ThriftyRentACarAuditReport
Internal Audit Report
DTG Operations, Inc
D/B/A/Thrifty Rent-A-Car
Lease and Concession Compliance Audit
November 1, 2007 through October 31, 2009
Issue Date: April 05, 2011
Report No. 2011-03
Internal Audit
DTG Operations, Inc.
DBA/Thrifty Car Rental; Agreement No. 592
Table of Contents
Transmittal Letter .............................................................................................................. 3
Executive Summary .......................................................................................................... 4
Audit Scope and Audit Methodology ............................................................................... 5
Conclusion ......................................................................................................................... 6
Schedule of Findings and Recommendations ................................................................ 7
1. Underreported Customer Facility Charge (CFC)
2. Concession Overpayment
Schedule A --- Underreported CFC from Nov. 2007 to Oct. 2009 ............................................................. 9
Schedule B --- Concession Overpayment due to Local Customer from Nov. 2007 to Oct. 2008 ......... 10
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Internal Audit
DTG Operations, Inc.
DBA/Thrifty Car Rental; Agreement No. 592ar Rental; Agreement No. 592
Transmittal Letter
We have completed an audit of the Lease and Concession Agreement, asand Concession Agreement, as amended, between
the Port of Seattle and DTG Operations, Inc. (DBA/Thrifty Car Rental).DTG Operations, Inc. (DBA/Thrifty Car Rental). The purpose of the auditThe purpose of the audit
was to determine whether:
1) Reported concession was complete, properly calculated, and remittedReported concession was remitted timely to the Port.
2) Port and the lessee complied with provisions of the Lease and Concession Agreement.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 PortLease and Concession Agreement with applicable state and Port
requirements.
4) Customer Facility Charges (CFC) were properly collected andFacility Charges (CFC) were properly collected and remitted timely to the Portremitted timely to the Port.
We examined information related to a two-year period from November 1, 200We examined information related to a 1, 2007, through October
31, 2009.
We conducted our auditit using due professional care. WWee planned and performedperf the audit to
obtain reasonable assurance as to compliance with significant provisions of the agreementagreement,
including complete and timely reporting of concessionable revenuesincluding complete and timely reporting of concessionable revenues.
Thrifty Car Rental materially complied with the terms of the Lease and Concesmaterially complied with the terms of the Lease and Concession agreement.materially complied with the terms of the Lease and Conces
However, the audit disclosed underreported Customer Facility Charge (CFC) and a concession
overpayment, as identified in the audit report.
We extend our appreciation to the management and staff of Aviation Business Development,Development
and Accounting & Financial Reporting for their assistance and cooperationting & Financial Reporting for their assistance and cooperationting & Financial Reporting for their assistance and cooperation during the audit.
Joyce Kirangi, CPA
Director, Internal Audit
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Internal Audit
DTG Operations, Inc.
DBA/Thrifty Car Rental; Agreement No. 592
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 Thrifty Car Rental for a two-year period from November
1, 2007 through October 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 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. The
agreement further requires a Percentage Fee of ten percent (10%) of Gross Revenue to be
paid to the Port, or the Minimum Annual Guarantee whichever is greater.
The following are the only agreed-upon deductions allowed in the agreement to concession:
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. Non-revenue rentals to employees.
e. Fees paid to other governmental agencies (excluding the Port).
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 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 Thrifty Car Rental materially complied with the terms of the Lease
and Concession agreement. The audit; however, disclosed: 1) Underreported CFC, resulting in
additional payments to the Port of approximately $26,145. 2) A concession overpayment of
approximately $87,565 due back to Thrifty Car Rental for paying concession fee on local
customers at the off-airport location. After offsetting the additional payments against the
overpayment, the questioned amounts result in a net amount of $61,420 due back to Thrifty Car
Rental.
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Internal Audit
DTG Operations, Inc.
DBA/Thrifty Car Rental; Agreement No. 592
Background
The Port of Seattle entered into an agreement with Pacific Northwest Rental & Leasing
d/b/a/Thrifty Car Rental (Pacific NW) dated November 8, 2004. The agreement was
subsequently assigned to DTG Operations, Inc. (d/b/a Thrifty Car Rental) on February 1, 2007.
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. The agreement further requires a
Percentage Fee of ten percent (10%) of Gross Revenue to be paid to the Port, or the Minimum
Annual Guarantee whichever is greater.
The MAG is payable in advance, on or before the first day of each month, without notice from
the Port, and without setoff or deduction. The Percentage Fee, if applicable, is due on or before
the 20th of the following 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 are the financial highlights for the last four years:
Reported Paid
Gross Revenue Concession
2006 $12,822,900 $1,412,909
2007 12,591,659 1,280,724
2008 13,343,271 1,431,170
2009 12,619,687 1,201,617
Total $51,377,517 $5,326,420
Source: PROPWorks and PeopleSoft
Audit Scope and Audit Methodology
The scope of the audit covered the period of November 1, 2007 through October 31, 2009.
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 agreement.
· Designed and executed audit procedures based on risk.
· Analyzed data (internal & external) to determine consistency, completeness, &
compliance. This included performing the following additional procedures:
o We reconciled the gross concession receipts reported to the Port to the lessee’s
accounting records (general ledger revenue and liability account).
o We verified that concession fees were paid timely and intact.
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Internal Audit
DTG Operations, Inc.
DBA/Thrifty Car Rental; Agreement No. 592
o We recalculated concession revenue and related fees to ensure accuracy.
o We reviewed monthly totals of car rental days and calculated CFC that would have
been due to the Port. We then compared the result to payment history
o We selected seven of twenty-four months that we deemed high risk and conducted
further detailed audit of specific rental car agreements.
Conclusion
Thrifty Car Rental materially complied with the terms of the Lease and Concession agreement.
The audit; however, disclosed: 1) Underreported CFC, resulting in additional payments to the
Port of approximately $26,145. 2) A concession overpayment of approximately $87,565 due
back to Thrifty Car Rental for paying concession fee on local customers at the off-airport
location. After offsetting the additional payments against the overpayment, the questioned
amounts result in a net amount of $61,420 due back to Thrifty Car Rental.
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Internal Audit
DTG Operations, Inc.
DBA/Thrifty Car Rental; Agreement No. 592
Schedule of Findings and Recommendations
1. Underreported 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…”
Section 5.25.B further states that “Concessionaire agrees that the CFC is not income,
revenue or any other asset of Concessionaire; that Concessionaire has no ownership or
property interest in such CFCs; and that Concessionaire hereby waives any claim to a
possessory or ownership interest in the CFCs…”
We reviewed rent days by month and calculated monthly CFC that would have been due to
the Port. We compared the result to payment history and noted that the lessee did not report
CFC completely. We observed that the lessee underpaid CFC in seven of twenty-four
months reviewed.
The underpaid CFC to the Port for the audit period was $17,382 in principle and $8,763 in
financial charges for a grand total of $26,145.
Recommendation
We recommend Port management:
· Seek recovery of approximately $26,145 of underpaid CFC and interest charges.
· Consider reviewing fiscal years prior to the audit period for potential CFC
underreporting.
Management Response
Aviation Business Development (ABD) agrees with Internal Audit’s (IA) finding in Section 1
and will forward an invoice to Thrifty for $26,145 to collect the underreported CFC’s and
associated interest. In addition, ABD will request additional information from Thrifty to
ascertain whether CFC’s were paid correctly from the time the CFC was first implemented
on 2/1/06.
2. Concession Overpayment
Under Section 1.5, Airport Customer is defined to exclude “…any person who does not
arrive through the Airport and enters into a motor vehicle rental agreement with
Concessionaire at any of Concessionaire’s rental car operations outside the Airport’s
boundary line...” These customers are commonly referred to as local customers.
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Internal Audit
DTG Operations, Inc.
DBA/Thrifty Car Rental; Agreement No. 592
Thrifty Car Rental during the audit period had two locations subject to the terms of the
agreement. One location is at the Airport, and other location is off airport and is outside the
Airport’s boundary. Rental agreements with local customers at the off-airport location should
not have been subject to concession fee. However, we noted that Thrifty Car Rental
reported and paid concession fee on all customers at the out-of-airport boundary. For the
audit period, Thrifty Car Rental overpaid concession fee to the Port by approximately
$87,565.
Recommendation
We recommend Port management:
· Work with Thrifty Car Rental to determine the full extent of the potential overpayment
to the Port.
Management Response
ABD agrees with the audit findings and will issue a credit to Thrifty of $87,565 accordingly.
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8,763 26,145 TOTAL 75,630 89,201 (8,959) 155,872 706,140 688,758 17,382 17 82 (878) 5 65 17 10/1/2009 10,065 14,362 23,549 117,745 117,680 968 4,553 9/1/2009 12,318 16,820 (611) 28,527 5 142,635 139,050 3,585 18 0 (72) 7/1/2009 15,491 16,165 (1,080) 30,576 5 152,880 152,952 (72) 20 4,123 12,207 4 8,084 34 9 5/1/2008 13,612 13,748 (2,378) 24,982 99,928 91,844 0 (380) 1/1/2008 7,640 9,933 4 (1,728) 15,845 63,380 63,760 (380) 38 173 469 4 296 39 DTG OPERATIONS, INC (D/B/A THRIFTY CAR RENTAL) 12/1/2007 7,005 8,167 (1,002) 14,170 56,680 56,384 11/1/2007 9,499 10,006 (1,282) 18,223 4 72,892 67,088 5,804 40 3,482 9,286
LOCAL CUSTOMERS (Non-airport user) FOR THE TWENTY-FOUR MONTHS ENDING OCTOBER 2009 SCHEDULE A - UNDERREPORTED CFC INTEREST CALCULATED AS OF 02/28/2011 OFF AIRPORT LOCATION ON AIRPORT LOCATION TOTAL NUMBER RENTAL DAYS DAILY CFC RATE CFC PAYABLE CFC PAYMENT REMITTED (OVER)/UNDER PAID NUMBER OF MONTHS ELASPED AS OF 2/28/2011 INTEREST RATE ANNUALLY 18% OR 1.5% PER MONTJ OR 1.5% PER MONTH ADDITIONAL AMOUNT DUE (CFC AND INTEREST)
= d - g 1,435,345 g = e + f (177,944) h 9 i j = h-i a ) b c =a + b e f d = c x 10% 7 9 0 , 3 , 5 2 2 , 0 9 0 (87,565) TOTAL 7 5 0 (8 1,025,325 41 1,257,402 94,656 13,449,547 12,574,018 10/2008 946,573 ) 1 1 2 1 6 , 7 (5 889,862 85,444 9, 2 88,986 137,581 Credit due to Thrifty 09/2008 1,375,817 9 ) 7 , 5 5 3 , 1 (6 5 1,310,259 85,444 52 131,026 235,653 Overpaid Concession Fee Credit issued on LEASS-303309 08/2008 2,356,593 1 ) 0 , 9 4 1 6 , 2 (7 2,279,652 85,444 0 15 227,965 202,005 07/2008 2,020,084 ) 0 9 1 , 5 6 0 6 , 5 (1 1 1,909,575 85,444 11 190,957 157,434 ) 9 0 9 1 5 , 5 , 9 10 06/2008 1,574,346 (9 1,478,837 85,444 71 147,884 95,354 ) 5 9 1 0 05/2008 953,538 6 , 7 (8 866,779 85,444 9, 9 86,678 85,444 04/2008 784,931 7 ) , 9 3 - 3 (8 700,994 85,444 70,099 85,444 03/2008 808,574 ) 5 2 , 5 - (7 3 735,022 85,444 73,502 85,444 02/2008 648,184 4 ) 9 - 4 , 2 (6 583,890 85,444 58,389 DTG OPERATIONS, INC (D/B/A THRIFTY CAR RENTAL) ) 2 - AMOUNT DUE BACK TO THRIFTY FOR THE TWELVE MONTHS FROM NOVEMBER 2007 THROUGH OCTOBER 2008 01/2008 632,354 1 , 7 -
(7 3 558,642 85,444 85,444 55,864 12/2007 581,644 1 ) 2 , 6
-
(3 9 542,023 54,202 85,444 85,444 71,848 11/2007 766,909 (48,426) 718,483 85,444 - 85,444 @10% Payable SCHEDULE B Report Gross Less Local Revenue Grand Total Concessionable Concession Fee MAG Payment Concession Payable Total Billings & Payment
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