1. IFTA BALLOT #3 Overview of changes

2. Overview of Changes The new Language in Ballot #3 introduces 5 new requirements and defines “should” as a conditional requirement in the Audit Manual.

3. Overview of Changes A310 Preliminary Audit Procedures A320 Evaluations Of Internal Controls A330 Sampling and Projection A360 Reduction to total fleet fuel A430 Request for Records

4. Overview of Changes These added requirements do not impact the non- compliance audit issues that can be brought to the membership by the PCRC as a result of a Final Finding of Non-Compliance. R1555 provides that only specific non-compliance issues can be brought before the membership for dispute. The proposed language does not change the dispute process, or the non-compliance issues that can be brought forth by the PCRC.

5. These audit related issues are: Numbers of Audits Audit Stratification Notification of the Findings Audit Transmittals

6. New Requirements A310 PRELIMINARY AUDIT PROCEDURES.100The auditor must identify, and document in the audit file, the licensee’s vehicles operated in the audit period, and vehicle characteristics that might affect the audit.

7. New Requirements Although this is new language, the scope of the audit includes an analysis of the reported returns including the MPG/KPL. The characteristics of the vehicles help determine the expected MPG/KPL. For example, a fleet of vehicles in the 26,001 – 32,000 lb gross vehicle weight rating (gvwr) range can be expected to have a higher average MPG/KPL than a fleet of vehicles in the 70,000 - 80,000 lb gvwr range.

8. New Requirements A320 EVALUATION OF INTERNAL CONTROLS –The auditor must provide a summary description of the licensee’s distance and fuel accounting systems. The auditor should compare the distance and fuel summaries provided by the licensee to the tax returns, and document any differences. An example of the licensee’s records examined by the auditor should be included in the audit file.

9. New Requirements A330 SAMPLING AND PROJECTION When the summary information does not match information reported on the quarterly returns, the auditor must attempt to determine the reason for the discrepancy. The auditor must also determine whether to project the sample findings per the summaries or tax returns. It is generally preferable to project to summary distance and fuel (corrected as necessary). The auditor must document in the audit file and note in the audit report the conclusions made as to whether the distance and fuel per summary or tax return has sufficient accuracy and reliability to be used in sampling projections. The requirements under A330 are only necessary when summaries are used for audit purposes.

10. New Requirements A360 REDUCTION TO TOTAL FUEL The total fuel reported by a licensee shall only be reduced when there is clear proof, based on the records provided by the licensee, to support such a reduction and such proof is documented in the audit file. The absence of tax paid fuel receipts and a subsequent denial of tax-paid credits claimed does not, in and of itself, warrant a reduction to reported total gallons.

11. New Requirements A430 REQUEST FOR RECORDS The auditor must request the appropriate records to conduct an audit of the selected audit period.

12. Use of the term “should” A240 AUDITOR QUALIFICATIONS AND RESPONSIBILITIES.200 Auditors should conduct themselves in a manner promoting cooperation and good relations with licensees and member jurisdictions.

13. Use of the term “should” A320 EVALUATION OF INTERNAL CONTROLS The auditor must provide a summary description of the licensee’s distance and fuel accounting systems. The auditor should compare the distance and fuel summaries provided by the licensee to the tax returns, and document any differences. An example of the licensee’s records examined by the auditor must be included in the audit file.

14. Use of the term “should” A320 EVALUATION OF INTERNAL CONTROLS.600When sampling is appropriate, the auditor should determine the level of testing according to the reliability of the licensee’s internal controls.

15. Use of the term “should” A420 NOTIFICATION.100The licensee should be contacted at least 30 days prior to the conduct of an audit. Through the initial or subsequent audit contacts, the licensee must be advised of the audit period, the type of records to be audited, and the proposed audit start date.

16. Use of the term “should” A440 OPENING CONFERENCE A documented opening conference should be held with the licensee to discuss the licensee’s operations, distance and fuel accounting system, audit procedures, records to be examined, sample period, sampling procedures, etc

17. Use of the term “should” A450 CLOSING CONFERENCE A documented closing conference should be held with the licensee during which any areas of non-compliance, and any requirements and recommendations for improvement to the distance and fuel accounting systems are discussed.

18. Use of the term “should” A460 AUDIT REPORT An audit report, including a narrative and a billing summary documenting the audit, must be prepared by the base jurisdiction and provided to the licensee and all affected member jurisdictions. Where appropriate a checklist may serve this purpose. A copy of the audit report must be kept in the audit file. The base jurisdiction should send the audit report to all affected Jurisdictions at the same time it sends the report to the licensee.

19. In Summary The word “should” is a requirement unless circumstances outside of the auditor’s control exist. The auditor is responsible for documenting the file with the reason the requirement could not be met to achieve compliance.

21. IRP Ballot Discussions Anthony Madsen – Washington Renée Kyser – Alabama

22. IRP Ballot Discussions Ballot 400: Voting ended September 8, 2015Voting ended September 8, 2015 Effective January 1, 2016Effective January 1, 2016 Distance Audit Procedures Adjusted to conform to FRPDistance Audit Procedures Adjusted to conform to FRP Former APM 504 & 505 now 504Former APM 504 & 505 now 504

23. IRP Ballot Discussions AC Survey: Audit ContactsAudit Contacts 20 Respondents20 Respondents

24. IRP Ballot Discussions AC Survey Topic: When a vehicle is removed for not meeting “intent” to the base jurisdiction’s satisfaction, should the fees originally paid for that vehicle be credited against the application of full fees?

25. IRP Ballot Discussions Is this your jurisdiction’s position? We didn’t think the Plan allowed for the credit of those fees. 16.67%

26. IRP Ballot Discussions Is this your jurisdiction’s position? If we are assessing full fees it is only fair to allow credits. 38.89%

27. IRP Ballot Discussions Is this your jurisdiction’s position? The registrant was not required to report incorrectly and should not be rewarded for doing so. 22.22%

28. IRP Ballot Discussions Is this your jurisdiction’s position? If we don’t refund we exceed 100%, and FRP keeps fees within 100%. 11.11%

29. IRP Ballot Discussions Is this your jurisdiction’s position? Adjusting the distance adjusts the fees so this is being handled. 50.00%

30. IRP Ballot Discussions Other observations and comments… Each case should be treated individually.Each case should be treated individually. We don’t usually remove – we tell the registrant to either base plate locally or make a trip.We don’t usually remove – we tell the registrant to either base plate locally or make a trip. Registrant had the opportunity by apportioning so no credit is warranted.Registrant had the opportunity by apportioning so no credit is warranted.

31. IRP Ballot Discussions In the end – it was unanimous: All jurisdictions should handle consistently! 75% were in favor of a ballot 25% were unsure

32. IRP Ballot Discussions Should the process allow or deny credits? Allow – 68.42% Deny – 31.58%

33. IRP Ballot Discussions If your answer is “allow”, would the same be true if the records as a whole were rated inadequate? Yes – 25% No – 75%

34. IRP Ballot Discussions AC to draft ballot that will be discussed at the IRP Annual Meeting in May – ballot will follow the majority of survey respondents by proposing the credit of apportionable fees paid.

35. IRP Ballot Discussions Clean-up Ballot: IFTA Ballot 3IFTA Ballot 3 Minor adjustments to ensure IRP & IFTA distance requirements / language are as consistent as possibleMinor adjustments to ensure IRP & IFTA distance requirements / language are as consistent as possible

36. IRP Ballot Discussions AC Survey Topic 2: Unreported jurisdictions when records are inadequate. Although NE sponsored ballot failed in 2014, more jurisdictions seem to be finding under FRP.

37. IRP Ballot Discussions Survey Says: 80% of respondents look for unreported jurisdictions80% of respondents look for unreported jurisdictions 70% occasionally find authoritative evidence70% occasionally find authoritative evidence –10% ignored –25% added distance – did not assess percentage –10% made an audit of it –45% had other responses

38. IRP Ballot Discussions AC Survey Topic 2: Would you favor a ballot? Yes – 60% No – 10% Unsure – 30%

39. IRP Ballot Discussions Next Steps – –Seeking industry input –Working on stats regarding frequency –Planned discussion at IRP Annual Meeting –As an auditor… WHAT IS YOUR PERSPECTIVE?

40. Questions / Observations?