• Following these best practices can help carriers ensure their recordkeeping obligations are met.
• Improving internal controls by implementing a system of checks and balances can improve auditor evaluations.
• Avoiding common mistakes and understanding vehicle types are two methods that can help ensure proper and compliant recordkeeping.

The International Fuel Tax Agreement (IFTA) and International Registration Plan (IRP) recordkeeping requirements seem straightforward, yet there are always questions and concerns because each carrier’s operation is different. A few general best practices can be followed to help carriers ensure their recordkeeping obligations are met.

Perform an internal controls evaluation

A big part of the audit process involves an evaluation of the carrier’s “internal controls.” Internal controls are the collective systems the carrier has in place to ensure accurate recordkeeping and IFTA/IRP filings.

Internal controls, or lack thereof, can give the auditor an idea if the carrier’s recordkeeping system as a whole is reliable and trustworthy. To evaluate the internal controls, the auditor may ask for a walk-through of the recordkeeping process from start to finish. The auditor may also interview personnel involved in the filing and recordkeeping processes. Auditors also use questionnaires to evaluate carriers’ processes.

Improving internal controls could include implementing a system of checks and balances, including:

• Reviewing the miles per gallon (MPG)/kilometers per liter (KPL) to make sure it is within a reasonable limit for the vehicle;
• Ensuring the ending odometer reading for the month matches the beginning reading for the next month;
• Investigating units with no activity;
• Looking at the cities on the Individual Vehicle Mileage Records (IVMRs) and checking the route for distance accuracy; and
• Reviewing the IVMRs for jurisdictions that should not be listed based on the route (for example, “CA” being mistaken for “GA”).

Common mistakes

Common mistakes include:

• Missing or gap miles. This may occur if there is no record of where a vehicle was during a specific time frame. This could happen if the end-of-day and next-day numbers do not match. The driver may have mistakenly thought personal miles/kilometers do not have to be recorded, or the vehicle may have been leased out and the leasing miles/kilometers were not documented. All movement must be recorded, including distance driven by mechanics and loaded, empty, deadhead, and/or bobtail distances.
• Missing or illegible fuel receipts. Photocopies are allowed, but not always encouraged by the jurisdictions. For fuel receipts that are hard to read, carriers should make a photocopy or take a photo of the receipt and save it in an image file.
• Missing information on the driver trip report. If an auditor finds an incomplete driver trip report, the jurisdiction has the authority to ask the carrier to pull secondary documents to substantiate the tax claims. This could open a motor carrier up to more scrutiny and potential liability than it wishes.

Some of these mistakes can be avoided if the carrier has solid internal controls.

Understanding vehicle types

Knowing a fleet’s vehicles means that the carrier is familiar with the types vehicles it has, where they typically operate, and the vehicles’ average MPG/KPL. This per-vehicle information can be tracked using the monthly and quarterly summaries.

Keeping a vehicle listing can also help the carrier keep track of the IRP plates and IFTA decals.