Dollar RAC Audit Report
Internal Audit Report CMC Investment, Inc DBA/Dollar Rent-A-Car Lease and Concession Compliance Audit January 1, 2008 through December 31, 2009 Issue Date: January 11, 2011 Report No. 2011-02 Internal Audit CMC Investment, Inc DBA/Dollar Rent A Car; Agreement No. 589 Audit Period: January 1, 2008 December 31, 2009 Table of Contents Internal Auditor's Report .................................................................................................. 3 Executive Summary .......................................................................................................... 4 Audit Scope ....................................................................................................................... 5 Audit Approach ................................................................................................................. 5 Conclusion ......................................................................................................................... 6 Schedule of Findings and Recommendations ................................................................ 7 1. Underreported Gross Receipts 2. Untimely Payments 2 Internal Audit CMC Investment, Inc DBA/Dollar Rent A Car; Agreement No. 589 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 CMC Investment, Inc. (DBA/Dollar 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. CMC Investment, Inc. materially complied with the terms of the Lease and Concession agreement. However, the audit disclosed instances of late payments and underreported gross receipts as identified in the audit report. 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 CMC Investment, Inc DBA/Dollar Rent A Car; Agreement No. 589 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 Dollar 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 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 to be paid to the Port to the extent the fee exceeds the MAG at 10% of gross receipts. The following are the only agreed-upon deductions allowed in the 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 a taxing authority. 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 15th 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 Dollar-Rent-A-Car materially complied with the terms of the Lease and Concession agreement. The audit; however, disclosed that the Dollar Rent-A-Car underreported gross revenue to the Port. Additionally, we noted instances of late payments, ranging from 1 to 24 days. The noted exceptions as a whole resulted in underreporting to the Port, and the auditor recommends recovery of approximately $92,233 in additional concession fees, and late fee interest. 4 Internal Audit CMC Investment, Inc DBA/Dollar Rent A Car; Agreement No. 589 Audit Period: January 1, 2008 December 31, 2009 Background Dollar Rent-A-Car is a private company located in Mercer Island, WA. The company incorporated in 1987 and operates a number of rental facilities, including two car rental facilities at the following locations around the airport: 1. Dollar Rent-A-Car at 19707 International Blvd, Seatac, WA. 2. Dollar Rent-A-Car at 17600 Pacific Hwy S, Seatac, WA. 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 to be paid to the extent the fee exceeds the MAG at 10% of gross receipts. 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 15th 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 three years: Reported Paid Year Gross Revenue Concession 2007 $12,157,119 $1,200,905 2008 13,700,673 1,428,315 2009 15,371,427 1,504,796 Total $41,229,219 $4,134,016 Source: PROPWorks and PeopleSoft Audit Scope 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 agreement. Designed and executed audit procedures based on risk. 5 Internal Audit CMC Investment, Inc DBA/Dollar Rent A Car; Agreement No. 589 Audit Period: January 1, 2008 December 31, 2009 Analyzed data (internal & external) to determine completeness & compliance. This included performing the following additional procedures: o Reconciliation of the reported gross receipts to the lessee's accounting records to ensure completeness and consistency. o Verified that concession fees were paid timely and intact. o Recalculated concession revenue and related fees to ensure accuracy. o Selected the test months that deemed high risks for review. Conclusion Dollar Rent-A-Car materially complied with the terms of the Lease and Concession agreement. The audit; however, disclosed that the Dollar Rent-A-Car underreported gross revenue to the Port. Additionally, we noted instances of late payments, ranging from 1 to 24 days. The noted exceptions as a whole resulted in underreporting to the Port, and the auditor recommends recovery of approximately $92,233 in additional concession fees, and late fee interest. 6 Internal Audit CMC Investment, Inc DBA/Dollar Rent A Car; Agreement No. 589 Audit Period: January 1, 2008 December 31, 2009 Schedule of Findings and Recommendations 1. Underreported Gross Receipts Gross revenue is defined under Section 1.26 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" 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 a taxing authority. We reviewed the lessee's financial records to include monthly sales summary and noted that the following incidental gross revenues were not reported to the Port: Violation Frequent flyer surcharges Parking & storage Express mail Miscellaneous The table below summarizes underreported gross revenues. Underreported Percentage Interest Total Fees @10% (18%/yr) 2008 38,840 3,884 1,650 5,534 2009 59,688 5,969 1,518 7,487 98,528 9,853 3,168 13,021 Recommendation We recommend that Port management: Seek and recover approximately $13,021 in underpaid concession fees and interest. Work with Dollar rent-A-Car to ensure all receipts subject to concession are reported. 7 Internal Audit CMC Investment, Inc DBA/Dollar Rent A Car; Agreement No. 589 Audit Period: January 1, 2008 December 31, 2009 Management Response 2. Untimely Payments The agreement, as amended under Section 5, stipulates specific payment terms for MAG and percentage fee payments as follows: MAG is payable in advance on or before the first day of each month. Percentage fee, if applicable, is due within 20 days following the end of each month. Late payments, as stipulated under Section 6 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 12 and 6 instances of late payments in 2008 and 2009, respectively. The table below summarizes Dollar Rent-A-Car untimely payments and Calculated 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 2008 MAG 1 to 11 11 50,487 770 51,257 CFC 24 1 10 2 12 2009 MAG 1 to 4 6 27,943 27,943 78,440 772 79,212 Recommendation We recommend that Port management: Seek and recover approximately $79,212 in one-time late charge and in interest/finance charges. Work with Dollar Rent-A-Car to ensure timely payments. Management Response 8 Total 13,700,673 542 27,949 6,928 283 3,138 38,840 13,739,513 1,373,951 1,370,067 3,884 1,650 5,534 Dec-08 1,073,784 62 2,790 1,732 13 256 4,853 1,078,637 107,864 107,378 485 24 175 660 Nov-08 788,771 29 2,205 2,149 2 69 4,454 793,225 79,322 78,877 445 25 167 612 Oct-08 968,738 18 2,870 2,771 20 5,679 974,417 97,442 96,874 568 26 221 789 27 Sep-08 1,283,397 105 3,325 276 447 4,154 1,287,551 128,755 128,340 415 168 584 Aug-08 2,146,847 134 3,045 7 66 3,252 2,150,099 215,010 214,685 325 28 137 462 Jul-08 2,055,830 17 2,380 69 1,699 4,165 2,059,994 205,999 205,583 416 29 181 598 Jun-08 1,444,267 73 1,645 7 390 2,115 1,446,382 144,638 144,427 212 30 95 307 May-08 956,228 14 2,310 26 62 2,412 958,640 95,864 95,623 241 31 112 353 Apr-08 772,865 13 1,460 7 1,480 774,345 77,435 77,287 148 32 71 219 33 Mar-08 810,729 812,185 81,219 81,073 146 72 218 1,400 6 50 1,456 Feb-08 711,020 29 1,614 105 73 1,821 712,841 34 71,284 71,102 182 93 275 CMC INVESTMENT, INC - DOLLAR RENT A CAR FOR THE TWELVE MONTHS ENDED DECEMBER 2008 688,197 47 2,905 41 7 3,000 691,197 69,120 68,820 300 Jan-08 35 158 458 Parking & Storage Miscellaneous Total Additions Adjusted Gross Revenue Concession Fee Payable - 10% Concession Fee Reported by CMC Frequent Flyer Surcharge Add'l Concession Payable SCHEDULE OF FINDINGS INTEREST CALCULATED AS OF 11/30/10 Dollar Reported Gross Revenue FINDINGS: ADD Express Mail Ticket # of Month to Current Interest Rate Annually 18% or 1.5% Per Month Total Add'l Concession Payable and Interest Payable Total 15,371,454 33 30,051 23,084 4,760 96 1,664 59,688 15,431,142 1,543,114 1,537,145 5,969 1,518 7,488 Dec-09 918,285 3,465 2,044 200 5,709 923,994 92,399 91,829 571 12 103 674 Nov-09 823,986 2,140 1,720 3,860 827,846 82,785 82,398 387 13 75 462 Oct-09 1,047,447 3,570 2,217 5,787 1,053,234 105,323 104,745 579 14 122 700 242 728 15 164 891 Sep-09 1,540,201 5,040 1,995 7,277 1,547,478 154,748 154,020 Aug-09 2,455,229 4,393 1,965 25 65 6,447 2,461,676 246,168 245,523 645 16 155 799 Jul-09 2,035,720 3,710 1,991 425 6,126 2,041,846 204,185 203,572 613 17 156 769 Jun-09 1,518,624 2,860 2,116 26 271 5,273 1,523,897 152,390 151,862 527 18 142 670 May-09 1,213,085 3,045 1,997 19 5,060 1,218,145 121,815 121,309 506 19 144 650 Apr-09 1,106,610 1,750 1,987 380 4,117 1,110,727 111,073 110,661 412 20 124 535 21 Mar-09 1,001,550 57 240 100,337 100,155 182 1,821 1,821 1,003,371 78 1,499 2,730 10 62 4,378 792,392 79,239 78,801 438 22 144 582 Feb-09 788,014 CMC INVESTMENT, INC - DOLLAR RENT A CAR FOR THE TWELVE MONTHS ENDED DECEMBER 2009 Jan-09 922,703 33 1,733 2,030 35 3,831 926,534 92,653 92,270 383 23 132 515 Frequent Flyer Surcharge Parking & Storage Pickup Miscellaneous Total Additions SCHEDULE OF FINDINGS INTEREST CALCULATED AS OF 11/30/10 Dollar Reported Gross Revenue FINDINGS: ADD Express Mail Ticket Adjusted Gross Revenue Concession Fee Payable - 10% Concession Fee Reported by CMC 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
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