Joint Audit Subcommittee Overview

1. Joint Audit SubcommitteeOverview 2008 IFTA/IRP WORKSHOP TEMPE AZ Thom Rabaglia – WI (IRP Co-Chair) Dawn Lietz – NV (IFTA Co-Chair) Rick LaRose – CT; Jeff Hood – IN; David Nicholson – OK (Committee Members)

2. Goal & Objectives • Goal: • Determine the feasibility of conducting joint audits with multiple jurisdictions. • Objectives: • Identify obstacles and present solutions • Provide comprehensive feedback to the IFTA/IRP Audit Committees • Summarize findings and present to attendees at the 2008 IFTA/IRP Workshop

3. Sub-Committee • Thom was nominated as Co-Chair by the IRP Audit Committee and represents the Midwest. • Dawn was nominated as Co-Chair by the IFTA Audit Committee and represents the West.

4. Sub-Committee Members • The Audit Committees accepted the other participants in March 2007. • Rick LaRose from the East. • Dave Nicholson from the South. • A representative from Canada was invited to participate, but declined. • Jeff Hood accepted for Indiana. • Representation from Indiana was sought due to number of mega carriers and potential affect to this jurisdiction.

5. Role of the Sub-Committee • Conduct monthly meetings • Clarify role of the base jurisdiction • Clarify role of the participating jurisdictions • Define Mega-Carrier • Identify obstacles • Bring overview of meetings back to the IRP & IFTA Audit Committees for discussion

6. Topics of Discussion • What is the role of the base jurisdiction? • What is the role of the participating jurisdictions? • What constitutes a “Mega-fleet”? • What if a request for audit is made by another jurisdiction to the base jurisdiction. • If the base jurisdiction refuses to cooperate, what happens?

7. Role of Base Jurisdiction • Coordinates audit • Determines who will be audited and when • Invites participation by other jurisdictions • Communicates with Carrier/Registrant • Determines software/audit tools to be used • Issues final report

8. Role of Participating Jurisdictions • Consensus on sample periods; sample size; waiver of odometer or route of travel. • Support audit findings with the base jurisdiction through the DRC process, if necessary. • Adherence to IRP APM & IFTA Audit Manual

9. Define Mega-Carrier or Fleet • What constitutes a Mega-Carrier (Fleet) • Discussion included using the Transport Topics top 100 • Problem, categorized based on revenues not size. • Identified based on risk to Jurisdictions • Total distance, total vehicles • Top 1% in each jurisdiction

10. Obstacles • If base jurisdiction refuses to audit, what happens? • How will adjustments be handled when credits result from improper or negligent reporting by the carrier. • IE: Using pre-determined miles to file tax returns in lieu of reporting actual. • Does the clearinghouse have to be used?

11. Obstacles - Continued • How do we measure the effectiveness of any program resulting from our work? • How do we minimize any negative impacts to licensees? • IE: Travel expenses, larger audit teams. • Should the process extend beyond the mega-carriers?

12. Potential Solutions The base jurisdiction does not respond to a request. • If a request for audit is sent to a base jurisdiction, to allow time for adequate planning, a jurisdiction should be given 18 months to schedule the audit before filing a dispute. • Communication is encouraged between the requesting jurisdiction and the base jurisdiction.

13. Potential Solutions How will adjustments be handled? • Based on the individual jurisdictional laws, this must be decided prior to the start of the audit. Consensus is vitally important. • Should a non-compliant carrier be rewarded with a refund when odometers or actual routes traveled are not used to prepare returns? • Ensure any waiver of odometer or route of travel was granted prior to notification of audit. • Waivers should not be granted during the audit.

14. Potential Solutions Does the clearinghouse have to be used? • No, not necessarily. • Prior to the clearinghouse, manual payments were made. • Jurisdictions still have the ability to distribute and receive manual payments.

15. Potential Solutions How do we measure the effectiveness? • All carriers are being audited. • Levels the playing field. • Audit results have greater credibility. • Jurisdictional auditors have the opportunity to learn from other more experienced auditors.

16. Potential Solutions How do we minimize any negative impacts to the licensee? • If the licensee maintains records outside of the base jurisdiction, they are responsible for the cost. • Based on size of audit, discuss the number of auditors needed. Costs are limited to the amount needed to send that number of auditors from the base jurisdiction to the place records are maintained. • The base jurisdiction should ensure the licensee has the ability to handle the number of auditors needed.

17. Potential Solutions Should the joint audit process be extended beyond the mega-carriers? • Yes, if a jurisdiction has a high profile carrier and is concerned about the risk, they should have the same opportunity to request a joint audit with the affected jurisdictions.

18. Discussion

19. Auditor Qualifications • In order to ensure the integrity of the audit and reduce the amount of time spent coordinating the audit, the Sub-committee felt it is important for the participating jurisdictions to ensure the auditors assigned to participate are proficient. • Senior auditors with large fleet, GPS, and computerized system review background.

20. Pool of Resources • Who will maintain the pool of resources for jurisdictions to draw from? • There was some discussion that perhaps individual jurisdictions could provide the names of qualified auditors to the respective audit committee for other jurisdictions to draw from.

21. How are the auditors selected? • Based on the jurisdictions with the greatest exposure. • Geographical location in proximity to the location of records/base jurisdiction.

22. Advantages • Jurisdictions have the opportunity to actively participate in those audits that have the greatest exposure and risk. • Gives auditors from smaller jurisdictions experience working with different levels of expertise. • Opportunity for auditors to learn from each other. • Carriers have the assurance that the audit is conducted by auditors with experience in large operations.

23. Disadvantages • Software variance. • Long distance communication after the field work is completed. • Potential lack of volunteers or cooperation. • Differences of opinion between jurisdictions on how to handle adjustments.

24. Discussion

25. Where do we go from here? • Before we can actively pursue joint audits, it is vitally important that all jurisdictions be on the same page. • Guidelines to conduct the joint audits. • Ballots to clarify ambiguous or silent language on areas of potential conflict. • IE: What constitutes a waiver of routes of travel or odometer? • What defines “reasonable cause”. • Does every jurisdiction need to participate like we do for the Compliance Review Teams? (Once every four years) • Audit counts for participating jurisdictions.

26. Where do we go from here? (Part 2) • How can we ensure each jurisdiction is auditing the carrier consistently? • How do we reduce conflict in the field when differences between auditing techniques arise? • How does auditor judgment affect an audit? • Does IRP or IFTA provide enough direction for a jurisdiction to consistently conduct joint audits?

27. Where do we go from here? (part 3) • What is your jurisdiction willing to do to ensure you protect the interests of the other member jurisdictions when a carrier is clearly non-compliant? • Lack of required recordkeeping but enough documents to ‘audit’ what is provided. • What does “making the carrier whole at any cost” mean to you? • Are you willing to support uniformity among the jurisdictions and vote for any needed changes?

28. Discussion

29. Thank you for your participation.

30. Joint Audit SubcommitteeOverview 2008 IFTA/IRP WORKSHOP TEMPE AZ Thom Rabaglia – WI (IRP Co-Chair) Dawn Lietz – NV (IFTA Co-Chair) Rick LaRose – CT; Jeff Hood – IN; David Nicholson – OK (Committee Members)