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Managing for ComplianceIFTA/IRP Compliance/Peer ReviewsGuide to Preparing for Reviews

What You Need to Know

Betsy McCabe (NV)Chester Cook (GA)IFTA Compliance ReviewThe IFTA Procedures Manual, P1220, provides, in part: program compliance reviews shall be conducted in accordance with the procedures and specifications outlined in the IFTA Program Compliance Review Guide, . . . . Therefore, knowledge of the contents of the Review Guide is essential prior to participating in a Review as a member of a Review Team or as a Jurisdiction being reviewed

IFTA Compliance ReviewHow Often?

Every five years on a Regional BasisSchedule determined by Senior DirectorSchedule can be found on IFTAs websiteCan be conducted via onsite review or remote review

IFTA Compliance ReviewJurisdiction contacted approximately 120 days prior to scheduled review dates to conduct a preliminary reviewPreliminary information will be requested including lists of audits completed by year, sample audits, etc.Administrator will select a sample of audits, which will be the basis for the review

IFTA Compliance ReviewOnce sample is selected, audit file documents will be uploaded to IFTA if remote review; sample audits may be e-mailed if on-site review.Review team will conduct a preliminary review prior to start of reviewIFTA Compliance ReviewOVERVIEW:Opening Conference

Closing Conference

Report ProcessReassessment

IFTA Compliance ReviewThe Review Itself What you need to knowWorksheets are provided to ensure uniformity in the review process (i.e., Worksheets A P)

The Worksheets are lettered and page numbered in accordance with the letter shown with the topic. Any areas of non-compliance or concern will be noted on the comment sheet attached to the applicable Worksheet.

IFTA Compliance ReviewWorksheet J.1P910.150 Jurisdictions licensee account records contain at least the following.Audit findings and work papers

A690.300 jurisdiction notifies appropriate member jurisdictions of audit findingsIFTA Compliance ReviewWorksheet J.1 continuedP1110.300.015, P1110.300.015 and P1110.00.030Communication with IFTA, Inc. Staff i.e, jurisdictions annual report contains the number of audits completed, number of audits with assessments and reports any unusual activities within a member jurisdiction that could affect an auditIFTA Compliance ReviewWorksheet J.2TransmittalsA690.400 - Audit results are transmitted to member jurisdictions with monthly transmittals P1060 - Jurisdiction properly transmits funds to other member jurisdictions according to the payment option chosenOption 1 or Option 2IFTA Compliance ReviewWorksheet K - AuditorsA210.100 - IFTA auditors have adequate technical training and proficiencyA410.100 - Jurisdiction auditors meet the qualifications of the jurisdiction's personnel guidelines A410.200 - Jurisdiction's audit and audit support staffs are properly trained in audit planning and audit procedures A220.200 - Supervisory follow-up and review of the auditor's procedures exists IFTA Compliance ReviewWorksheet K Auditors continued

A210.200 - In all matters relating to an audit assignment, an independence in mental attitude is maintained by the jurisdiction's auditors

A210.300 - Due professional care is exercised in performing an audit and in preparing an audit report

A420.100 - All licensees are given equal consideration; no preferential treatment is given

IFTA Compliance ReviewWorksheet K Auditors continued

A420.300 - All licensees are audited under a uniform program unless special circumstances dictate otherwise

A420.200 - Each member jurisdiction is given equal consideration in an audit

A410.400 - Auditors are allowed to discuss any discrepancies with a licensee IFTA Compliance ReviewWorksheet M Audit Procedures

The audit was conducted on a sampling basis, unless a specific situation dictated otherwise A530

Sample period(s) selected are representative of the licensee's operations A530.100

Auditors, through inquiry and observation, determined the licensee's prescribed policies and procedures. (An auditor normally documents his understanding in his work papers by completing a questionnaire designed for this purpose, or by diagramming or describing the flow of transactions in flowchart or narrative form) A640.100

The auditors reviewed the licensee's accounting system A640.100

IFTA Compliance ReviewWorksheet M Audit Procedures

Auditors identified the records that the licensee keeps to support his returns A640.100.015

Auditors determined if there had been changes in the licensee's accounting procedures or operations during the audit period A640.100.005

Audit was conducted on behalf of all member jurisdictions R1310

Receipts for tax-paid purchases that have been altered or indicate erasures are not accepted without demonstration from the licensee that the receipt is valid. P570.200

If tax paid fuel documentation was unavailable, all claims for tax paid fuel were disallowed A550.200

IFTA Compliance ReviewWorksheet M Audit Procedures

The auditor made any reasonable attempt to verify distance A540.300

If the auditor was unable to determine any reasonable method to assign or allocate unreported miles/kilometers, unreported miles/kilometers were assigned to all jurisdictions on the basis of each jurisdictions audited percentage of total miles/kilometers. A520

In the absence of adequate records, 4 m.p.g. was used unless substantial evidence exists to the contrary. A550.100

Audit documentation accomplishes the following: A670

Communicates the results of the audit, showing adjusted distance, fuel and monetary results A670.100

IFTA Compliance ReviewDocuments and justifies procedures conducted by the auditor A670.200

Indicates source of audit results (for example, audited fuel determined from retail purchase receipts) A670.300

Communicates suggestions and recommendations made to the licensee A670.400Clearly supports audit findings A670.500

IFTA Compliance ReviewThe audit file contains at least the following: A680

Schedules: A680.100Summary schedules A680.100.005Supplementary schedulesA680.100.010Support Documentation A680.200Detail Information A680.200.005Listing of Records Maintained A680.200.010

A synopsis of opening and closing conference notes with licensee indicating date, and persons attending A680.200.015

IFTA Compliance ReviewLicensee Audit Report contains at least the following information:

Name and address of licensee A660.100.005Account number A660.100.010Audit period A660.100.015Types of records audited A660.100.020Description of audit techniques employed A660.100.025Net distance adjustmentA660.100.030Net tax paid fuel purchases adjustmentA660.100.035MPG/KPL as reportedA660.100.040MPG as result of auditA660.100.045Net fuel tax adjustment per jurisdictionA660.100.050Remarks and recommendationsA660.100.055Signature of auditor or reviewing jurisdictional official and date A660.100.060

IFTA Compliance ReviewOther Miscellaneous Worksheet M Items

In calculating audit interest, overpayments to any jurisdiction quarterly returns within the audit period were applied to any liability on subsequent quarterly returns on a jurisdictional basis within the audit period R1230.300.010

In calculating audit interest, interest accrued on the net amount of tax due each jurisdiction within the period of time audited R1230.300.010

Interest was calculated from the date the tax was due for each calendar month or fraction thereof. (A fraction of a month accrued a full months interest.) R1230.300.010

IFTA Compliance ReviewOther Miscellaneous Worksheet M Items cont.The auditor used the best information available to the jurisdiction in conducting the audit A540.200

If a software distance program was used, it was used only as an audit tool A540.400

Following the close-out conference and any review period, the licensee was furnished with the Licensee Audit Report and a customary notice of assessment, billing or other notification which would signify the beginning of the licensees appeal period A690.100

Within 45 days of the providing the licensee with the Licensee Audit Report and its customary notification of assessment or billing, the Interjurisdictional Audit Report was prepared and the jurisdiction notified the affected member jurisdictions of the audit findings A690.200

IFTA Compliance ReviewOther Miscellaneous Worksheet M Items cont.

The Interjurisdictional Audit Report contains at least the following information A660.200Name of base jurisdiction A660.200.005Name and address of licensee A660.200.010FEIN or equivalent A660.200.015Reported tax by jurisdictionA660.200.020Audited tax by jurisdiction A660.200.025Penalty A660.200.030Interest by jurisdiction A660.200.035Total by jurisdiction A660.200.040

Top 5 IFTA Findings#5 A320 SELECTIONS OF AUDITS You must when making your audit list yearly include 25% high distance accounts. 15% low distance accounts. There were 22 violations of this in the last five years.

#4 A310 NUMBER OF AUDITSYou are required to complete audits of an average of three percent per year of the number of IFTA accounts reported on the annual report.There were 28 violations of this in the last five years. #3 R1230 INTERESTThe base jurisdiction, for itself and on behalf of the other jurisdictions, shall assess interest on all delinquent taxes due each jurisdiction except taxes collected directly by other jurisdictions in accordance with IFTA. There were 50 violations of this in the last five years.

Top 5 IFTA Findings#2 R940 TAX RETURN FORMAT The tax return must be furnished at no charge at least 30 days prior to the due date. Whether by standard, non-standard or electronic format. There were 64 violations of this in the last five years. Lets talk about this one. What does furnished mean?

#1 P1040 MONTHLY TRANSMITTALS Outgoing Transmittals, Incoming Billing Transmittals even with the clearinghouse there are still 87 issues with this yearly and with only to 10-15 jurisdictions being reviewed every year more than likely each of those jurisdictions are being hit by this violation.

IFTA Compliance ReviewHow should I respond to any findings?

What happens next?IRP Peer ReviewIRP Peer ReviewPeer Review Schedule

IRP Member Jurisdictions are reviewed once within a five-year peer review cycle.

The peer review period begins with the earliest un-reviewed calendar year and ends with the most recently completed calendar year.

The peer review schedule is managed by the staff liaison and is approved annually by the IRP Board of Directors.

IRP Peer ReviewTWO OPTIONS for the Review

On-site Review

Remote ReviewA remote Peer Review is an alternate process to the traditional on-site Peer Review. Instead of reviewing documents on-site, the Jurisdiction being reviewed provides all requested documents and information electronically.

IRP Peer ReviewPreliminary ReviewWithin 120 days of the scheduled peer review, the staff liaison sends a letter to the jurisdictions contact person identifying information that will be required prior to and during the peer review (attachments 1, 2 and 3). The staff liaison sends copies of the information submitted by the jurisdiction to the review team.

Prior to the review of any documents, the review team will sign a confidentiality statement regarding the review/documents, etc. The registrant information included in the documents reviewed during the peer review process. IRP Peer ReviewPreliminary Review cont.

The review team will contact the jurisdiction and identify any missing documents and reports any concerns with the report formats (60 days prior to scheduled review). If account/audit selections have been made, lists(s) are provided to the jurisdiction. If account/audit selections have not been made, the review team will provide the jurisdiction a date in which the selections will be sent to the jurisdiction. The review team will obtain missing documents and reports from the jurisdiction, identify new or additional contacts if necessary, and discuss any preliminary concerns with the staff liaison (30 days prior to the scheduled review). For audits, they generally will have reviewed some sample audits.

IRP Peer ReviewPreliminary Review cont.

The review will begin 3-30 days prior to the scheduled Peer Review. IRP Peer ReviewOpening Conference

The review begins with an opening conference, at which time introductions are made and the jurisdictions staff and the review team discuss any areas of concern identified in the preliminary review, along with explaining the review process and answering any questions. Conference calls are used for Remote Reviews.

The information required for the peer review must be available to the review team at this time (for Remote Reviews, some information that may typically be provided on-site may need to be available before Opening Conference)

IRP Peer ReviewClosing Conference & Report Process

On the final day, the review team and staff liaison prepares a preliminary report, which includes all findings of compliance/non-compliance, and confirms with the jurisdiction the time for the Closing Conference.

The preliminary report and supporting documentation are provided at the Closing Conference. The review team discusses the findings with the jurisdiction, which may include verbal suggestions for the jurisdiction to consider. The jurisdictions IRP staff is encouraged to ask questions.

IRP Peer ReviewAt the end of an IRP Peer Review a closing conference will be held with the Jurisdiction. The purpose of the closing conference is to present preliminary findings of the Review to the jurisdiction.

Following the completion of a Review, a preliminary Report will be prepared based on the findings of the Team, and will be presented to the jurisdiction at the closing. The jurisdictions will be encouraged to provide a response on the review.

After 30 days, the preliminary report will become Final and posted on the IRP web site along with Jurisdiction responses to the review.

IRP Peer ReviewFor IRP there will be a Follow-up Peer Review for non-compliant Sections (Conference Call)

Approximately one year from the closing conference, a follow-up Peer Review call will be held with the Jurisdiction as part of the Committees monthly conference call.

Jurisdiction will be provided with Action Plan requesting required documents to determine compliance with Sections found out of compliance.

Jurisdiction staff members may participate in the conference call to explain the information provided.

Continued non-compliance issues will be referred to the Dispute Resolution Committee (DRC).

IRP Peer ReviewThe Review Itself What you need to know

IRP Peer ReviewArticle X, Section 1065, Netting of Audit AdjustmentsVerify the jurisdiction has procedures in place to properly collect and refund audit adjustments.Ensure that the collection of any underpayment is transmitted within 30 days following the transmittal period during which such payment was received.

Article X, Section 1070, Audit Transmittals Determine whether the jurisdiction is netting its audit adjustments as defined in the Plan to both Clearinghouse and non-Clearinghouse member jurisdictions.IRP Peer Review(IRP 1025) Obtain the Annual Report of IRP Audit Activity forms (APM Appendix A) completed each of the calendar years under review by the jurisdiction being reviewed.

Determine whether the total number of audits listed meets or exceeds the 3% yearly average requirement (attachment 3).

If the jurisdiction conducts Records Reviews, determine the number of reviews conducted each of the calendar years under review and ensure no more than 25% of the audit requirement (per year) is satisfied by those reviews (3 reviews may be substituted for 1 audit)

IRP Peer Review(IRP 1055) Check with reviewers audit personnel to determine if the jurisdiction has sent audit findings during a period of three to six months prior to the review visit. Determine if the information being sent would allow a proper decision to be made by a foreign jurisdiction.(APM 201) Obtain and review the jurisdictional personnel hiring guidelines, organizational chart, and procedural flowcharts (if available).

IRP Peer Review(APM 201) Select a sample of audits from the jurisdictions audit list. It is up to the review auditor to determine a sample selection method. Once the population size is determined, at least half of the audits to be sampled shall be from the final calendar year of the review period, and the remaining audits shall be randomly selected from the two calendar years preceding the final calendar year. The initial sample size can be reduced or expanded based on auditor judgment; if reduction or expansion occurs, document this on the Peer Review Log.

IRP Peer Review(APM 205) Review the standardized audit program submitted by the jurisdiction.

(APM 204) Review the jurisdictions organizational chart to determine if possible organization impairments to auditor independence may exist.

(APM 1220) Verify whether annual audit reports have been filed for the period covered by the compliance review. Examine the annual reports to determine whether the reports were filed timely and accurately.802(a) A copy of the Registrant Audit Report is kept in the audit file.

IRP Peer Review802 Registrant Audit Report contains at least the following information:Name and address of registrant.Account number and fleet number.Registration years audited.Distance traveled & percent as originally filed.Distance traveled & percent as a result of audit.Amount of percent factor change.Net fees due (or credit) for each Member Jurisdiction.Remarks, recommendation and findings, including a description of the type records audited.Audit techniques employed.IRP Peer Review802 Registrant Audit Report contains at least the following information:

Identification of any vehicles removed from the fleet which have full plate fees assessed in the audit.Date the audit report was issued and the name of the auditor.The Registrant Audit Report contains enough information, including detailed schedules, to allow the Registrant to verify any adjustments made.A copy of the Interjurisdictional Audit Report is kept in the audit file.

IRP Peer Review803(b) Interjurisdictional Audit Report contains at least the following information:Name of base jurisdiction.Name and address of registrant.Account number.Registration years audited.Number of vehicles apportioned.Reported distance traveled, distance percentage, and fees by jurisdiction.Audited distance traveled, distance percentage, and fees by jurisdiction.IRP Peer Review803(b) Interjurisdictional Audit Report contains at least the following information:

A brief narrative of the audit procedures, findings and any other necessary information. Date the audit report was issued and the name of the auditor.Contains a statement on whether the registrants distance accounting system is adequate or inadequate; if inadequate, the reason why is to be noted.

IRP Peer Review1035, 1040(a), 802(a), 803(a) Upon completion of the audit, the registrant and the jurisdictions were provided with a copy of the audit report and afforded the specified review period 30 days for the registrant and 45 days for the jurisdictions. The file includes evidence that timely notification was given to the affected jurisdictions.Ballot 371 ComparisonsAUDITS PRIOR TO JULY 1, 2013AUDITS AFTER JULY 1, 2013CITE & DESCRIPTIONCITE & DESCRIPTION301Jurisdiction auditors meet the qualifications of the jurisdiction's personnel guidelines.301(a)Jurisdiction auditors meet the qualifications of the jurisdiction's personnel guidelines.201Auditors have adequate technical training and proficiency.301(b)Internal and/or external training opportunities are provided to the audit staff.204(a)Jurisdiction's audit and audit support staffs are properly trained in audit planning and audit procedures.302(a)All licensees and member jurisdictions are given equal consideration; no preferential treatment is given.204(b)Supervisory follow-up and review of the auditor's procedures exists.302(b)Auditors conduct themselves in a manner which promotes cooperation and good relations. Ballot 371 ComparisonsAUDITS PRIOR TO JULY 1, 2013AUDITS AFTER JULY 1, 2013CITE & DESCRIPTIONCITE & DESCRIPTION205(a)The auditor must be free from personal and external impairments to independence. The auditors are without bias with respect to a licensee under audit.201Auditors exercise due professional care and have adequate technical training and proficiency. 205(b)In order to maintain independence, auditors should not be involved with the processing of IRP applications.203(a)Audits are adequately planned.302(a)All licensees are given equal consideration; no preferential treatment is given.203(b)The audit function includes supervisory review, which is documented in the audit file. 202(a)Due professional care is exercised in performing an audit and in preparing an audit report.204The auditor and organization must be free from personal, external and organizational impairments to independence. Auditors should not be involved with the processing of IRP applications.Ballot 371 ComparisonsAUDITS PRIOR TO JULY 1, 2013AUDITS AFTER JULY 1, 2013CITE & DESCRIPTIONCITE & DESCRIPTION202(b)The Audit program adopted by the jurisdiction is uniform and thorough to ensure accuracy. Any discrepancies in total distance reported for member jurisdictions are reported by the base jurisdiction per a complete audit of the registration for the 1 member jurisdictions, and the necessary adjustments are made.1000(a)The base jurisdiction requires that registrants preserve the records for a period of three years after the close of the registration year. Such records shall be made available for audit.302(d)Auditors conduct themselves in a manner which promotes cooperation and good relations. 1005(a)Review policies and procedures pertaining to the adequacy of the distance accounting system maintained by the registrant. Records 1) contain the kind of information needed and 2) substantially cover the fleet's operations.303(b)Auditors are allowed to discuss any discrepancies with a licensee.1005(b)Records may be produced through any means and retained in any format or medium accessible by the base jurisdiction. 303(c)Auditors are able to make preliminary recommendations to a licensee.1010The base jurisdiction provides the registrant with information that supports what types of information constitutes adequate recordsBallot 371 ComparisonsAUDITS PRIOR TO JULY 1, 2013AUDITS AFTER JULY 1, 2013CITE & DESCRIPTIONCITE & DESCRIPTION1005The base jurisdiction requires registrants to maintain records to substantiate information on the apportioned application.1015Inadequate records prompt the graduated assessment: 1st offense = 20% for all jurisdictions; 2nd = 50%; 3rd + = 100%.1005The base jurisdiction requires that registrants preserve the records for a period of three years after the close of the registration year. Such records shall be made available for audit.1020(b)Audits are conducted on behalf of all member jurisdictions, and the base makes assessments and collections based on its audits.401Review policies and procedures pertaining to the adequacy of the distance accounting system maintained by the registrant.1025Determine how audits are counted, and verify other numbers on the annual audit report. Document if by fleet, account, etc. 1010Review policies and procedures pertaining to a registrants failure to preserve or maintain records. When inadequate, credits are denied and/or a full fee assessment is applied for the base.1055The base jurisdiction provided pertinent information to the member jurisdictions concerning the registrant selected for audit.Ballot 371 ComparisonsAUDITS PRIOR TO JULY 1, 2013AUDITS AFTER JULY 1, 2013CITE & DESCRIPTIONCITE & DESCRIPTION1015Determine how audits are counted, and verify other numbers on the annual audit report. Document if by fleet, account, etc.1040/1045Request and examine the jurisdictions reexamination correspondence, if any. Verify that affected member jurisdictions were properly notified.1025The base jurisdiction provided pertinent information to participating jurisdictions concerning the registrant selected for audit in accordance with Section 410.404(a)(ii)Auditors are able to make recommendations to a licensee.1040/1045Request and examine the jurisdictions reexamination correspondence, if any. Verify that affected member jurisdictions were properly notified.404(c)Auditors are allowed to discuss any discrepancies with a licensee.Ballot 371 ComparisonsAUDITS PRIOR TO JULY 1, 2013AUDITS AFTER JULY 1, 2013CITE & DESCRIPTIONCITE & DESCRIPTION701Reflect no fee adjustments702(a)(i)Comply with Articles 2 and 3 of the Manual702(a)(ii)Documents the distance accounting system, items in source documents and source used to determine distances702(a)(iii)Documents/assesses internal controls702(a)(iv)Determines/documents adequacy of records, identifying specific deficiencies702(a)(v)Results in a written report to the registrant citing specific deficienciesBallot 371 ComparisonsAUDITS PRIOR TO JULY 1, 2013AUDITS AFTER JULY 1, 2013CITE & DESCRIPTIONCITE & DESCRIPTION702(a)(vi)Documents all contacts with the registrant702(a)(vi)Retained in accordance with prevailing audit retention requirements702If conducted by personnel who are processing applications, all other provisions of the Manual are met.IRP Peer ReviewHow should I respond to any findings?

What happens next?Top 5 IRP Findings# 5 Section 1015 Frequency of Audits (Current Section 1025)Each Member Jurisdiction shall conduct a number of Audits equivalent to an average of 3% per year of the number of Fleets whose registration it renews annually under the Plan, as required to be reported by the Member Jurisdiction in the annual report filed pursuant to the Plan

#4 Section 305 Selection of Base JurisdictionAn applicant may elect as its Base Jurisdiction any Member Jurisdiction (i) where the Applicant has an Established Place of Business, (ii) where the Fleet the Applicant seeks to register under the Plan accrues distance, and (iii) where Records of the Fleet are maintained or can be made available.

Top 5 IRP Findings#3 Section 1025 Notification of Audit Findings

Upon the completion of an Audit, the Base jurisdictions shall provide notice of the Audit findings to the registrant and to all Member Jurisdictions in which the Registrant was apportioned or in which it traveled.The base jurisdiction shall submit the Interjurisdictional reports to all affected jurisdictions at the time the Registrant Audit Report is sent.

Top 5 IRP Findings#2 APM 803 Interjurisdictional Audit Report

The Audit file or other record maintained separately shall include evidence of timely notification.The Interjurisdictional audit report shall contain the information outlined in 803 (b).

Top 5 IRP Findings#1 Section 315 Application Process Section 320 Distance Estimates by Base Jurisdictions

The Base Jurisdiction shall review any estimate of distance and any supporting documentation. If the Base Jurisdiction does not accept the Applicants estimate of distance, or if the Applicant does not submit an estimate, the Base Jurisdiction shall estimate the distance using the method provided in Section 320.When an Applicant for a fleet that did not accrue any actual distance during the Reporting Period does not have an estimate of anticipated Fleet distance that is acceptable to the Base Jurisdiction, the Base Jurisdiction shall estimate distance based on the average per-Vehicle distance in each Member Jurisdiction (Estimated Distance Chart)

Best Practice Tips for IFTA&IRPDo your own mock Review on your own Jurisdiction.

Review recent final reports to determine common non-compliance findings.

Review your Jurisdictions past review results. The reviews will always look at previous non-compliance areas.

Find & Fix non-compliance areas BEFORE the review.

If you or your staff have questions, ask the Review Team about the process or any issue concerning the Review prior to the review.(Remember questions dont count as a non-compliance finding!!!)

Who to ContactFor IFTA Contact Dick Beckner, Phone 480-839-4382 E-mail rbeckner@iftach.orgFor IRP Ken Carey,Phone: (703) 963-1604E-mail: kcarey@irpinc.org

(Coordinators of the reviews who can confirm what is expected, information requested/received and corroborate time frames during the review period.)

IFTA ResourcesIFTA

IFTA Program Compliance Guidehttp://www.iftach.org/procomp/2011/Review%20Guide%20Ratified%20August%202011%20including%20Worksheet%20L.pdf

Review Worksheetshttp://www.iftach.org/procomp/2012/Revised%20Worksheets%20A-P%20January%202012.pdf

IRP ResourcesIRP

Peer Review Compliance Guide:http://c.ymcdn.com/sites/www.irponline.org/resource/resmgr/resources_&_services/comp_guide_2013.pdf

Peer Review Compliance Guide Attachment:http://c.ymcdn.com/sites/www.irponline.org/resource/resmgr/resources_&_services/comp_guide_att_2013-2.pdf

Questions?