Internal Audit Report 

Lease and Concession Audit
Avis Budget Group, LLC
dba Avis Rent A Car System, Inc.

November 1, 2008  October 31, 2011




Issue Date: November 13, 2012
Report No. 2012-20

Internal Audit Report
Avis Rent A Car System
November 1, 2008, through October 31, 2011

Table of Contents

Transmittal Letter ........................................................................................................................ 3 
Executive Summary .................................................................................................................... 4 
Background ................................................................................................................................ 5 
Conclusion .................................................................................................................................. 7 
Schedule of Findings and Recommendations ............................................................................. 8 
1. Avis Did Not Comply With Record Retention Requirements ................................................................. 8 
2. Concession Revenue Was Underreported ............................................................................................... 9 













Page 2 of 10

Internal Audit Report
Avis Rent A Car System
November 1, 2008, through October 31, 2011

Transmittal Letter

Audit Committee
Port of Seattle
Seattle, Washington

We have completed an audit of the Avis Budget Group LLC, dba Avis Rent A Car System, Inc. We
reviewed information relating to a three-year period from November 1, 2008, through October 31,
2011.
We conducted this performance audit in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and conclusions based on our
audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.
We extend our appreciation to the management and staff of Aviation Business Development and
Accounting and Financial Reporting for their assistance and cooperation during the audit.



Joyce Kirangi, CPA
Internal Audit, Director







Page 3 of 10

Internal Audit Report
Avis Rent A Car System
November 1, 2008, through October 31, 2011
Executive Summary

Audit Scope and Objective The purpose of the audit was to determine whether:
1) The reported concession fees were complete, properly calculated, and remitted timely to the
Port.
2) The Port and the lessee complied with provisions of the Lease and Concession Agreement, as
amended.
3) Customer Facility Charges (CFC) were properly collected and remitted timely to the Port.
We examined the books and records of Avis Rent A Car, Inc. (Avis) for a three-year period from
November 1, 2008, through October 31, 2011. Aviation Business Development, in conjunction with
Accounting and Financial Reporting, has the primary responsibility for administering and monitoring
the agreement to ensure compliance with agreed-upon terms.

Agreement Terms  The terms of the agreement provide for a Minimum Annual Guarantee (MAG) of
80% of the total amount paid to the Port in the previous agreement year. Additionally, the agreement
requires a Percentage Fee equal to 10% of gross revenues, provided the fee is higher than the
monthly MAG payment.

Audit Result Summary Avis materially complied with the terms of the Lease and Concession
agreement. However, as reported in Findings 1 and 2, we determined that records had not been
retained in accordance with the terms of the agreement and certain gross receipts were
underreported. We recommend Port management seek and recover approximately $7,671 in
additional concession fees, late fees, and interest charges.








Page 4 of 10

Internal Audit Report
Avis Rent A Car System
November 1, 2008, through October 31, 2011
Background
Avis is one of three brands offering rental cars/trucks within the Avis Budget Group, LLC. Avis Budget
Group is headquartered in Parsippany, N.J., and maintains a local administrative office and fleet
maintenance facility near Seattle-Tacoma International Airport. The Avis office within the airport is
wholly owned by Avis Budget Group, LLC., and in 2008, Avis entered into a 30-year agreement with
the Port to operate from its (future) consolidated rental car facility.
The terms of the agreement provide for a Minimum Annual Guarantee (MAG) of 80% of the total
amount paid to the Port in the previous agreement year. Additionally, the agreement requires a
Percentage Fee equal to 10% of gross revenues, provided the Percentage Fee is higher than the
monthly MAG payment.
The following are the only agreed-upon deductions allowed in the agreement:
a. Any tax imposed or collected on behalf of a taxing authority
b. Any amounts received as insurance proceeds or for damage to vehicles or other property,
or for loss, conversion or abandonment of such vehicles
c. The wholesale transfer of salvage vehicles
d. All non-revenue rentals to employees
e. Fees paid to other governmental agencies (excluding the Port), relating to transactions at the
Airport
The MAG is payable in advance, on or before the first day of each month, without notice from the
Port. The percentage fee, if applicable, is due on or before the 20th of the following month. For
untimely payments, the agreement provides for a one-time late fee of 5% of the overdue amount and
interest to be accrued at the rate of 18% per year from the due date until paid.
Below are the financial highlights for the last three fiscal years:
Fiscal       Reported       Paid 
Year    Gross Revenue  Concession 
2008  2009    $40,271,615   $4,225,757 
2009  2010*     38,181,518    4,058,000 
2010  2011*     42,257,572    4,058,000 
Total         $120,710,705  $12,341,757 
* MAG is greater than concession for the Agreement Year

Audit Scope and Methodology
We conducted the audit to determine whether the parties were in compliance with the lease
agreement terms including, but not limited to, proper concession and CFC payments. We utilized a
risk-based audit approach from planning to test sampling. We gathered information through document
requests, interviews, observation, and analytical reviews. We obtained a complete understanding of
the financial requirements of the Agreement between the Port of Seattle and Avis. We applied

Page 5 of 10

Internal Audit Report
Avis Rent A Car System
November 1, 2008, through October 31, 2011
additional detailed audit procedures to areas with the highest likelihood of significant negative impact
as follows:
a. Timely Payment                      e. CPA Certified Annual Report
b. Insurance Liability                         f. Concession Revenue
c. Surety Bond/Security Deposit               g. Customer Facility Charge (CFC)
d. Minimum Annual Guarantee (MAG)
a) Timely Payment
We reviewed payment records to determine whether the lessee complied with the required due
date.
b) Insurance Liability 
We reconciled insurance requirements to the coverage reflected in the certificate of insurance in
force for the audit period to current.
c) Surety Bond/Security Deposit 
We determined whether the surety bond amount complied with the requirements stipulated in the
agreement.
d) Minimum Annual Guarantee
We determined whether MAG was properly calculated and Port management obtained Port
Commission approval for Exception Relief to MAG.
e) CPA Certified Annual Report 
We reviewed audit reports for the audit period to determine compliance with the timely and
complete submission of the report.
f)  Concession Revenue 
We interviewed Avis Personnel about their policies, procedures, and internal controls over cash
receipts, sales, accounting, and reporting.
The Business Adjustment Report (BAR), which is the general ledger, shows the monthly detail per
revenue category. The Revenue Report shows the monthly totals summarized by revenue
category. We reconciled the BAR to the CPA report to the Revenue Report.
To determine whether the lessee completely reported all concession revenues, we selected a
sample of 150 closed rental agreements deemed high-risk for the audit period. We determined
whether the revenue reported on each rental agreement agreed to the amount posted to the BAR.

Page 6 of 10

Internal Audit Report
Avis Rent A Car System
November 1, 2008, through October 31, 2011

g) Customer Facility Charges
We reconciled the CFC amount reported in the BAR to each rental agreement in the risk-based
sample of closed rental transactions. We determined whether the CFC was properly calculated,
timely collected, and remitted in full to the Port, as required in the agreement.

Conclusion
Avis materially complied with the terms of the Lease and Concession agreement. However, as
reported in Findings 1 and 2, we determined that records had not been retained in accordance with
the terms of the agreement and certain gross receipts were underreported. We recommend Port
management seek and recover approximately $7,671 in additional concession fees, late fees, and
interest charges.













Page 7 of 10

Internal Audit Report
Avis Rent A Car System
November 1, 2008, through October 31, 2011
Schedule of Findings and Recommendations

1. Avis Did Not Comply With Record Retention Requirements Related to Certain Key Records 

The Section 7.1 of the agreement states, in part:
"Concessionaire shall maintain its records relating to the operation permitted by this Agreement for
a period of at least three (3) years after the end of each Agreement Year (or until the close of any
ongoing audit thereof being conducted by, or on behalf of, the Port)". 
The above section translates to the following record retention time schedule for the audit period:
Record Retention for three (3) years after the end of each
Agreement Year                        agreement year
st                       nd                     rd
1 Year         2 Year        3 Year
November 1, 2008 to October 31, 2009     October 31, 2010     October 31, 2011   October 31, 2012
November 1, 2009 to October 31, 2010     October 31, 2011     October 31, 2012   October 31, 2013
November 1, 2010 to October 31, 2011     October 31, 2012     October 31, 2013   October 31, 2014
Section 7.1 further states:
"Concessionaire covenants and agrees that it will establish and maintain an accounting system
(specifically including all books of account and records customarily used in the type of operation
permitted by this Agreement) in full and complete accordance with generally accepted accounting
principles and otherwise satisfactory to the Port for the determination of any Concession Fees or
other computations, or both, which may be necessary or essential in carrying out the terms of this
Agreement."
For the fiscal period ended 2009 and 2010, we were unable to verify adjustments to concession
revenue because Avis had not retained the following key records in accordance with the lease and
concession agreement.
12 months
12 months ending
Unavailable Key Records         Avis Report Ref.        ending
Oct. 31, 2010
Oct. 31, 2009
RA PAYMENT/HISTORY
Time and Mileage (T&M) Adjustments
SCREEN
No          Limited
Closed Car Rental Agreements           RECEIPT
Availability        Availability
Detail Customer Payment Information
CCB020
Including Refunds
Consequently we could not determine the completeness of the following:
a. CFC for the 10-month period ending August 31, 2009.
b. Total adjustments of $188,653 and $142,761 to concession revenues in 2009 and 2010,
respectively.

Page 8 of 10

Internal Audit Report
Avis Rent A Car System
November 1, 2008, through October 31, 2011
Recommendations:
We recommend management:
Ensure the lessee maintains records in accordance with the lease agreement.
Consider amending the agreement to specifically address noncompliance with record
retention requirements.
Management Response
Management believes that Avis/Budget did materially comply with the Lease requirements
regarding record retention. Their policy is to retain the records in questions on a rolling 3 year
basis (most recent 36 months). As such, it would be in the Port's best interest to conduct the
audits one to two years after the close of the year to ensure we get the information we need.
Management does not believe that amending the lease is a viable option, as the Concessionaire
would not agree to terms that would add penalties and/or more burdensome record keeping.

2. Concession Revenue Was Underreported 
The lease agreement in Section 1.26 stipulates:
"Gross Revenues" shall mean and refer to all consideration of any kind- whether cash, credit
or in kind- received, derived and/or billed by the Concessionaire for: (a) all charges, including,
but not limited to, time and mileage charges and separately stated fees for rental of vehicles
and other related or incidental services or merchandise, and any other items or services,
made at or from Concessionaire's Rental Car Concession, regardless of where the vehicles or
services are delivered to or returned; (b) all amounts charged to the customer for insurance
offered by Concessionaire incidental to the rental of such vehicles, including but not limited to
personal accident insurance; (c) all charges attributable to any vehicle originally rented at
Concessionaire's Rental Car Concession which is exchanged at any other location; (d) all
proceeds from the long-term lease of vehicles from Concessionaire's Rental Car Concession;
and (j) all amounts charged by Concessionaire for the Recovery Fee"
All gross revenues from operations are subject to concession, except for the following agreedupon
exclusions.
a. Any amounts received as insurance proceeds or for damage to vehicles or other property,
or for loss, conversion or abandonment of such vehicles.
b. The wholesale transfer of salvage vehicles.
c. Non-revenue rentals to employees.
d. Fees paid to other governmental agencies (excluding the Port)
e. Any tax imposed or collected on behalf of a taxing authority.
Our analysis and review of the lessee's financial records and detail transaction testing determined
that the following gross revenues were underreported to the Port:
No-Show Revenue                      Miscellaneous Vendor Recovery
Page 9 of 10

Internal Audit Report
Avis Rent A Car System
November 1, 2008, through October 31, 2011
Foreign Exchange Fee                    Transportation Fee
MBNA Hospitality Division                  Environment Fee
Shopping Cart Income                    Employee (Paid) Rental 
Parking Garage Storage                   Valet/Overdue Charge 
Road Safety Fee
Avis has acknowledged the amounts cited in the table below, which summarizes underreported
gross revenue: (See Schedules A, B, and C, for detail.) 
Total
Year-Ended
Gross Revenue  Understatement
October 31,
to the Port
2009       $42,257,572      $66,212
2010*        38,181,518        49,232
2011*        40,271,615        67,182
Concession Revenue
182,626
Underreported
Concession Fees Underpaid        4,815
One Time Late Payment Fee (5%)         220
Interest Accrued (18%)         2,636
Total Due to the Port        $7,671 
* No fee due on understated revenue for this period 
because MAG was greater than concession fee.

Recommendations:
We recommend management:
Seek and recover approximately $7,671 in underpaid concession fees, late fees, and
interest charges.
Work with Avis Budget Group, LLC, to ensure that all receipts subject to the concession
fee are accurately and completely reported.
Management Response
Concessionaire is in agreement with findings, and Management will collect monies owed
accordingly.



Page 10 of 10

Total  42,257,572          9,423     1,954  31,404  4,050  18,694  687  66,212    42,323,784    4,232,378   4,565,363  4,403         220         7,259 -    4,403  412  4,815  2,856  7,671                                                                  Oct-09  3,182,640          1,848.55       2,533  (17,745)  909   (12,454)    3,170,186    317,019   338,167  -     37            - - 298                                                        Sep-09  4,019,113          513.20       4,131  (3,589)  841   1,896    4,021,009    402,101   401,911  190     38         108  - 2,636       Concession Fee Per Audit       Amount Due to the Port                                                                  Aug-09  5,440,767                 3,825  6,676  1,438   11,939    5,452,706    545,271   544,077  1,194     39         698  - - 1,106   1,892     Credit Over Issued At Year End True Up  Concession Fee Due To The Port  Plus Late Fee & Interest Accrued                                                                Jul-09  5,158,178          1,185.47 -     1,092  4,526  11,630     18,433    5,176,611    517,661   515,818  1,843     40            2,949                                                        Jun-09  3,982,234          698.73       3,563  5,050  2,450   11,762    3,993,996    399,400   398,223  1,176     41         723   1,900                                                        May-09  3,340,131          631.75       1,548  2,028  2,057 -   6,265    3,346,396    334,640   338,167  -     42                                            Apr-09  3,355,202          262.38     738  1,737   1,897   4,634    3,359,836    335,984   338,167  -     43                                                              11
Mar-09  3,208,690         1,487.68      1,693   3,561 -   6,742   3,215,432   321,543                  -   -                 338,167  -     44                                      Feb-09  2,731,489         1,036.19      2,726      3,762   2,735,251                       -                    273,525   338,167  -     45                                      Jan-09  2,511,417         1,146.32     124  932   1,539   3,741   2,515,158   251,516   338,167  -     46         - - - -                                               Dec-08  2,483,980         227.74      2,038   711   2,977   2,486,957   248,696   338,167  -     47           - - -
Nov-08  2,843,731         384.93      2,152   3,291 687 6,515   2,850,246   285,025   338,167  - Add'l Concession Payable    48         Interest                     Adjusted Gross Revenue (a ) + (b )   Concession Fee Payable - 10%   Concession Fee Reported by Avis (MAG & %)      # of Months to Current   One Time Late Payment Charge 5%   Interest Rate Annually 18%                                                 SCHEDULE A - GROSS REVENUE UNDERREPORTING FOR THE 12 MONTHS ENDED OCTOBER 31, 2009 INTEREST CALCULATED AS OF 10/31/2012 ) CPA year-end true up Gross Revenue (a     FINDINGS: ADD E - Transaction (Rental Agreements with Employees for Cars that are Owned by the Renting Location) F - Transaction (Rental Agreements with Employees for Cars that are Not Owned by the Renting Location) No-show Revenue - 4204275 Misc Vendor Recovery - 4204613 Foreign Exchange Fee - 4404620 MBNA Hospitality Division Total Additions (b )                       or 1.5% Per Month Total Add'l Concession Payable and Payable

Total  38,181,518       24,708  (3,485)  27,734  275  49,232    38,230,750    3,823,075    4,438,700   (380,700)   4,058,000                                 Oct-10  3,344,231       2,432  581  917   3,930    3,348,161    334,816    338,167                          Sep-10  3,910,254       3,041  630  18,594   22,265    3,932,519    393,252    391,025       Net Payment from Avis                                 Aug-10  5,223,437       2,673  597  1,185   4,455    5,227,892    522,789    522,344   Credit Issued at Fiscal Year End                   275  877            Jul-10  4,653,004       2,509       3,661    4,656,665    465,666    465,300                          Jun-10  3,546,975       2,627  (5,978)  944   (2,407)    3,544,568    354,457    354,698                          May-10  2,936,764       1,679  5,677  780   8,136    2,944,900    294,490    338,167                          Apr-10  2,738,143       1,026  1,151  941   3,118    2,741,261    274,126    338,167                        2,712,429       1,297   834
12
























Mar-10              2,131   2,714,560   271,456   338,167                        Feb-10  2,555,711      1,620  915  699   3,234   2,558,945   255,895   338,167                        Jan-10  2,119,821      2,459  175  662   3,296   2,123,117   212,312   338,167                        Dec-09  2,078,303      1,342  55  702 - 275  2,374   2,080,677   208,068   338,167             599                SCHEDULE B - GROSS REVENUE UNDERREPORTING     Nov-09  2,362,447      2,003 - (7,563)     (4,961)   2,357,486   235,749   338,167
) = c






AVIS RENT A CAR SYSTEM, INC   FOR THE 12 MONTHS ENDED OCTOBER 31, 2010 ) CPA year-end true up Gross Revenue (a               ) + (b
FINDINGS: ADD  No-show Revenue Misc Vendor Recovery Foreign Exchange Fee MBNA Hospitality Division ) Total Additions (b   Adjusted Gross Revenue (a   Concession Fee Payable - (c) x 10%   Concession Fee Reported

Total  40,271,615       50  1,280  (24)  7  5  (76)  10,310  23,872  5,469  26,290  67,182    40,338,797    4,033,880    4,549,301   (491,301)   4,058,000                                            Oct-11  3,084,575         180   7  5    2,099  1,612  450  3,560  7,912    3,092,487    309,249    338,167                                     Sep-11  3,944,533          6       1,689  3,414  931  4,764  10,804    3,955,337    395,534    394,453       Net Payment from Avis                                            Aug-11  5,457,534         200  8       1,611  2,998  1,007  4,611  10,435    5,467,969    546,797    545,753   Credit Issued at Fiscal Year End                              150  9            Jul-11  5,062,395                  1,212  2,451  469  3,073  7,364    5,069,758    506,976    506,239                                     Jun-11  3,975,219         150  8       923  2,096  490  2,220  5,887    3,981,106    398,111    397,522                                     May-11  2,960,724         100  (6)     (76)  728  1,674  362  2,540  5,322    2,966,046    296,605    338,167                                     Apr-11  2,937,765       50  100         641  1,792  278  967  3,828    2,941,593    294,159    338,167                                   3,126,428         100  (18)       462   232                                                                               13
Mar-11                   1,397   (83)  2,090   3,128,518   312,852   338,167                                 Feb-11  2,607,471        50  (11)      618  3,818  224  810  5,509   2,612,980   261,298   338,167                                 Jan-11  2,205,133        50  (13)      205  315  598  1,821  2,976   2,208,109   220,811   338,167
Dec-10  2,317,899        100  (11)      122  351  36  973  1,571   2,319,469   231,947    338,167
Nov-10  2,591,940        100 4        1,954 392                        SCHEDULE C - GROSS REVENUE UNDERREPORTING
1,034  3,484   2,595,425   259,542    338,167       ) = c







AVIS RENT A CAR SYSTEM, INC   FOR THE 12 MONTHS ENDED OCTOBER 31, 2011    CPA year-end true up Gross Revenue (a )                        ) + (b
FINDINGS: ADD  Parking garage storage Valet/Overdue charge VLF - 4205597 Transportation fee Environment Fee - 4204276 State Surcharge  Shopping Cart Income - 4204269 No-show Revenue - 4204275 Misc Vendor Recovery - 4204613 Foreign Exchange Fee - 4404620 ) Total Additions (b   Adjusted Gross Revenue (a   Concession Fee Payable - (c) x 10%   Concession Fee Reported