RAILINC I ACACSO AAR Car Hire Audit Old to New Jim Pinson ACACSO November 11 – 13, 2015

RAILINC I ACACSO Agenda Overview Auditing in the Past –The Life of an Auditor –Early Tests –Modernization Recent Updates –List of Specific Tests (Prizes) –Updated Tests 2

RAILINC I ACACSO Overview of the Car Hire Audit Process 3

RAILINC I ACACSO Car Hire Audit Process Overview Authority:Car Hire Rule 6 Auditors:Railinc on the behalf of the AAR Timing:Class I Alternating Years Class II & III Carriers every 3 to 5 years Result:Report Indicating Compliance with Car Hire Rules 4

RAILINC I ACACSO Car Hire Audit Process Overview Car Hire Audits are Conducted Based on Sample Data Car Hire Audits are Procedural – Not Financial 5

RAILINC I ACACSO Auditing in the Past 6

RAILINC I ACACSO The Life of an Auditor All Audits Conducted on Site –Travel up to 35 Weeks Annually –Arrive Monday Around Noon –Depart Friday Around Noon –Coat & Tie Mandatory –West Coast Audits Required Weekend Stays 7

RAILINC I ACACSO The Life of an Auditor Resources were Carried to the Audit –Five Inch Brief Case Previous Audit Reference Material –14 Column Accounting Paper –Hand Calculator 8

RAILINC I ACACSO The Life of an Auditor Paper Record Books –Up to 50 per Month for Foreign Cars –Up to 10 Pounds per Book Misc. Stacks of Paper Storage Outside Car Accounting Microfiche 9

RAILINC I ACACSO Early Audit Tests Mileage Gap –30 to 40 Records per Month –24 Months Reclaim Audits – Started in 1988 –Rule 22: 720 Reclaims Across 3 Months –Reduced in the 1990’s to 240 Cars for 1 Month 10

RAILINC I ACACSO Early Audit Tests Value & Age –Conducted on All Cars in Revenue Service Trailer & Container Audits –Same Time Audits as Railcars –Age Audits in Umler 11

RAILINC I ACACSO Early Audit Tests Sampling Procedures –Identify Documents that Contain the Population being Sampled –Manually Selected from Paper Documents –Manually Recorded on the Work Papers 12

RAILINC I ACACSO Modernization Remote Access Almost Eliminated Travel Laptops Eliminated the Need to Take Documents to the Audit Site Electronic Storage –Eliminated Hard most Copy Documents –Allowed Data Access via Railinc SAS Eliminated Manual Sample Selection 13

RAILINC I ACACSO Recent Updates 14

RAILINC I ACACSO List of Specific Tests Mileage Master Audit - Mileage Master Accuracy Gap Analysis- Mileage is Paid for All Movements LCS Audit- Use of LCS in Calculations Payable Claims Audit- Payable Claim Handling Receivable Claims Audit- Receivable Claim Handling Percent Payment Audit- Car Hire is Paid Timely 15

RAILINC I ACACSO List of Specific Tests Rule 22 Audit- Accurate Rule 22 Reclaims Rule 5 TOL Audit- Accurate Rule 5 TOL Rule 4 TOL Audit- Accurate Rule 4 TOL Rule 7 & Rule 8 Audit- Conformance to DDCT 16

RAILINC I ACACSO Updated Tests – Gap Analysis Old Process Approximately Three Days to Draw Sample Sample was not Statistically Significant Carrier Provided Appendix H Data Current Process Sample is Drawn in 30 Minutes Sample is Statistically Significant No Carrier Data is Required 17

RAILINC I ACACSO Updated Tests - % Payment Old Process Performed on a Sample of Carriers Carrier Provided Appendix H Documents Performed Only During Audit Current Process Performed on 100% of Carriers No Documentation Required from Carrier Performed Monthly Can Influence Audit Schedule 18

RAILINC I ACACSO Updated Tests – Rule 22 Old Process Sample (240 Cars) Selected Manually Sample not Statistically Significant Manually Entered in Work Papers Current Process Sample Selected Electronically Sample is Statistically Significant Selection Process Populates Work “Papers” 19

RAILINC I ACACSO Updated Tests - Rule 5 TOL Old Process Current Process System Audit First Test to Use Electronically Drawn Sampling Techniques Statistically Significant Sample Drawn Electronically 20

RAILINC I ACACSO Update Tests – Rule 4 TOL Old Process Current Process System Audit A New System Eliminated Traditional Reclaims Statistically Significant Sample Drawn Electronically 21

RAILINC I ACACSO Updated Tests – Rule 7 & 8 Old Process Current Process System Audit A New System Eliminated Traditional Reclaims Statistically Significant Sample Drawn Electronically 22

RAILINC I ACACSO For Additional Information Contact: Railinc Customer Support Center 877-RAILINC 23

RAILINC I ACACSO Questions? 24