1. Promoting Cooperation Between Audit and Operations Presenter: William P. Cullen Audit Manager Arizona Department of Transportation Office of Audit and Analysis- Revenue Audit

2. Level of Cooperation Between Audit and Operations Prior to July 2005Prior to July 2005 –Limited interaction with Internal/External operations –Assistance was usually on a case by case basis, mostly problem Taxpayers –Audit defined its role in a limited basis “We do audits”

3. Level of Cooperation Between Audit and Operations continued… July 2005 to CurrentJuly 2005 to Current –Extensive interaction with operations and related departments- usually weekly –Continuous projects –Attend weekly meetings (if needed) –Quarterly and semi-annual status report to MVD Operations Management

4. Areas Subject to Interaction and Interfacing InternalInternal –MVD Management –Operations Management –IFTA/IRP Licensing –Fleet Services –Accounting –Collections –Enforcement (Ports of Entry) –Third Party –Information Technology (IT) –Office of Inspector General External –Office of the Attorney General –Department of Revenue –County Attorney –Internal Revenue Service –Department of Weights and Measures –Towns and Cities –Navajo Nation –Department of Public Safety (DPS) –Federal Highway Administration (FHWA)

5. Implementation of Refund Processing Program 1 of 4 Refund: Refers primarily to the refund of state tax ($0.26) for consumption of use fuel used in a non-taxable application, i.e. off highway miles, reefer gallons, etc.

6. Implementation of Refund Processing Program 2 of 4 Problem: The Attorney General’s office conducted an audit of the Refund Department. Recommendations included involvement of Audit Department to improve internal controls and procedures for processing of refunds.

7. Implementation of Refund Processing Program 3 of 4 Solution: Create a Refund Team consisting of Refund, Operations, and Audit team membersCreate a Refund Team consisting of Refund, Operations, and Audit team members Met 2-4 hours per week for 2 years. Consolidated refund forms.Met 2-4 hours per week for 2 years. Consolidated refund forms. Developed refund processing procedures and policiesDeveloped refund processing procedures and policies Refunds over a specified amount need secondary (audit) approvalRefunds over a specified amount need secondary (audit) approval

8. Implementation of Refund Processing Program 4 of 4 Result: Department and Division efficiency and productivity was improvedDepartment and Division efficiency and productivity was improved Customer service was enhancedCustomer service was enhanced Frivolous and duplicate refunds were eliminatedFrivolous and duplicate refunds were eliminated Customer database was establishedCustomer database was established Resulted in a 4 hour internal training session for auditorsResulted in a 4 hour internal training session for auditors A Win-Win situationA Win-Win situation

9. Sanitizing the IFTA/IRP Renewal Database 1 of 3 Problem: Many IFTA registrants were automatically renewed, although some of them were non- compliant.

10. Sanitizing the IFTA/IRP Renewal Database 2 of 3 Solution: Create an ongoing system to ensure a compliant registration processCreate an ongoing system to ensure a compliant registration process A Motor Carrier Process Team was formed which included Operations, Audit, and ITA Motor Carrier Process Team was formed which included Operations, Audit, and IT A preliminary letter was sent to Taxpayers who had a missing report, only traveling intrastate, or did not file any activityA preliminary letter was sent to Taxpayers who had a missing report, only traveling intrastate, or did not file any activity A second letter with action by a bonding deadline was sent- If not complied with, result could be revocationA second letter with action by a bonding deadline was sent- If not complied with, result could be revocation

11. Sanitizing the IFTA/IRP Renewal Database 3 of 3 Result: Hundreds of (Non-compliant) Licensees have been removed from active account statusHundreds of (Non-compliant) Licensees have been removed from active account status Audits required are based on number of active renewed registrants.Audits required are based on number of active renewed registrants. 500 removed accounts = 15 IFTA Audits 15 entities = One Auditor

12. Implementation of Record Keeping Agreement 1 of 3 Problem: Many Taxpayers do not meet the minimum record keeping requirements and some Taxpayers do not keep records for the required four (4) year retention period.

13. Implementation of Record Keeping Agreement 2 of 3 Solution: Educate the Taxpayers by having them sign a Record Keeping Agreement which identifies all records to be maintained and the time period for keeping all the records.

14. Implementation of Record Keeping Agreement 3 of 3 Results: A partial mailing was sent in July 2008 with the remainder to be mailed to all IFTA/IRP registrants in September 2008. Early indications are very positive. Follow up training at several levels will be required. Full impact of the project will take 3 years.A partial mailing was sent in July 2008 with the remainder to be mailed to all IFTA/IRP registrants in September 2008. Early indications are very positive. Follow up training at several levels will be required. Full impact of the project will take 3 years. Should enhance the revenue being reported from IFTA tax reports and annual IRP applications.Should enhance the revenue being reported from IFTA tax reports and annual IRP applications. The improved record keeping will dramatically reduce the number of hours required to conduct IFTA and IRP audits.The improved record keeping will dramatically reduce the number of hours required to conduct IFTA and IRP audits.

15. Making it Happen Promoting Cooperation Between Departments and Agencies Not one solution, situations are uniqueNot one solution, situations are unique Have patience, change will not happen overnightHave patience, change will not happen overnight Empathy- Try to look at things through their eyesEmpathy- Try to look at things through their eyes Look at the Big Picture, all the ramificationsLook at the Big Picture, all the ramifications Be responsive to requests and suggestionsBe responsive to requests and suggestions Use a Transparent ApproachUse a Transparent Approach Get to know the Players inside and outside of work environmentGet to know the Players inside and outside of work environment Invite to meetingsInvite to meetings Have lunchHave lunch Attend conference togetherAttend conference together Share credit- send a thank you e-mailShare credit- send a thank you e-mail

16. Benefits Both department enjoy productivity gainsBoth department enjoy productivity gains More relaxed atmosphereMore relaxed atmosphere Audit referrals from many departmentsAudit referrals from many departments Career opportunitiesCareer opportunities Much more informed- holistic knowledgeMuch more informed- holistic knowledge