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)
1. Representative nature of sample periods
2. Auditor judgment
3. Sample size
4. Jurisdictional coverage
5. Immaterial errors
6. Recurring errors
7. Non-recurring errors
QUESTION #20
8. Use of standard sampling procedures (i.e. random,
block, etc.)
9. Licensee input
10. Fleet operations (line haul vs local)
11. Employees vs. Owner operators
12. 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
QUESTION #28e
• Should IFTA allow for a waiver of (circle all
that apply):
– Route of travel 3
– Odometers 0
– Either routes or odometers 11
– Neither routes nor odometers 37
QUESTION #29
• Section A550 of the Agreement addresses
Inadequate Licensee
Records/Assessment. A base jurisdiction
may estimate the carrier’s fuel use based
on the provisions of Section A550.100. If
substantial evidence is not discovered
using the provisions in A550.100.005
through A550.100.025, then a standard of
4 MPG/1.7 KPL will be used. Is the
default 4.0 MPG/1.7 KPL fuel use factor:
QUESTION #29
• Too High 3
• Too low 7
• Appropriate 36
QUESTION #30
• COMMENTS (based on answers to
question #29)
– 4.0 is appropriate if no attempt is made to
keep records
– There needs to be some sort of punitive
measure to deal with licensees that do not
comply with recordkeeping requirements
– Agreement should state 4.0 or the lowest
reported factor
– Original intent was to not be punitive
QUESTION #30
• COMMENTS (based on answers to question
#29)
– It should be lower to help compliance efforts
– Too much emphasis on recordkeeping requirements,
should focus on arriving at the true tax liability
– Perhaps consider a percentage reduction of the
reported factors
– An adequate MPG/KPL could be lower than 4.0/1.7
– Perhaps a developed range based on vehicle size
– Ensures that jurisdictions are protected
QUESTION #31
• Section A550 of the Agreement addresses fuel
use estimation. It also addresses the
requirement to disallow tax paid credit when no
documentation exists to support the credit.
There is no provision for estimating distance
(either in total or per jurisdiction). Should the
Agreement be amended to include a provision
allowing a base jurisdiction to estimate
distance (either in total or per jurisdiction)
when the records are inadequate or absent?
QUESTION #31
• Yes 30
• No 16
QUESTION #32
• COMMENTS (to the answers provided for
question #31)
– Use past returns, IRP documents, pay records
– Should be permissive to the base jurisdiction
– Use a reasonable MPG
– Unit averages, other types of data available
– Perhaps the Agreement already allows it
– Explore the ballot language once offered (11-02?)
– Run sufficient distance in an unreported jurisdiction to
at least support the fuel gallons bought in that
jurisdiction
QUESTION #33
• Currently IFTA provides (Article R1220) for the
base jurisdiction to impose and retain a penalty
of $50.00 or 10% of the tax due (whichever is
greater) for the underpayment of the quarterly
tax. The base jurisdiction may also impose
other penalties provided for in jurisdictional
statute. In your opinion, should the IFTA provide
for the imposition of additional penalties paid to
the member jurisdictions (in addition to the base
jurisdiction) for the underpayment of taxes due?
QUESTION #33
• Yes 8
• No 40
QUESTION #34
• COMMENTS (based on answer given for
question #33)
– “No”- Sovereign rights, the 4.0 is sufficient
penalty
– “Yes”- Auditor discretion, failure to maintain
records
QUESTION #35a
• It is prior to IFTA implementation in your jurisdiction and your
agency is auditing the records of ABC Trucking (located in
Jurisdiction X, not in your jurisdiction). The audit reveals poor
recordkeeping. There were no odometer readings, routes of travel
were either absent or difficult to verify, audited fuel was less than
reported fuel, fuel receipts were missing, fuel receipts lacked proper
documentation, and your auditor discovered missing trips and
underreported distance in your jurisdiction. When the various errors
rates are calculated the miles per gallon (or kilometers per liter) rises
(due to the discovery of additional distance coupled with the
discovery of fewer units of fuel). The overall result of this audit is a
$1000.00 credit. If the credit audit is allowed, the $1000.00 will be
refunded to the taxpayer. Does your audit staff:
QUESTION 35a
• i. Process the credit per the findings and
issue the refund 7
• ii. Disallow the credit (refund) and accept
the reported data (no change audit) 6
• iii. Implement the reported MPG/KPL, pick
up the tax liability for the additional fuel
use based on the discovered additional
distance, deny unverified tax paid fuel 13
QUESTION #35a
• iv. Impose an audited MPG/KPL (i.e. best
information or 4.0), pick up the tax liability for the
additional fuel use based on the discovered
additional distance, deny unverified tax paid fuel
24
• v. Comments:
– Use a combination of ii, iii, iv
– Poorly crafted question
– Confusing scenario
– Not sure how jurisdictions did motor carrier audits
pre-IFTA
QUESTION #35b
• Your Jurisdiction (Jurisdiction A) is a member of IFTA. Jurisdiction
X is auditing the records of ABC Trucking (IFTA licensee in
Jurisdiction X). The audit reveals poor recordkeeping. There were
no odometer readings, routes of travel were either absent or difficult
to verify, audited fuel was less than reported fuel, fuel receipts were
missing, fuel receipts lacked proper documentation, and the auditor
discovered missing trips and underreported distance in member
jurisdictions including Your Jurisdiction. When the various errors
rates are calculated the miles per gallon (or kilometers per liter) rises
(due to the discovery of additional distance coupled with the
discovery of fewer units of fuel). The audit result for Your
Jurisdiction (Jurisdiction A) is a $1000.00 credit. If the audit is
processed based on the initial findings, Jurisdiction X will extract the
$1000.00 from Your Jurisdiction in the monthly transmittal pursuant
to Section P1040 of the Agreement. In your opinion, how should
Jurisdiction X process this audit?
QUESTION #35b
• i. Process it as is based on the findings
thereby granting the credit of tax in Your
Jurisdiction, refunding Your Jurisdiction’s
tax (used to offset other liabilities through
netting) to the taxpayer, and extracting the
credit in the next monthly transmittal
7
QUESTION #35b
• ii. Deny any calculated credits (including
the credit in Your Jurisdiction) based on a
lack of proper documentation supporting
the credit. The “amount due” Your
Jurisdiction would be set to “zero”
(effectively accepting the reported tax
return data for Your Jurisdiction).
15
QUESTION #35b
• iii. Lower the audited fleet MPG/KPL to a
threshold where no credits would exist
12
• iv. Lower the MPG to 4.0 and let the
debits and credits fall into a calculated
figured based on the 4.0
4
QUESTION #35b
• iv. COMMENTS
– Would like to see language similar to IRP where
credits can be denied
– Would like the issue clarified
– Unlikely that a credit would exist
– Unjust enrichment?
– More specifics needed
– Process the audit as per the results, don’t manipulate
the results
– Preferred method would be “ii”, but rules need to be
more specific; gray area between “sorta bad (sic)”
records and “no records”
QUESTION 35c
After a review of questions “a” and “b”
above, do you believe the scenarios are:
The Same 35
Different 9
QUESTION 35d
COMMENTS (on whether 35a and 35b are
the same or different)
Auditor cannot alter the netting process
Any credits generated as a result of poorly
kept records should be denied
Jurisdictions should not be adversely affected
by inadequate records
If the records are sufficient enough for an
assessment, they are sufficient enough for a
refund
QUESTION 35d
Believes that the Agreement already allows
for credit denial
Make it (denial) mandatory when records are
absent or poor
Agreement doesn’t allow for lowering an MPG
to eliminate credits
Auditor discretion/flexibility
Why should any jurisdiction have revenue
taken from them when the credit cannot be
supported?
QUESTION 35d
Scenarios are exactly the same; membership in IFTA was
supposed to enable the same level of protection of jurisdictional
taxes due
Findings would reward a taxpayer for not keeping records
required
Scenarios are different; pre-IFTA concerns are different than
post-IFTA concerns
The difference is in who is performing the audit, the outcome is
the same
If you have sufficient records to audit then the results should be
processed regardless of outcome
All jurisdictions should have equal consideration and protection
Scenarios are the same and the results should be the same
QUESTION #36
• The scenarios and questions in item 35 were
designed to determine what your jurisdiction
believes the IFTA should accomplish in
maintaining the integrity and accuracy of the
taxes due your jurisdiction. Under the
Agreement, your jurisdiction has authorized the
member jurisdictions to administer, enforce, and
collect your jurisdiction’s fuel use tax. Should
unverified tax credits for tax due your jurisdiction
be refunded to the licensee by the member
jurisdictions?
Question #36
• Yes 10
• No 37
QUESTION #37
• It has been opined in the audit community
that the Agreement is unclear on the issue
of credit denial. Should the Agreement be
amended to define a member jurisdiction’s
right to deny jurisdictional credits for lack
of verifiable documentation?
QUESTION #37
• Yes, but permissive to the base jurisdiction
10
• Yes, mandatory when records are
inadequate or non-compliant
27
• No 10
POSTSCRIPTS
Where do we go from here?
Release results to the Commissioners
Continue a healthy dialogue
Potential ballot language
Leave the status quo
Hazards
Re-examinations
Re-audits
Disputes
Lessened faith in the intent and mission of IFTA
Potential malaise by auditors
Increased loss of resources
Single jurisdiction fuel use tax audits
THANK YOU!