Internal Audit Report 

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

November 1, 2008  October 31, 2011




Issue Date: November 13, 2012
Report No. 2012-21

Internal Audit Report
Budget 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. Budget Did Not Comply With Record Retention Requirements Related to Certain Key Records 8 
2. Concession Revenue Was Underreported ...................................................................... 9 













Page 2 of 10

Internal Audit Report
Budget 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 Budget 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
Budget 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 Budget Rent A Car System, Inc. (Budget) 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 Budget materially complied with the terms of the Lease and Concession
agreement. However, as reported in Findings 1, we determined that certain key records had not been
retained in accordance with the terms of the agreement. Further, certain gross receipts were
underreported which resulted in approximately $9,217 of additional concession fees, late fees, and
interest charges.








Page 4 of 10

Internal Audit Report
Budget Rent A Car System
November 1, 2008, through October 31, 2011
Background
Budget 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 Budget office within the
airport is wholly owned by Avis Budget Group. In 2008, Budget 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*    $24,626,865   $3,500,400 
2009  2010*     21,527,526    2,452,727 
2010  2011     26,263,513    2,626,085 
Total          $72,417,904   $8,579,212 
* 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 Budget. We applied

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Internal Audit Report
Budget 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 Budget 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 213 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.

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Internal Audit Report
Budget 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
Budget materially complied with the terms of the Lease and Concession agreement. However, as
reported in Findings 1, we determined that certain key records had not been retained in accordance
with the terms of the agreement. Further, certain gross receipts were underreported which resulted in
approximately $9,217 of additional concession fees, late fees, and interest charges.













Page 7 of 10

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

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

Section 7.1 further states:
"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

The Section 7.1 of the agreement states, in part:
"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 Budget had not retained the following key records in accordance with the lease and
concession agreement.

12 months  12 months
Unavailable Key Records       Budget Report Ref.   ending Oct.  ending Oct.
31, 2009    31, 2010
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:
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Internal Audit Report
Budget Rent A Car System
November 1, 2008, through October 31, 2011
a. CFC for the 10-month period ending August 31, 2009.
b. Total adjustments of $197,403 and $181,522 reported concession revenues in 2009 and
2010, respectively.

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)
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Internal Audit Report
Budget Rent A Car System
November 1, 2008, through October 31, 2011
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                      Security Fee
Miscellaneous Vendor Recovery              Shopping Cart Income
Foreign Exchange Fee                    Employee (Paid) Rental 
MBNA Hospitality Division                  Valet/Overdue Charge 
Tire Wheel Damage Fee

Budget 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*       $24,626,865       $57,026
2010*        21,527,526        58,760
2011        26,260,852       80,326
Concession Revenue
196,112
Underreported
Concession Fees Underpaid        8,038
One Time Late Payment Fee (5%)         212
Interest Accrued (18%)          967
Total Due to the Port        $9,217 
* No fee due on understated revenue for this period 
because MAG was greater than concession fee.

Recommendations:
We recommend management:
Seek and recover approximately $9,217 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  24,626,865       4,650  964  1,252  2,868  18,974  5,903  22,104           2,468,389    3,679,980   (179,580)   3,500,400                   311  57,026    24,683,891                          Oct-09  1,544,885       100     217  1,137  (8,657)  2,619           154,030    291,700           (4,584)    1,540,301                          Sep-09  2,651,927       600     707  3,257  (2,481)  3,918           265,793    291,700       Net Payment from Avis                  6,001    2,657,928                          Aug-09  4,179,233       550     1,944  3,232  4,805  3,132           419,290    417,923   Credit Issued at Fiscal Year End              13,663    4,192,896                          Jul-09  3,450,565       700       4,424  7,796  1,890           346,537    345,057           14,810    3,465,375                          Jun-09  2,521,303       600       177  3,298  1,635           252,701    291,700           5,710    2,527,013                          May-09  1,807,011       500   100   1,226  1,142  1,574           181,155    291,700           4,542    1,811,553                          Apr-09  1,766,131       300   824   996   1,266   3,386                                                                                   11                                                                            176,952    291,700       1,769,517                          Mar-09  1,643,688       350       904   2,293           164,723    291,700           3,547    1,647,235                          Feb-09  1,258,937       250       1,010              126,020       1,260            291,700       1,260,197                          Jan-09  1,221,486       250  413     465   995 -           122,361    291,700           2,123    1,223,609                          Dec-08  1,319,203       200  483  220   1,026   933           132,206    291,700           2,862    1,322,065                 250  68  108         311                            SCHEDULE A - GROSS REVENUE UNDERREPORTING       Nov-08  1,262,496              1,120   1,849   3,706       126,620     291,700
FOR THE 12 MONTHS ENDED OCTOBER 31, 2009
1,266,202








BUDGET RENT A CAR SYSTEM, INC ) CPA year-end true up Gross Revenue (a              ) + (b) = c  (c x 10%)            Valet/Overdue Surcharge E - Transactions (Employee Paid Rental) Tire/Wheel Damage Shopping Cart Income No-show Revenue MISC Vendor Recovery - 4204613 Foreign Exchange Fee MBNA Hospitality Division Total Additions (b )  Adjusted Gross Revenue (a            FINDINGS: ADD              Concession Fee Payable -  Concession Fee Reported

Total  21,527,526       2,450  978  150  (322)  21,425  19,652  (5,735)  20,028  134  58,760    21,586,286    2,158,629    2,815,101   (362,374)   2,452,727                                          Oct-10  1,627,297       200     97  377  2,119  134  2,217   5,144    1,632,441    163,244    204,394                                   Sep-10  2,597,678       100  310  150  26  335  3,936  179  3,628   8,664    2,606,341    260,634    259,768       Net Payment from Avis                                          Aug-10  3,769,061       150     19  602  2,546  375  2,606   6,298    3,775,360    377,536    376,906   Credit Issued at Fiscal Year End                              450           387                    Jul-10  3,211,955            (1,214)  9,043  2,332   1,920   12,918    3,224,873    322,487    321,196                                   Jun-10  2,220,801       600     6  599  1,783  (3,396)  1,902   1,494    2,222,294    222,229    222,080                                   May-10  1,525,800       250     1  329  1,030  2,909  1,449   5,968    1,531,768    153,177    204,394                                   Apr-10  1,320,992       150     0  2,809  849  376  1,199   5,383    1,326,375    132,638    204,394                                  1,161,338       150     735  236  664
12
























Mar-10                          1,164,227   116,423   204,394             1,104   2,889                      Feb-10  1,044,746      100     7             1,053,865   105,386   204,394                 6,614  1,084 - 445  869   9,119                      Jan-10  823,958      150  669   0             827,718   82,772   204,394                 130  841  1,107  863   3,760                      Dec-09  1,016,836      100     2             1,019,404   101,940   204,394                 191  1,272  33  836  134  2,568               50     (2)  160                     SCHEDULE B - GROSS REVENUE UNDERREPORTING      Nov-09  1,207,065               1,196  (8,284)  1,435   (5,445)   1,201,620   120,162   204,394
BUDGET RENT A CAR SYSTEM, INC   FOR THE 12 MONTHS ENDED OCTOBER 31, 2010 ) CPA year-end true up Gross Revenue (a                      ) + (b) = c   (c x 10%)
FINDINGS: ADD   Valet/Overdue Surcharge E - Transactions (Employee Paid Rental) Tire/Wheel Damage Vehicle License Fee (VLF)  Shopping Cart Income No-show Revenue MISC Vendor Recovery Foreign Exchange Fee MBNA Hospitality Division ) Total Additions (b   Adjusted Gross Revenue (a   Concession Fee Payable -   Concession Fee Reported

Total  26,263,513       3,680  1,082  50  101  140  21,997  26,233  4,595  22,448  80,326    26,343,839    2,634,384      4,241         212 - - 967   5,420 - -           9,217       4,241  3,797  8,038  1,179                               3,115,604                                   Oct-11  1,680,847       420     8    1,431  1,695  411  2,672  6,637    1,687,484    168,748   205,224   -     13                                           Sep-11  2,724,661       460     5    3,306  4,545  891  3,719  12,926    2,737,587    273,759                    271                  272,466   1,293     14            1,564           Amount Due to the Port                                                                  Aug-11  4,795,070       100  564   4  140  4,264  4,643  704  3,211  13,630    4,808,700    480,870                    307       Concession Fee Per Audit                          479,507   1,363     15            1,670       Concession Fee Due To The Port  Plus Late Fee & Interest Accrued                                                  22                                               Credit Over Issued At Year End True Up                                                             Jul-11  4,255,304       600  372       2,932  3,758  551  2,201  10,436    4,265,740    426,574   425,530   1,044     16         250   1,294                                                        Jun-11  2,963,090       650   50  10    420  2,384  451  1,458  5,423    2,968,513    296,851   296,309   542     17         138 -   680 -                                                        May-11  1,909,189       200     2    1,010  1,360  260  1,584  4,416    1,913,605    191,360   205,224   -     18                                           Apr-11  1,761,160       250     6    997  1,533  303  1,508  4,597    1,765,757    176,576   205,224   -     19                                          1,614,332       200  53   6    763  1,165  158  1,391  3,736    1,618,068
13
























Mar-11                            161,807      -            -   -
205,224         20 -
Feb-11  1,060,434      150     12   881  1,898  112  1,111  4,164   1,064,598   106,460   205,224   -                -
21










Jan-11  1,024,996       100     1    714  731  314  993  2,853   1,027,849   102,785   205,224   -     22 -   -
3                            23                        (477)  847  38  1,065  1,726   1,178,556   117,856      -             -   -                                            250                          205,224                                 Dec-10  1,176,830                                       24                            22       402                -             - Interest  -                                            300  93                        205,224                5,756  1,674   1,535  9,782   1,307,382   130,738                              Nov-10 ) 1,297,600                         ) + (b) = c   (c x 10%) = (d)           # of Months to Current                                                 BUDGET RENT A CAR SYSTEM, INC  SCHEDULE C - GROSS REVENUE UNDERREPORTING  FOR THE 12 MONTHS ENDED OCTOBER 31, 2011  INTEREST CALCULATED AS OF 10/31/2012     CPA year-end true up Gross Revenue (a   FINDINGS: ADD   Valet/Overdue Surcharge  E - Transactions (Employee Paid Rental)  Tire/Wheel Damage  Vehicle License Fee (VLF)                                       e)                                      Security Fee  Shopping Cart Income  No-show Revenue  Misc Vendor Recovery  Foreign Exchange Fee ) Total Additions (b   Adjusted Gross Revenue (a   Concession Fee Payable -   Concession Fee Reported   Add'l Concession Payable (d)        One Time Late Payment Charge 5%   Interest Rate Annually 18%  or 1.5% Per Month Total Add'l Concession Payable and  Payable ( d) + (