Internal Audit Report

Fox Rent-A-Car

Lease and Concession Compliance Audit

January 1, 2008 through December 31, 2009




Issue Date: January 11, 2011
Report No. 2011-01

Internal Audit 
Fox Rent A Car
Agreement No. 940 and 1285
Audit Period: January 1, 2008  December 31, 2009 
Table of Contents
Internal Auditor's Report .................................................................................................. 3 
Executive Summary .......................................................................................................... 4 
Audit Approach ................................................................................................................. 5 
Conclusion ......................................................................................................................... 6 
Schedule of Findings and Recommendations ................................................................ 7 
1.   Underreported and Reduction of Gross Receipts 
2.   Underpaid Customer Facility Charge (CFC) 
3.   Untimely Payments 













2

Internal Audit 
Fox Rent A Car
Agreement No. 940 and 1285
Audit Period: January 1, 2008  December 31, 2009 
Internal Auditor's Report
We have completed an audit of the Lease and Concession Agreement, as amended, between
the Port of Seattle and Fox Rent-A-Car.
The purpose of the audit was to determine whether:
1) Reported concession was complete, properly calculated, and remitted timely to the Port.
2) Port and the lessee complied with provisions of the Lease and Concession Agreement.
3) Lease and Concession Agreement, as amended, complies with applicable state and Port
requirements.
4) Customer Facility Charges (CFC) were properly collected and remitted timely to the Port.

We examined information related to a two-year period from January 1, 2008, through December
31, 2009. 
We conducted our audit using due professional care. We planned and performed the audit to
obtain reasonable assurance as to compliance with significant provisions of the agreement,
including complete and timely reporting of concessionable revenues.
Fox Rent-A-Car materially complied with the terms of the Lease and Concession agreement.
The agreement itself also complies with applicable state and Port requirements. As reported in
the subsequent page of this report, the audit disclosed instances of late payments,
underreported gross receipts, and underreported Customer Facility Charge (CFC).
We extend our appreciation to the management and staff of Aviation Business Development,
and Accounting & Financial Reporting for their assistance and cooperation during the audit.

Joyce Kirangi, CPA
Director, Internal Audit




3

Internal Audit 
Fox Rent A Car
Agreement No. 940 and 1285
Audit Period: January 1, 2008  December 31, 2009 
Executive Summary
Audit Scope and Objective The purpose of the audit was to determine the following:
1.  Reported concession was complete, properly calculated and remitted timely to the Port.
2. Port and the lessee complied with provisions of the Lease and Concession Agreement.
3.  Lease and Concession Agreement, as amended, complies with applicable state and Port
requirements.
4. Customer Facility Charges (CFC) were properly collected and remitted timely to the Port.
We examined the books and records of Fox Rent-A-Car for a two-year period from January 1,
2008 through December 31, 2009. Aviation Business Development, in conjunction with
Accounting and Financial Reporting (AFR), has the primary responsibility for administering and
monitoring the agreement to ensure compliance with agreed-upon terms.
Agreement Terms The agreement requires Fox Rent-A-Car to pay the Port a monthly
percentage fee of 4% of its Gross Revenue that is greater than $40,000. The allowed $40,000
monthly deduction is adjusted annually to reflect changes in Consumer Price Index (CPI).
The following agreed-upon deductions are allowed in the RAC lease agreement:
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 taxing authority.
The privilege fee is payable to the Port no later than 30 days after the end of each month.
For untimely payments, the agreement provides a one-time late fee of 5% of the overdue
amount and interest to be accrued at the rate of 18% per annum from the due date until paid.

Audit Result Summary Fox Rent-A-Car materially complied with the terms of the Lease and
Concession agreement. The audit; however, disclosed Fox Rent-A-Car underreported gross
revenues and Customer Facility Charges (CFC) to the Port. Additionally, we noted instances of
late payments ranging from 2 to 37 days where no late fee charges had been assessed.
These exceptions resulted in underreporting to the Port, and the auditor recommends Port
management seek and recover approximately $129,291 in additional concession fees, CFC,
and late fee charges.


4

Internal Audit 
Fox Rent A Car
Agreement No. 940 and 1285
Audit Period: January 1, 2008  December 31, 2009 
Background
Fox Rent-A-Car is a franchise car rental. The agreement between the Port of Seattle and Fox
Rent-A-Car became effective in August 2007. The agreement is operated on a month-to-month
basis. The Fox Rent-A-Car is a California corporation, with many independent car rentals in the
United States, Canada and around the world.
Fox Rent-A-Car agreement does not require a monthly MAG payment to the Port. It requires the
rental car agency to pay the Port a monthly concession percentage fee of 4% of its Gross
Revenue that is exceeds $40,000.The allowed $40,000 monthly deduction is adjusted annually
to reflect changes in the Consumer Price Index (CPI).
The concession fee is payable to the Port no later than 30 days after the end of each month.

For untimely payments, the agreement provides a one-time late fee of 5% of the overdue
amount and interest to be accrued at the rate of 18% per annum from the due date until paid.

Below is Fox Rent-A-Car financial highlights for the last two years:
Reported    Less Allowable     Net        Paid
Year    Gross Revenue    Deduction   Concessionable   Concession
2008        6,603,567     (480,000)     6,423,567      217,979 
2009        5,976,073     (485,420)     5,490,653      234,926 
Total         12,579,640      (965,420)     11,614,220       452,905 
Source: PROPWorks and PeopleSoft

The scope of the audit covered the period of January 1, 2008 through December 31, 2009.

Audit Approach
To achieve our audit objective, we performed the following procedures:
Read and analyzed the lease agreement, as amended. 
Reviewed applicable state and local rules and regulations.
Identified significant provisions in the agreement.
Obtained necessary financial and non-financial data from the lessee.
Assessed relevant risks associate with the RAC agreement.
Designed and executed audit procedures based on risk.
Analyzed data (internal & external) to determine completeness & compliance. This
included performing the following additional procedures:
5

Internal Audit 
Fox Rent A Car
Agreement No. 940 and 1285
Audit Period: January 1, 2008  December 31, 2009 
o Reconciliation of the reported gross receipts to the RAC agency accounting records
to ensure completeness and consistency.
o Verified that concession fees were paid timely to the Port.
o Recalculated concession revenue and related fees to ensure accuracy.
o Selected the test months that deemed high risks for further details tests.

Conclusion
Fox Rent-A-Car materially complied with the terms of the Lease and Concession agreement.
The audit; however, disclosed Fox Rent-A-Car underreported gross revenues and Customer
Facility Charges to the Port. Additionally, we noted instances of late payments ranging from 2 to
37 days where no late fee charges were assessed.
The noted exceptions in total resulted in underreporting to the Port, and the auditor
recommends Port management seek and recover of approximately $129,291 in additional
concession fees, CFC, and late fee charges.












6

Internal Audit 
Fox Rent A Car
Agreement No. 940 and 1285
Audit Period: January 1, 2008  December 31, 2009 
Schedule of Findings and Recommendations
1. Underreported and Reduction of Gross Receipts
Gross revenue is defined under Section 1.E as:
" 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; personal accident insurance; any vehicle
originally rented at Concessionaire's Rental Car Concession which exchanged at
any other location; the long-term lease; all amount charged to concessionaire's
customers and which are separately stated on the rental agreement as an
optional charge for waiver; personal property (including, but not limited to, mobile
phones, child seats, ski racks, etc; furnishing and/or replacing fuel; all monies,
fees, or other consideration received from airlines, travel agents or other; intercity
or drop charges; and recovery fee"
All gross revenues from operations are subject to concession, except for the following
agreed-upon 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 taxing authority.
We reviewed Fox Rent-A-Car financial records including monthly sales summary, and noted
the following gross revenues were underreported to the Port:

Time & mileage                       Miscellaneous
Recovery Fee                        Age different
Drop charges                        Class upgrade
Child seat                          Insurance
Additional Driver                      Road side assistant
Navigation                          Towing
Fuel

In addition, we noted customer discount/rebate was offset against gross revenues reported
to the Port. The un-allowed discount/rebate offset against reported gross revenue amounted
to approximately $6,631 in 2008 and $25,518 in 2009.

7

Internal Audit 
Fox Rent A Car
Agreement No. 940 and 1285
Audit Period: January 1, 2008  December 31, 2009 
The table below summarizes underreported and offset gross revenues.
Description               2008     2009     Total
Fox Reported Gross Revenue   6,306,567  5,976,073  12,282,640 
Plus Underreported          162,714    58,720    221,434 
Plus Discount/Rebate          6,631    25,518     32,149 
Less Allowance           (480,000)  (485,420)   (965,420) 
Concessionable Revenue
Net of Allowance           5,995,912  5,574,891  11,570,803 
Percentage Fees Payable @4%   239,836   222,996    462,832 
Less Concession Fee Paid     (233,063)  (219,843)   (452,906) 
Underpaid                6,773    3,153     9,926 
Interest (18%/yr)               1,778      737      2,598 
Grand Total Owed           8,551    3,890    12,441 

Recommendation 
We recommend that management:
Seek and recover approximately $12,441 in underpaid concession fees and late fee
interest charges
Work with the Fox Rent-A-Car to ensure that all receipts subject to concession fee
are accurate and completely reported.

Management Response

2. Underpaid Customer Facility Charge (CFC)
Section 5.25.A of the agreement states, in part, that the company "must collect the CFC at
the time the first payment is made under a Rental Car Contract, and must remit the full
amount of the CFC to the Port regardless of whether or not the full amount of such CFC is
actually collected by the Concessionaire" 
Further, the Port notification letter sent out to Fox Rent-A-Car on July 03, 2008, gave the
rental car company a 45-day notice to start collecting the CFC charges effective on August
18, 2008.
We reviewed the monthly transaction totals against the CFC payment history and noted that
from August 2008 through December 2009, Fox Rent-A-Car inconsistently collected the
CFC charges, and or did not properly remit all CFC owed the Port. The total CFC
underreported to the Port was $58,756. We further applied 18% on the underreported CFC
2

Internal Audit 
Fox Rent A Car
Agreement No. 940 and 1285
Audit Period: January 1, 2008  December 31, 2009 
payments and this totaled to $21,615 of late fee financial charges. A grand total of $80,371
of additional CFC and late fee charges is now owed the Port.

Recommendation 
We recommend Port management:
Seek recovery of approximately $80,371 of underpaid CFC and late fee interest
charges.

Management Response

3. Untimely Payments
The agreement, as amended under Section 4.a, stipulates specific payment terms for
percentage fee payments as follows:

Percentage fee is due no later than thirty (30) days after the end of each month.
Late payments, as stipulated under Section 8 of the agreement, are to be assessed a onetime
late fee of 5% on the overdue amount, and interest of 18% per annum or the maximum
allowed by the law, whichever is less.
We reviewed payment history, and noted six and four instances of late payments in 2008
and 2009, respectively and no late fee financial charges were applied.
The table below summarizes untimely payments and related late fee and interest
charges

# of Instances  One-Time   Interest
Type of    Range of     of Late     Charge   Charge
Year   Payment   Days Late   Payments    @ 5%   (18%/yr)   Total
Concession               6         6,007     918    6,925 
2008           3 to 37
CFC              4      12,430   4,099   16,529 
Concession               4         1,859     669    2,528 
2009          2 TO 32
CFC              4       7,810   2,687   10,497 
28,106     8,373   36,479 
Recommendation 
We recommend that Port management:

3

Internal Audit 
Fox Rent A Car
Agreement No. 940 and 1285
Audit Period: January 1, 2008  December 31, 2009 
Seek and recovery approximately $36,479 in one-time late charge and in
interest/finance charges.
Work with the Fox Rent-A-Car to ensure timely payments.
Management Response
















4

Total  6,306,567       231  5,542  14  145  226  260  15  90  (141)  145,827   1,037  12  622  69  14,109  10   189  1,089  169,345   6,475,912  (480,000)   5,995,912     239,836  233,063  6,774          1,778     8,552                                                                            Dec-08  417,089       (235)  320              150 -          10 -  189  600  1,034   418,124  (40,000)   378,124     15,125  15,084  41     12     7     49                                                                            Nov-08  307,207         290            (8)  75                 400  757   307,964  (40,000)   267,964     10,719  10,688  30     13     6     36                                                                            Oct-08  383,645         2,885  14  145  189  260  15  90  (63)  250   700  12  622  69         89  5,276   388,921  (40,000)   348,921     13,957  13,746  211     14     44     255
Sep-08  709,124        173           (70)  3,436                                         32                        3,539               142     15         173               26,765           712,663  (40,000)   672,663     26,907                                                  Aug-08  1,227,145                    45,590         5,244        50,833               2,033     16     488    2,521               47,486           1,277,979  (40,000)   1,237,979     49,519                                                  Jul-08  1,040,433
17                                   37,933         4,177       42,110   1,082,543 (40,000)   1,042,543    41,702 40,017 1,684         430    2,114









19,809   338      93        20,240   591,977  (40,000)   551,977     22,079  21,269  810                                                        Jun-08  571,737
18    219    1,028                     435,580    17,423 16,757 666    19















May-08 458,934      516             15,193         937       16,646   475,580 (40,000)                   190    856                    283,802    11,352 10,866 486    20
Apr-08  311,658      (50)              11,246         948        12,144   323,802  (40,000)                    146     632                      306,172     12,247  11,734  513     21
Mar-08  333,352            37        12,079         703        12,820   346,172  (40,000)                    162     674                 10,045  10,048  (3)     22            251,121                                              Feb-08  291,208
(87)                    (87)    291,121  (40,000)         8,763  8,601  161      23                                                                             FOR THE TWELVE MONTHS ENDED DECEMBER 2008         255,035         1,874               151





Jan-08
2,008        4,032   259,067  (40,000)   219,067                  56     217










FOX RENT A CAR SCHEDULE OF FINDINGS   INTEREST CALCULATED AS OF 11/30/10    Dates Fox Reported Gross Revenue    FINDINGS: ADD Time & Mileage Customer Rebate                                                    Interest Payable                                                   Child Seat Navigation Fuel Age Different Add'l Driver GARS Late charge Recovery Fee Towing Insurance Class Upgrade Road Assistant (transporation) VLF Miscellaneous (P Type) Airport transfer fee (TRANS) LMV17 TAI & TRAI Discount Total Additions   Adjusted Gross Revenue Less Allowance Concessionable Revenue net of allowance    Concession Fee Payable - 4% Concession Fee Reported by Fox Add'l Concession Payable    # of Months to Current   Interest Rate Annually 18% or 1.5% Per Month   Total Add'l Concession Payable and

Total  5,976,073       25,750  24,032  77  135  745  480  65  24,679   (963)  742  922  416  381  42  138   (75)  1,309 -  511  786 -         84,238   6,060,311  (485,420)   5,574,891     222,996  219,843  3,153          737     3,890                                       1,696  335  549  1,485                                                      Dec-09  287,633       845  2,411     98     4,700 -  (22)                               8,581   296,214  (40,542)   255,672     10,227  9,905  322     12     58     379                                    549                                                    Nov-09  259,060       2,390  800   102       7,243   (60)          (9) -                   10,466   269,526  (40,542)   228,984     9,159  8,762  397     13     77     474
Oct-09  401,715      1,991           12,528   (303)                  170           16,079        377,252     15,090  14,469  621     14     131    752                           417,794  (40,542)           610     1,083                                                  Sep-09  629,113      7,020  5,225  77  133  640  260  125  133   (20)  314  900  818  353  9  100                   16,086        604,657     24,186  23,565  622     15     140    762                           645,199  (40,542)                16
Aug-09 1,110,232      1,507 6,586         75   225 16 22                        8,432       1,078,122    43,125 42,809 316         76    391                         1,118,664 (40,542)                                                    Jul-09 993,521      1,316 3,655    6                                                     17    38                                                  (295) 31   (428)                      4,285    (40,542)   957,264    38,291 38,141 150             188                         997,806
26                         Jun-09 583,443      4,227       220 (60)    (104) 264    28 33 47       297    1,061 335   248 6,621   590,064 (40,542)   549,522    21,981 21,738 243    18    66    309
3,587  (476)             (300)                  23            2,823                            (11)                                385,517  (40,542)   344,975     13,799  13,708  91     19     26     117                                                                                     May-09  382,694       746  505   (100)          (82)               931               2,000   318,819  (40,542)   278,277     11,131  11,073  58     20     17     76                                                                                     Apr-09  316,819       1,065  3,996                            9             25  5,209   320,615  (40,542)   280,073     11,203                                          114                                           11,016  187     21     59     245                                                                                     Mar-09  315,406       1,260                                   536   25       1,821   320,204  (40,000)   280,204     11,208  11,135  73     22     24     97                                                                                     Feb-09  318,382       (205)  1,330                            369   21  250        130  1,835   379,889  (40,000)   339,889     13,596                              (75)                                13,522  73                                             15                                                  23     25     99                                                                                     Jan-09  378,054          SCHEDULE OF FINDINGS  FOR THE TWELVE MONTHS ENDED DECEMBER 2009  INTEREST CALCULATED AS OF 11/30/10     Dates          FOX RENT A CAR            Fox Reported Gross Revenue     FINDINGS: ADD  Time & Mileage  Customer Rebate  Child Seat  Navigation  Fuel  Age Different  Add'l Driver  Drop Charge  GARS  Late charge  Recovery Fee  Towing  Insurance  Class Upgrade  Road Assistant (transporation)  VLF  Miscellaneous  Claim  ASV17  LMV17  TAI & TRAI  UAF17  AHC17  FSS17  WRS17  WPD17  Discount  Total Additions   Adjusted Gross Revenue  Less Allowance  Concessionable Revenue net of  allowance     Concession Fee Payable - 4%  Concession Fee Reported by Fox  Add'l Concession Payable     # of Months to Current   Interest Rate Annually 18%  or 1.5% Per Month   Total Add'l Concession Payable  and Interest Payable

Total     1,080,105       1,021,349  58,756        21,615       80,371                              12/09  9,337  5  46,685     46,605  46,605  80     12   14.40       94.40                              11/09  8,515  5  42,575     42,370  42,370  205     13   39.98       244.98               390              10/09  12,766  5  63,830     63,440  63,440      14   81.90       471.90                              09/09  14,817  5  74,085     72,780  72,780  1,305     15   293.63       1,598.63                              08/09  18,458  5  92,290     91,780  91,780  510     16   122.40       632.40                              07/09  17,432  5  87,160     87,275  87,275  (115)     17                   06/09  12,592  5  62,960     62,560  62,560  400     18   108.00       508.00                              05/09  10,708  5  53,540     45,310  45,535  8,005     19   2,281.43       10,286.43                              04/09  8,425  5  42,125     42,070  42,070  55     20   16.50       71.50                              03/09  8,749  5  43,745     43,915  43,915  (170)     21                   02/09  11,583  5  57,915     47,780  47,780  10,135     22   3,344.55       13,479.55                              01/09  11,494  5  57,470     57,255  57,255  215     23   74.18       289.18                              12/08  14,092  5  70,460     70,210  70,210  250     24   90.00       340.00                              11/08  14,232  5  71,160     70,207  70,207  953     25   357.26       1,309.95                                     FOR THE SEVENTEEN MONTHS ENDED DECEMBER 2009       10/08  17,169  5  85,845     79,471  79,471  6,374     26   2,485.86       8,859.86
20,564  5              27        78,535  78,535  24,285                  INTEREST CALCULATED AS OF 11/30/10     09/08     102,820                9,835.33       34,120.09
CFC      08/08 5,088 5 25,440    19,560 19,560 5,880   28  2,469.60     8,349.60
FOX RENT A CAR SCHEDULE OF FINDINGS -       Month # of Transaction Days $ Rate CFC Payable    Per activity reported CFC Payment Add'l CFC Payable    # of Months to Current Interest Rate Annually 18% or 1.5% Per Month    Total Add'l CFC Payable and Interest