The word ‘audit’ is a serious word. It conjures up feelings of dread in most people.
But at the IFTA/IRP (International Fuel Tax Association/International Registration Plan) Audit Workshop in Las Vegas last month, the top administrators of the fuel tax and licensing programs used a compliance audit in a way that made both wily fleet tax pros like me and rank beginners more comfortable with the process. They devoted much of the three-day program to analyzing actual carrier data – manual source documents, GPS data, manual and card lock (invoiced) fuel purchase data, etc. – and leading auditors, administrators and folks from industry in a deep dive of a compliance audit.
It’s an important exercise because when it comes to the IFTA, we’re all about to leap into the uncharted waters of ‘electronic credentialing.’
Off the paper trail
A credential, as we say in the language of the IFTA, is a licence. Traditionally, it’s a piece of paper and a set of decals to indicate that you’re licensed to report and pay fuel tax. You are required to make copies of the licence and carry one in each qualified motor vehicle.
But is a piece of paper really necessary? Just because you have paper credentials doesn’t mean they’re valid or prove that you paid your tax. On the other hand, maybe you’ve filed your returns and are fully paid up but don’t have a physical copy of your credentials.
Starting next month and running through November, the IFTA is conducting a pilot project on electronic credentials. For participating carriers, credentials will be available for display as PDFs on tablets, smartphones and other devices. Carriers will still be required to carry paper credentials and affix decals to their IFTA-licensed vehicles, but clearly we’re moving toward an electronic format. The pilot should start to answer essential questions about how to manage electronic credentials and other types of data in the future.
Remember, the whole idea behind the IFTA is that it’s supposed to be a simpler way for 58 member states and provinces to manage fuel tax and make sure every jurisdiction gets its fair share.
But going electronic is complicated. Right now, there is no standard way to ‘read’ electronic data among IFTA jurisdictions. There are many different types of bar codes, scanners and other smart devices out there, and it’s expensive to outfit inspectors with new hardware. Converting government databases to a common set of information requires a lot of trial and error, and it takes time for everyone – government and industry alike – to change and adjust accordingly.
Of course, no one can agree on how electronic credentials should roll out and when, but the pilot is a step in that direction. There are even some companies that make its IFTA licence available to its drivers through a link on the company Web site.
As we stand on the ledge and look down on waves of change, one thing that the IFTA/IRP Audit Workshop made clear was the fact that we’re all still trying to get the basics down. Under the IFTA and IRP, what constitutes a trip? Is it a round trip from origin to destination and back home? Is it a week’s worth of travel?What about GPS records?Does GPS satisfy the very specific requirements for reporting distance? What internal controls should a carrier have to make sure it’s collecting the right data? What sources of information could an auditor use to learn as much about the carrier as possible?
During the workshops, tax administrators and auditors were constantly reviewing these questions, looking at policies, sharing notes and refining their approach. They talked openly about what they look for during a compliance review.
These conversations were like treasure at the bottom of the ocean – gold. I only wish more carriers had attended. If you run a truck fleet, consider this: Would you send your fleet tax compliance manager to next year’s meeting if he or she could learn something that would help you avoid penalties and fines? It’s a question I’d love to ask the company that was charged $15,000 each for three IFTA decals it could not account for. (True story).
The bottom line is there’s huge value in attending events like the IFTA/IRP Audit Workshop.
It’s one week out of the year when we can peer into the audit process without dread and ask every question under the sun.
Like, “Fifteen grand for a missing decal? Seriously?” Yup, seriously.
Sandy Johnson has been managing IFTA, IRP and other fleet taxes for more than 25 years. She operates FleetTaxPro.com, which provides vehicle tax and licence compliance services for trucking operations ranging from single vehicles to large fleets. She can be reached at 877-860-8025 or FleetTaxPro.com.