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Inadequate is a harsh word. It means that someone or something is falling short.

When referring to inadequacy in terms of records under the International Fuel Tax Agreement (IFTA) or the International Registration Plan (IRP), it can be confusing. What exactly are inadequate records?

Adequate vs. inadequate

In an audit, the auditor makes an initial assessment to determine whether a carrier’s records are adequate or inadequate.

Adequate means that the records are appropriate and sufficient. Appropriate refers to the quality of the records, meaning that they contain the right kinds of information. Sufficient refers to the quantity of the records, meaning that there are enough records to audit.

If the auditor determines that the records are appropriate and sufficient, the carrier is given an “adequate” rating. The adequate rating is simply a way to determine whether the auditor has enough data to proceed with the audit.

However, if the quality and quantity of the records is lacking, the carrier is given an inadequate rating. Inadequate means exactly what has been described above — that a carrier has fallen short and that the records are not meeting expectations.

Do all jurisdictions have the same definition of inadequate?

Inadequate records can have different meanings among the jurisdictions. In one jurisdiction, if the carrier is missing odometer readings in the records, the records could be deemed inadequate. In other jurisdictions, if the routes of travel are missing, the records could be deemed inadequate. Yet in other jurisdictions, missing odometer readings or missing routes of travel don’t warrant an automatic inadequate rating.

Much depends on the specifics of the situation. Was the lack of odometer readings an isolated incident or a regular occurrence? Some auditors will give carriers opportunities to gather data from other sources to help complete records; for example, an auditor may allow a carrier to reference maintenance records, driver logs, or bills of lading to help substantiate routes or odometers. An auditor may give a carrier this opportunity, but the question is: does the carrier have the resources, staff, and time to gather these records and create them from secondary sources? Most likely, a carrier will have difficulty gathering this data in a timely manner.

Why care about inadequate records?

In an IFTA or IRP audit, carriers should strive for an adequate records rating. The reason is because if the records are inadequate, under the IRP, carriers will pay a 20 percent assessment. The 20 percent assessment is 20 percent of the IRP fees for the audit period in question. Consider your last IRP bill and then take 20 percent of that bill — that would be your IRP penalty assessment. If you’re like most carriers, it’s a steep assessment. Under IFTA, the auditor can drop a carrier’s reported miles-per-gallon (MPG) to 4 MPG/1.7 kilometers-per-liter (KPL) or may reduce the reported MPG/KPL by 20 percent and recalculate the reported taxes.

How can you ensure your records are adequate?

The IFTA and IRP have virtually the same requirements for recordkeeping, whether keeping records on paper or using a global positioning system (GPS) or electronic logging device (ELD). The closer your records are to including all of the items on the list, the better your chances are in receiving an adequate rating.

Below are a few actions you can take to ensure your records are deemed adequate:

ODOMETERS. Make sure you’re tracking trip start and end odometer readings. In many jurisdictions, the odometer readings are critical to, and the sole basis for, an adequate rating.

ROUTES. Ensure you’re tracking your routes of travel. Getting from point A to B can be done in many different ways, and the route of travel helps to validate the distances recorded for your trips.

SUMMARIES. Create monthly and quarterly summaries of your distance and fuel data. This is a great habit to get into because not only are summaries a best practice “internal control,” they can help you ensure the data collected throughout the month and quarter is accurate and makes sense. In an audit, it’s likely that an auditor will ask for them anyway. Auditors love it when they can reference summaries and test accuracy with your trip reports. It saves their time and yours.