A Deep Dive Inside an Audit
Attendees at the IFTA/IRP Audit Workshop range from rank beginners to the auditors who’ve been in the trenches for many years. All parts of the countries are represented by both government and industry, including service bureaus who represent thousands of carriers.
It’s clear the organizers went to a lot of effort to help attendees learn the language of IFTA/IRP. As part of a case study, they put together actual data from manual source documents, GPS data, and manual and card lock (invoiced) fuel purchase data. All the summaries are there both monthly and quarterly.
The case study focuses on the audit process and what an auditor should look for. What internal controls does the carrier use to make sure it’s collecting the right data? Are its records adequate? What sources of information can an auditor use to learn as much about the carrier as possible?
From a carrier’s perspective, it’s a valuable exercise. There’s a lot for Fleet Tax Pros to know.
Do you keep a list of how your IFTA decals were distributed. Can you prove that you didn’t supply a decal to a friend? What happens if you screw up, like the company that was charged $15,000 each for three IFTA decals it could not account for? Yup, a true story.
Do your distance records have the information required by the agreements? Are the gaps in your data? Can you get your hands on the original GPS data from your vendor going back 5 1/2 years if you’re going to use it to report your IRP distance?
What constitutes a trip? Is it a round trip from origin to destination and back home? Is it a week’s worth of travel? Is it a month’s worth of travel? Make sure the fuel follows the distance. Don’t report fuel in one quarter and distance in the next.
What about fuel receipts? Ever tried to get a tax refund or a credit without a valid receipt? There was lots of discussion of how to handle disallowed (meaning non-tax paid) fuel. Do you include it to calculate the fleet MPG? Yes! You have to include it in the total, but you can’t take credit for the tax.
What about bulk fuel? Some states have a requirement that if you are selling from your bulk tank, you are now a fuel retailer and better be licensed to sell fuel. Work with your bulk fuel provider to come up with a system so you can be consistent in reporting. Make sure the tank is metered. You have to be able to prove the fuel was tax paid and was what was actually put in IFTA qualified vehicles.
These are all things that people who speak the language of tax compliance understand and those who don’t need to learn.
Remember what I said about Fleet Tax Compliance Week and how maybe it’s time to buy your tax people coffee or lunch? A trip to next year’s meeting would pay for itself if you can follow procedures and avoid penalties and fines.
Fifteen grand for a missing IFTA decal! I still can’t believe it.
The internal control examination is not complete until the auditor and client have a thorough understanding of the company being audited. More than ever, your internal controls include data. Manual vs electronic distance is basically the same regardless of the system. However it was suggested that if an electronic system is tamperproof and has a very strong system of internal controls, the sample size may reduce.
As an auditor, make sure you talk to the right people. People who can get you the data you need and answer your questions. The assessment of your internal controls will set the tone of your audit.
Communication is key. Speaking the language and knowing which questions to ask will take you far in an audit. Both for the auditor and the audited.