adjustments as defined in the Plan to both Clearinghouse and non-Clearinghouse member jurisdictions.

38. IRP Peer Review • (IRP 1025) Obtain the Annual Report of IRP Audit Activity forms (APM Appendix A) completed each of the calendar years under review by the jurisdiction being reviewed. • Determine whether the total number of audits listed meets or exceeds the 3% yearly average requirement (attachment 3). • If the jurisdiction conducts Records Reviews, determine the number of reviews conducted each of the calendar years under review and ensure no more than 25% of the audit requirement (per year) is satisfied by those reviews (3 reviews may be substituted for 1 audit)

39. IRP Peer Review • (IRP 1055) Check with reviewer’s audit personnel to determine if the jurisdiction has sent audit findings during a period of three to six months prior to the review visit. Determine if the information being sent would allow a proper decision to be made by a foreign jurisdiction. • (APM 201) Obtain and review the jurisdictional personnel hiring guidelines, organizational chart, and procedural flowcharts (if available).

40. IRP Peer Review • (APM 201) Select a sample of audits from the jurisdiction’s audit list. It is up to the review auditor to determine a sample selection method. Once the population size is determined,at least half of the audits to be sampled shall be from the final calendar year of the review period, and the remaining audits shall be randomly selected from the two calendar years preceding the final calendar year. The initial sample size can be reduced or expanded based on auditor judgment; if reduction or expansion occurs, document this on the Peer Review Log.

41. IRP Peer Review • (APM 205) Review the standardized audit program submitted by the jurisdiction. • (APM 204) Review the jurisdiction’s organizational chart to determine if possible organization impairments to auditor independence may exist. • (APM 1220) Verify whether annual audit reports have been filed for the period covered by the compliance review. Examine the annual reports to determine whether the reports were filed timely and accurately. • 802(a) A copy of the Registrant Audit Report is kept in the audit file.

42. IRP Peer Review • 802 Registrant Audit Report contains at least the following information: • Name and address of registrant. • Account number and fleet number. • Registration years audited. • Distance traveled & percent as originally filed. • Distance traveled & percent as a result of audit. • Amount of percent factor change. • Net fees due (or credit) for each Member Jurisdiction. • Remarks, recommendation and findings, including a description of the type records audited. • Audit techniques employed.

43. IRP Peer Review • 802 Registrant Audit Report contains at least the following information: • Identification of any vehicles removed from the fleet which have full plate fees assessed in the audit. • Date the audit report was issued and the name of the auditor. • The Registrant Audit Report contains enough information, including detailed schedules, to allow the Registrant to verify any adjustments made. • A copy of the Interjurisdictional Audit Report is kept in the audit file.

44. IRP Peer Review • 803(b) Interjurisdictional Audit Report contains at least the following information: • Name of base jurisdiction. • Name and address of registrant. • Account number. • Registration years audited. • Number of vehicles apportioned. • Reported distance traveled, distance percentage, and fees by jurisdiction. • Audited distance traveled, distance percentage, and fees by jurisdiction.

45. IRP Peer Review • 803(b) Interjurisdictional Audit Report contains at least the following information: • A brief narrative of the audit procedures, findings and any other necessary information. • Date the audit report was issued and the name of the auditor. • Contains a statement on whether the registrant’s distance accounting system is adequate or inadequate; if inadequate, the reason why is to be noted.

46. IRP Peer Review • 1035, 1040(a), 802(a), 803(a) Upon completion of the audit, the registrant and the jurisdictions were provided with a copy of the audit report and afforded the specified review period – 30 days for the registrant and 45 days for the jurisdictions. The file includes evidence that timely notification was given to the affected jurisdictions.

47. Ballot 371 Comparisons

48. Ballot 371 Comparisons

49. Ballot 371 Comparisons

50. Ballot 371 Comparisons