IFTA Annual Business Meeting IFTA Annual Business Meeting Grand Rapids, MI Grand Rapids, MI July 18 – 19, 2012July 18 – 19, 2012

2012 – Audit Committee Report Dawn Lietz (NV) AC Chair

2012 – Audit Committee 2012 – Audit Committee MembersMembers

Dawn Lietz – NV (Chair) Jeff Hood – IN (Vice-chair)Dawn Lietz – NV (Chair) Jeff Hood – IN (Vice-chair)

Tony Dewell (ON) ‘08 Dave Nicholson (OK) ‘09Tony Dewell (ON) ‘08 Dave Nicholson (OK) ‘09

Bob Schwab (MO) ‘09 Diana Kay (FL) ‘10Bob Schwab (MO) ‘09 Diana Kay (FL) ‘10

Kelly Achenbach (NH) ‘12 Stacey Hammock (WY) ‘11Kelly Achenbach (NH) ‘12 Stacey Hammock (WY) ‘11

Don Williams (ID) ‘12 Jimmy Tompkins (AL) ‘12Don Williams (ID) ‘12 Jimmy Tompkins (AL) ‘12

Kristine Funk (SD) ‘12Kristine Funk (SD) ‘12

AnnMarie Chamberlain (MA) – Ex-officioAnnMarie Chamberlain (MA) – Ex-officio

2011/12 – Audit Committee 2011/12 – Audit Committee ReportReport

2012 IFTA/IRP Audit Workshop2012 IFTA/IRP Audit Workshop

2013 IFTA/IRP Audit Workshop2013 IFTA/IRP Audit Workshop

Charge from Board RE: Charge from Board RE: Procedures Manual P600Procedures Manual P600

Audit Manual ReviewAudit Manual Review

2012 IFTA/IRP Audit 2012 IFTA/IRP Audit WorkshopWorkshop

Held January 4 – 6, 2012 Tempe AZHeld January 4 – 6, 2012 Tempe AZ Theme was “Auditing in the 21Theme was “Auditing in the 21stst

Century: A Look at New and Evolving Century: A Look at New and Evolving Technologies”Technologies”

162 Attendees162 Attendees Overall attendance was up 41% over Overall attendance was up 41% over

20102010 Jurisdiction attendance was up 39% Jurisdiction attendance was up 39%

2013 IFTA/IRP Audit 2013 IFTA/IRP Audit WorkshopWorkshop

January 28 – 30, 2013 San Antonio, TX January 28 – 30, 2013 San Antonio, TX

Theme is “Audit Smarter: Improving Theme is “Audit Smarter: Improving Your Audit Processes”Your Audit Processes”

Topics: Interviewing Techniques; Topics: Interviewing Techniques; Internal Control Testing; Data Sharing; Internal Control Testing; Data Sharing; IRP Ballot 371 implementation IRP Ballot 371 implementation suggestions; and “hands-on” case suggestions; and “hands-on” case studies.studies.

Charge from Board RE: P600Charge from Board RE: P600

Review survey/recommendations from ITAC Committee and provide the Board with any recommendations for change.

Determine feasibility of developing minimum requirements for electronic submission of audits, and if possible, develop same.

Develop criteria so jurisdictions have necessary audit evidence when electronic technology is utilized

P600 – Audit Committee P600 – Audit Committee ReviewReview

Created a sub-committee to review and respond to the request. •Dawn Lietz; Bob Schwab; Diana Kay; Dave Nicholson• Note: Hoa Quach and Jeff Hood

(advisors)

•Changes from IRP Rewrite used as a guide to the IFTA language.

•Recognized need to consolidate P500 and P600 due to conflicting requirements

Audit Manual ReviewAudit Manual Review

Created a sub-committee in March 2011 to review make recommendations on changes to the Audit Manual. •Dan Young; Gene Hall; Dave Nicholson

Monthly updates provided to entire Committee

Periodic teleconferences to work through proposed changes

Recommendation to Board (April 2012) to consolidate with P600 changes

P500/600/Audit Manual P500/600/Audit Manual ConsolidationConsolidation

Expanded scope to add changes in Audit Manual and Agreement where references to the Procedures Manual were in conflict

Due to extensive cross-over language and impact recommend moving toward development of a single ballot

Provided all 3 documents to stakeholders as a survey for comment.

Comment Period (Survey)Comment Period (Survey)

ALAL ABAB AZAZ CTCT IL IL ININ KS KS KY KY MAMAMI MNMI MN MSMS MTMT NENENV NMNV NM OKOK ONON ORORSD TXSD TX UTUT WAWA WIWI

ATA IACATA IAC 24 Jurisdictions24 Jurisdictions 2 Industry Groups2 Industry Groups

And the Survey Says….And the Survey Says….

Articles of Agreement:Articles of Agreement:– Comments:Comments:

R1010.200 R1010.200 R1210.100R1210.100

– Requires use of P540 (4 MPG/1.7 KPL)Requires use of P540 (4 MPG/1.7 KPL)– Use of 4 MPG eliminates states flexibility of Industry Use of 4 MPG eliminates states flexibility of Industry

AvgAvg

R1210.200R1210.200– What is an “insufficient records notice”What is an “insufficient records notice”– Concern with combining tax return with audit notice.Concern with combining tax return with audit notice.

R1210.300R1210.300

And the Survey Says….And the Survey Says….

Procedures Manual: Procedures Manual: – Consolidation of P500 and P600Consolidation of P500 and P600

– Comments: P510Comments: P510 .100.100

– Add back period covered by waiverAdd back period covered by waiver

.200.200– Add back extension until records are providedAdd back extension until records are provided

.300 – .300 – – “…“…must send” languagemust send” language

And the Survey Says….And the Survey Says….

Procedures Manual:Procedures Manual:– Comments: P520Comments: P520– .100.100

Term “Be conclusive” is contradictoryTerm “Be conclusive” is contradictory

– .200.200 Uncertain how/when to apply P540Uncertain how/when to apply P540

– .300.300 Add “are accessible” or “as approved”Add “are accessible” or “as approved”

– .400.400 Add “distance software program” languageAdd “distance software program” language

And the Survey Says….And the Survey Says….

Procedures Manual:Procedures Manual:– Comments: P530Comments: P530– .100; .300; .400 – No changes .100; .300; .400 – No changes

recommendedrecommended– .200.200

Add “but not limited to” Add “but not limited to” .010 – recommend capture “goal” not minutes.010 – recommend capture “goal” not minutes .015 – “Unsure” what this means.015 – “Unsure” what this means .020 – “…but must not exceed” not necessary.020 – “…but must not exceed” not necessary

– .500.500 Specify “calendar year” instead of 4-quartersSpecify “calendar year” instead of 4-quarters

And the Survey Says….And the Survey Says….

Procedures Manual:Procedures Manual:– Comments: P540Comments: P540– ““No auditor discretion”No auditor discretion”– ““Reduces the natural ability of the Reduces the natural ability of the

auditor to use judgment”auditor to use judgment”

And the Survey Says….And the Survey Says….

Procedures Manual:Procedures Manual:– Comments: P550Comments: P550

All comments were supportiveAll comments were supportive

And the Survey Says….And the Survey Says….

Audit Manual:Audit Manual:– Several jurisdictions stated prefer to Several jurisdictions stated prefer to

incorporate existing IRP language where incorporate existing IRP language where possiblepossible

– Overall, comments were positive and Overall, comments were positive and constructiveconstructive

And the Survey Says….And the Survey Says….

Audit Manual:Audit Manual:– Comments: A100 Comments: A100

No definition for may, shouldNo definition for may, should Provides for extenuating circumstances to Provides for extenuating circumstances to

prevail on mandates such as 3% audit prevail on mandates such as 3% audit requirement.requirement.

And the Survey Says….And the Survey Says….

Audit Manual:Audit Manual:– Comments: A200 General StandardsComments: A200 General Standards

210.100 Proficiency and Due Prof Care210.100 Proficiency and Due Prof Care– Interferes with States sovereign rights Interferes with States sovereign rights

210.200 Auditor Independence 210.200 Auditor Independence 210.300 Planning and Supervision210.300 Planning and Supervision 220 - Auditor Qualifications & 220 - Auditor Qualifications &

ResponsibilitiesResponsibilities 230 – Audit Program230 – Audit Program

And the Survey Says….And the Survey Says….

Audit Manual:Audit Manual:– Comments: A300 Jurisdiction Req.Comments: A300 Jurisdiction Req.

310.300310.300– Insert “Calendar” to require 4 calendar quarters.Insert “Calendar” to require 4 calendar quarters.– Should not allow for audits less than 4 quartersShould not allow for audits less than 4 quarters– Could be abused by a jurisdiction trying to meet Could be abused by a jurisdiction trying to meet

numbersnumbers

320 Selection of Audits320 Selection of Audits– Numbering change only.Numbering change only.

And the Survey Says….And the Survey Says….

Audit Manual:Audit Manual:– Comments: A400 General GuidelinesComments: A400 General Guidelines– 420.100.005420.100.005

Clarify meaning of “Licensee’s business and Clarify meaning of “Licensee’s business and reporting history”reporting history”

– 420.200.005420.200.005 Should this be removed since it is not required?Should this be removed since it is not required?

– 420.200.020420.200.020 Change “may” to “will” require re-computationChange “may” to “will” require re-computation

And the Survey Says….And the Survey Says….

Audit Manual:Audit Manual:– Comments: A400 General GuidelinesComments: A400 General Guidelines– 430.400 – Sampling430.400 – Sampling

Recommend adding back signed agreementRecommend adding back signed agreement

– 440 Verification of Licensee Records440 Verification of Licensee Records No recommendationsNo recommendations

And the Survey Says….And the Survey Says….

Audit Manual:Audit Manual:– Comments: A450 Alternate EstimationsComments: A450 Alternate Estimations

Recommend definition of “sufficient” and Recommend definition of “sufficient” and “appropriate”“appropriate”

What is “An alternative estimation”What is “An alternative estimation”

450.100 MPG/KPL Estimation450.100 MPG/KPL Estimation– Recommend “adjustment”Recommend “adjustment”

And the Survey Says….And the Survey Says….

Audit Manual:Audit Manual:– Comments: A500 The Audit ProcessComments: A500 The Audit Process

A510A510– ““must” interferes with jurisdictional laws must” interferes with jurisdictional laws – should be up to the base jurisdiction to decide should be up to the base jurisdiction to decide

how soonhow soon– 510.100 – change to should510.100 – change to should– 510.200 - remove510.200 - remove

A520 – Opening ConferenceA520 – Opening Conference– Ballot 8-2000 clarified opening conferencesBallot 8-2000 clarified opening conferences– Recommend adding language that allows for Recommend adding language that allows for

more than face-to-face conference.more than face-to-face conference.

And the Survey Says….And the Survey Says….

Audit Manual:Audit Manual:– Comments: A530 Evaluation of Internal Comments: A530 Evaluation of Internal

ControlsControls 530.100.035530.100.035

– Too ambiguous – PCRC scrutinyToo ambiguous – PCRC scrutiny

530.200.005530.200.005– ““Study and evaluate” missingStudy and evaluate” missing

530.200.010530.200.010– Shifts burden of proofShifts burden of proof

And the Survey Says….And the Survey Says….

Audit Manual:Audit Manual:– Comments: A540 Closing ConferenceComments: A540 Closing Conference

A540A540– Make consistent with A520Make consistent with A520– Recommend adding language that allows for Recommend adding language that allows for

more than face-to-face conference.more than face-to-face conference.

And the Survey Says….And the Survey Says….

Audit Manual:Audit Manual:– Comments: A550 Audit ReportsComments: A550 Audit Reports

Should allow for electronic transmissionShould allow for electronic transmission Break into two sections: Narrative/SchedulesBreak into two sections: Narrative/Schedules Separate deficiencies, recommendations, Separate deficiencies, recommendations,

etc (not necessary on no-change audits)etc (not necessary on no-change audits)

And the Survey Says….And the Survey Says….

Audit Manual:Audit Manual:– Comments: A560 Audit File DocumentationComments: A560 Audit File Documentation

.100, .005, .015.100, .005, .015– .100 Did not like the word justify.100 Did not like the word justify– .005 wanted clarification on sample tests.005 wanted clarification on sample tests– .015 Did not like the word “imputed”.015 Did not like the word “imputed”

.200.200– Requirements of no value - RemoveRequirements of no value - Remove

.300.300– Should not be required to provide examples unless a Should not be required to provide examples unless a

working paper.working paper.

And the Survey Says….And the Survey Says….

Additional General Comments: Additional General Comments: – Do not rush to get throughDo not rush to get through– Use IRP language whenever possibleUse IRP language whenever possible– Expand process to include other Expand process to include other

stakeholdersstakeholders– Broader (expand) visionBroader (expand) vision– Use IRP language for substantive areas Use IRP language for substantive areas

that IFTA shares with IRPthat IFTA shares with IRP– Avoid prescriptive languageAvoid prescriptive language

And the Survey Says….And the Survey Says….

Additional General Comments: Additional General Comments: – Make language clear and consistent to Make language clear and consistent to

foster compliance and uniformityfoster compliance and uniformity– Establish “Principle Standards” of Establish “Principle Standards” of

auditing rather than “Rules based” auditing rather than “Rules based” – Avoid ambiguous languageAvoid ambiguous language– Keep Distance Recordkeeping the same Keep Distance Recordkeeping the same

as IRPas IRP

And the Survey Says….And the Survey Says….

Additional General Comments: Additional General Comments: – Combine the proposed language of Combine the proposed language of

A450, P520 and P540 to establish a A450, P520 and P540 to establish a “Licensee Records Evaluation” Section. “Licensee Records Evaluation” Section. Recommended to be placed in the Audit Recommended to be placed in the Audit

ManualManual

And the Survey Says….And the Survey Says….

Another Consideration for A310.300:Another Consideration for A310.300:– .300 A member jurisdiction may conduct .300 A member jurisdiction may conduct

an audit covering less than 4 consecutive an audit covering less than 4 consecutive quarters when:quarters when: The licensee represents a financial or other The licensee represents a financial or other

risk; andrisk; and– The licensee was referred for audit by:The licensee was referred for audit by:

Law Enforcement; Failure to file a return; Fuel Law Enforcement; Failure to file a return; Fuel Use Tax deficiency; Referral from other member Use Tax deficiency; Referral from other member jurisdiction; Referral from other federal, state, jurisdiction; Referral from other federal, state, local provincial government agency; local provincial government agency; anonymous complaintanonymous complaint

2012 – Audit Committee 2012 – Audit Committee MembersMembers

Dawn Lietz – NV (Chair) Jeff Hood – IN (Vice-chair)Dawn Lietz – NV (Chair) Jeff Hood – IN (Vice-chair)

Tony Dewell (ON) ‘08 Dave Nicholson (OK) ‘09Tony Dewell (ON) ‘08 Dave Nicholson (OK) ‘09

Bob Schwab (MO) ‘09 Diana Kay (FL) ‘10Bob Schwab (MO) ‘09 Diana Kay (FL) ‘10

Kelly Achenbach (NH) ‘12 Stacey Hammock (WY) ‘11Kelly Achenbach (NH) ‘12 Stacey Hammock (WY) ‘11

Don Williams (ID) ‘12 Jimmy Tompkins (AL) ‘12Don Williams (ID) ‘12 Jimmy Tompkins (AL) ‘12

Kristine Funk (SD) ‘12Kristine Funk (SD) ‘12

AnnMarie Chamberlain (MA) – Ex-officioAnnMarie Chamberlain (MA) – Ex-officio

Where do we go from here?Where do we go from here?

Questions/CommentsQuestions/Comments

Contact Information:Contact Information:

Dawn LietzDawn Lietz Audit ManagerAudit Manager

NV Department of Motor VehiclesNV Department of Motor Vehicles 555 Wright Way555 Wright Way

Carson City, NV 89711-0600Carson City, NV 89711-0600 (775) 684-4626 phone(775) 684-4626 phone

(775) 684-4619 fax(775) 684-4619 fax

Thank You!!!Thank You!!!

2012 – Audit Committee Report Dawn Lietz (NV) AC Chair