Applying Agreed-Upon Procedures
Airport and Airway Trust Fund Excise Taxes Gao ID: GAO-02-380R February 15, 2002GAO examined the underlying records for the net excise tax revenue distributed to the Airport and Airway Trust Fund (AATF) for fiscal year 2001. GAO (1) did a detailed test of transactions that represent the underlying basis of amounts distributed to AATF, (2) reviewed the Internal Revenue Service's (IRS) quarterly AATF certifications, (3) reviewed the Department of the Treasury Financial Management Service adjustments to AATF for fiscal year 2001, (4) reviewed procedures in the Office of Tax Analysis' process for estimating amounts to be distributed to AATF for the fourth quarter of fiscal year 2001, (5) compared net excise tax distributions to AATF during fiscal year 2001 and amounts reported in the financial statements prepared by the Bureau of the Public Debt for AATF and the Federal Aviation Administration's consolidated financial statements, and (6) reviewed key reconciliations of IRS records to Treasury records.
GAO-02-380R, Applying Agreed-Upon Procedures: Airport and Airway Trust Fund Excise Taxes
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United States General Accounting Office:
Washington, DC 20548:
February 15, 2002:
The Honorable Kenneth M. Mead:
Inspector General:
Department of Transportation:
Subject: Applying Agreed-Upon Procedures: Airport and Airway Trust
Fund Excise Taxes:
Dear Mr. Mead:
We have performed the procedures contained in the enclosure to this
letter, which we agreed to perform and with which you concurred,
solely to assist your office in ascertaining whether the net excise
tax revenue distributed to the Airport and Airway Trust Fund (AATF)
for the fiscal year ended September 30, 2001, is supported by the
underlying records. As agreed with your office, we evaluated fiscal
year 2001 activity affecting distributions to AATF.
In performing the agreed-upon procedures, we conducted our work in
accordance with U.S. generally accepted government auditing standards,
which incorporate financial audit and attestation standards
established by the American Institute of Certified Public Accountants.
These standards also provide guidance when performing and reporting
the results of agreed-upon procedures.
The adequacy of the procedures to meet your objectives is your
responsibility, and we make no representation in that respect. The
procedures we agreed to perform include (1) detailed tests of
transactions that represent the underlying basis of amounts
distributed to AATF, (2) review of the Internal Revenue Service's
(IRS) quarterly AATF certifications, (3) review of the Department of
the Treasury Financial Management Service (FMS) adjustments to AATF
for fiscal year 2001, (4) review of certain procedures in the Office
of Tax Analysis's (OTA) process for estimating amounts to be
distributed to AATF for the fourth quarter of fiscal year 2001, (5)
comparison of net excise tax distributions to AATF during fiscal year
2001 and amounts reported in the financial statements prepared by the
Bureau of the Public Debt (BPD) for AATF and the Federal Aviation
Administration's consolidated financial statements, and (6) review of
key reconciliations of IRS records to Treasury records. The enclosure
contains the agreed-upon procedures and our findings from performing
each of the procedures.
We were not engaged to perform, and did not perform, an audit, the
objective of which would have been to express an opinion on the amount
of net excise taxes distributed to AATF. Accordingly, we do not
express such an opinion. Had we performed additional procedures, other
matters might have come to our attention that would have been reported
to you.[Footnote 1] We completed the agreed-upon procedures on
February 1, 2002.
We provided a draft of this letter to IRS and Treasury officials,
along with its enclosure, for review and comment. They agreed with the
results and findings presented in this letter.
This report is intended solely for the use of the Office of Inspector
General of the Department of Transportation and should not be used by
those who have not agreed to the procedures and have not taken
responsibility for the sufficiency of the procedures for their
purposes. However, this letter is a matter of public record and its
distribution is not limited. Consequently, copies are available to
others upon request. This letter will also be available on GAO's home
page at [hyperlink, http://www.gao.gov]. If you have any questions,
please call me at (202) 512-3406.
Sincerely yours,
Signed by:
Steven J. Sebastian:
Acting Director:
Financial Management and Assurance:
Enclosure:
[End of section]
Enclosure: Airport and Airway Trust Fund Excise Tax Procedures and
Results:
I. Detailed tests of transactions that represent the underlying basis
of amounts distributed to AATF in fiscal year 2001:
A. Nonrepresentative selection of tax returns from the quarter ended
September 30, 2000:[Footnote 2]
1. For the quarter ending September 30, 2000, select the 30 largest
excise tax returns on the basis of total tax liability[Footnote 3]
amount from IRS's master file.[Footnote 4]
Description of findings and results:
We selected the 30 largest excise tax returns from the quarter ended
September 30, 2000, for testing. The selection was based on the total
tax liability amount, for each return, from IRS's master file.
The total tax liability amount related to these 30 returns was
approximately $8.5 billion, or 63 percent of the total excise tax
liability amount ($13.4 billion)[Footnote 5] for the quarter ended
September 30, 2000.
Of these 30 returns, 7 contained primarily AATF related taxes, 21
contained primarily Highway Trust Fund (HTF) taxes, and 2 contained
telephone taxes related to the general fund.
2. For each of seven returns related primarily to AATF, we performed
the following procedures which resulted in our testing approximately
$1.6 billion in prorated collections[Footnote 6] affecting fiscal year
2001 distributions to AATF:
(a) Trace the liability amount for abstracts[Footnote 7] 26, 27, and
28 from the tax return to IRS's master file.
Description of findings and results:
The liability amount for abstracts 26, 27, and 28 on the tax return
agreed with IRS's master file for all seven of the returns.
(b) Check the mathematical accuracy of the taxpayer's calculations on
the tax return for the selected abstracts.
Description of findings and results:
The taxpayer's calculations on all seven of the returns were
mathematically correct.
(c) Recompute the prorated collection amount for the selected
abstracts based on information from the master file and compare this
amount to the amount from the Collection Certification System audit
file.[Footnote 8]
Description of findings and results:
The recomputed prorated collection amounts for the three selected
abstracts agreed with amounts in IRS's Collection Certification System
audit file for all seven of the returns.
B. Dollar unit sample (DUS) of transactions from the quarters ended
December 31, 2000, and March 31, 2001:
1. Sampling:
(a) Obtain excise tax assessments and collection data from IRS's
master file for the first 6 months of fiscal year 2001. Determine if
excise tax collections per master file agree with IRS's general
ledger. Reconcile total excise tax collections from the master file to
total excise tax collections from the Collection Certification System
audit files to determine if they materially[Footnote 9] agree.
Description of findings and results:
Excise tax collections for the first 6 months of fiscal year 2001 per
the master file materially agreed with IRS's general ledger and with
total excise tax collections from the Collection Certification System.
(b) Select a random attribute sample of 78 excise tax assessments from
IRS's master file.[Footnote 10] Compare assessment and receipt
information for each sample item from the master file to the
assessment and receipt information in the Collection Certification
System to determine if assessments and receipts from the master file
are contained in the Collection Certification System.
Description of findings and results:
For each sample item, assessments and receipts from the master file
were contained in the Collection Certification System.
(c) To determine if the Collection Certification System properly
summarized the prorated collections, total the prorated collections for
selected abstracts[Footnote 11] from the audit files and compare these
amounts to amounts in the Reports of Excise Tax Collection.[Footnote
12]
Description of findings and results:
The Collection Certification System properly summarized the prorated
collections for all of the selected abstracts related to AATF and HTF.
Prorated collections for the above-mentioned trust funds from the
audit files agreed with the corresponding amounts in the Reports of
Excise Tax Collection.
(d) Separate the total population of prorated collections from the
audit files into the following distinct populations: (1) AATF, (2)
HTF, and (3) other excise tax abstracts. Use DUS to select a sample of
prorated excise tax collections from the AATF population.
Description of findings and results:
Use of DUS with a confidence level of 80 percent, a test materiality
of $99 million, and an expected aggregate error amount of $29.7
million resulted in a sample of 69[Footnote 13] prorated collections
for the first 6 months of fiscal year 2001.
(e) Select samples of prorated excise tax collections from the two non-
AATF populations.
Description of findings and results:
Use of DUS with a confidence level of 80 percent, a test materiality
of $350 million, and an expected aggregate error amount of $105
million resulted in a sample of 100[Footnote 14] prorated collections
for the first 6 months of fiscal year 2001 for HTF.
A random attribute sample of 45 items from the population of prorated
tax collections related to all excise taxes other than AATF and HTF
was selected for testing.[Footnote 15]
2. Detailed tests of transactions:
(a) For each prorated excise tax collection sampled from the AATF
population:
Check to see that the assessment amount on the tax return, for the
sampled abstract, agrees with the amount recorded in IRS's master file.
Description of findings and results:
The assessment amounts on the tax returns agreed with the amounts
recorded in IRS's master file for all of the sampled abstracts.
Check the mathematical accuracy of the taxpayers' calculations on the
tax returns for the related abstract.
Description of findings and results:
The taxpayers' calculations on the tax returns for the related
abstracts were mathematically correct for all of the sampled abstracts.
Recompute the prorated collection amount based on information from the
master file and compare this amount to the sample items selected from
the Collection Certification System audit file.[Footnote 16]
Description of findings and results:
The recomputed prorated collection based on information from the
master file agreed with the amounts for 68 of the 69 items sampled
from the Collection Certification System audit file. For the other
case, an error in IRS's proration computer program resulted in an
understatement of $6,984,964 for abstract 26. In this case, a
programming error in handling certain credit adjustments caused a
double counting of collections and resulted in an incorrect allocation.
(b) Perform detailed testing on the two samples of prorated
collections from the non-AATF populations to determine if they contain
any AATF excise tax collections.
Description of findings and results:
The two samples of prorated collections from the non-AATF populations
did not contain any AATF excise tax collections.
(c) Evaluate the results of conducting steps (a) and (b).
Description of findings and results:
For the first 6 months of fiscal year 2001, the net most likely error
is ($7.0 million) with an upper error limit of $51.2 million at the 80
percent confidence level. Collections go through additional
calculations to produce certification amounts for distribution.
Consequently, the magnitude of this error cannot be quantified with
respect to the impact on recorded distributions to AATF.
II. Review of IRS's quarterly AATF certifications:
A. Receipt certifications:
Perform the following steps on IRS's AATF receipt certifications for
the quarters ended September 30, 2000; December 31, 2000; March 31,
2001; and June 30, 2001:[Footnote 17]
1. Inspect the certification letters for authorizing signatures.
Description of findings and results:
The certification letters for all 4 quarters had authorizing
signatures.
2. Determine if evidence exists that the supervisor or another analyst
checked the certification letters and supporting worksheets.
Description of findings and results:
There was evidence that another analyst and a supervisor checked the
certification letters and supporting worksheets for all four quarters.
3. Recalculate the totals on the certification letters to determine if
they are mathematically correct.
Description of findings and results:
The totals on the certification letters for all 4 quarters were
mathematically correct.
4. Trace the certified amounts for tax on transportation of persons by
air (abstract 26), tax on use of international air facilities
(abstract 27), tax on transportation of property by air (abstract 28),
and tax on aviation fuel for commercial use (abstract 77)[Footnote 18]
from the certification letters back to the Reports of Excise Tax
Collection.[Footnote 19]
Description of findings and results:
The certified amounts for tax on transportation of persons by air
(abstract 26), tax on use of international air facilities (abstract
27), tax on transportation of property by air (abstract 28), and tax
on aviation fuel for commercial use (abstract 77) per the
certification letters agreed with the related Report of Excise Tax
Collection for all 4 quarters.
5. Review the Reports of Excise Tax Collection used in the
certification to determine if they contain significant[Footnote 20]
collections from prior quarters.
Description of findings and results:;
The Reports of Excise Tax Collection supporting IRS's certifications
to AATF did not contain significant prior quarter collections for the
quarters ended September 30, 2000; March 31, 2001; and June 30, 2001.
The Reports of Excise Tax Collection supporting IRS's certification to
AATF for the quarter ended December 31, 2000, contained approximately
$28 million in AATF excise tax collections related to previous
quarters. Of this amount, approximately $20 million was from the
quarter ended September 30, 2000.
6. Review the distribution rates used by IRS to determine whether the
distribution rates for tax on transportation of persons by air
(abstract 26), tax on use of international air facilities (abstract
27), tax on transportation of property by air (abstract 28), and tax
on aviation fuel for commercial use (abstract 77) agree with the
applicable laws.
Description of findings and results:
We saw no evidence that the distribution rates used by IRS for tax on
transportation of persons by air (abstract 26), tax on use of
international air facilities (abstract 27), tax on transportation of
property by air (abstract 28), and tax on aviation fuel for commercial
use (abstract 77) did not agree with the applicable laws in effect
during the 4 quarters.
B. Refund/credit reclassification:[Footnote 21]
Perform the following steps on IRS's AATF refund/credit certifications
for the quarters ended December 31, 2000; March 31, 2001; June 30,
2001; and September 30, 2001:
1. Inspect the certification letters for authorizing signatures.
Description of findings and results:
The certification letters for all 4 quarters had authorizing
signatures.
2. Determine if evidence exists that the certification letters and
accompanying schedules[Footnote 22] were checked by the supervisor or
another analyst.
Description of findings and results:
There was evidence that another analyst and a supervisor checked the
certification letters and accompanying schedules for all 4 quarters.
3. Recalculate the totals on the certification letters and
accompanying schedules to determine if they are mathematically correct.
Description of findings and results:
The totals on the certification letters and accompanying schedules
were mathematically correct for all 4 quarters.
4. Trace the refund and credit amount for aviation gas and aviation
O/T gas, [Footnote 23] from the schedules accompanying the
certification letters to other summary refund/credit schedules. (These
other refund/credit summary schedules summarize refund and credit data
obtained from service center campus records.)
Description of findings and results:
The refund and credit amounts for aviation gas and aviation O/T gas on
the schedules accompanying the certification letters for the quarters
agreed with the amounts on the summary schedules for the quarters
ended December 31, 2000; June 30, 2001; and September 30, 2001.
On IRS's refund and credit certification for the quarter ended March
31, 2001, the IRS analyst entered data onto the wrong summary
schedules. As a result, IRS reported $10 million in AATF refunds as
credits and $5 million in AATF credits as refunds. There was no impact
on distributions to the AATF because BPD uses the total amount of
refunds and credits in calculating distributions to the trust fund.
III. Review of FMS adjustments:
Perform the following steps on FMS adjustments to AATF excise tax
distributions for the quarters ended September 30, 2000; December 31,
2000; March 31, 2001; and June 30, 2001.
A. Compare the FMS adjustments made to AATF for fiscal year 2001 with
original Office of Tax Analysis (OTA) estimates and IRS certified
amounts to see if they agree with the supporting schedules. [Footnote
24]
Description of findings and results:
For the FMS adjustments made to AATF, the original OTA estimates and
IRS certified amounts agreed with the supporting schedule for all 4
quarters.
B. Recompute the difference between the OTA estimates and final IRS
certified amounts to see if the amounts agree with the differences
computed by FMS.
Description of findings and results:
The independently recalculated differences between the OTA estimates
and the final IRS certified amounts for the AATF agreed with the
differences computed by FMS for all 4 quarters.
These amounts were: [Footnote 25]
* for the quarter ended September 30, 2000, $164,133,000;
* for the quarter ended December 31, 2000, $86,598,000;
* for the quarter ended March 31, 2001, $44,862,000; and;
* for the quarter ended June 30, 2001, $76,855,000.
IV. Procedures performed on excise tax distributions to AATF for the
quarter ended September 30, 2001:
A. Determine if OTA's process for identifying and incorporating into
its trust fund estimates [Footnote 26] the effect of new legislation
on excise tax receipts was in place during fiscal year 2001.
Description of findings and results:
OTA's process for identifying and incorporating into its trust fund
estimates the effect of new legislation on excise tax receipts was in
place during fiscal year 2001. OTA does not routinely compile a
comprehensive list of laws and regulations that affect the receipt
estimates. However, OTA prepares a tax rate table [Footnote 27] to
capture information relating to legislation that affects tax rates,
tax basis, accounts, and deposit rules in effect during the tax period.
For example, in calculating its trust fund estimates for the period
from September 16 through September 30, 2001, OTA took into
consideration the effect of Section 301 of the Air Transportation
Safety and System Stabilization Act (Public Law 107-42). This
legislation provided relief to domestic air carriers by suspending
required excise tax deposits due after September 10, 2001, until
November 15, 2001. As a result, OTA assumed air carriers would make no
payments for tax on transportation of persons by air (abstract 26) or
tax on use of international air facilities (abstract 27) until
November 15, thereby decreasing the amount of estimated excise taxes
transferred to AATF.
B. Determine if there is evidence of review of the transfer forms and
supporting schedules.
Description of findings and results:
There was evidence that another OTA economist reviewed the transfer
forms and supporting schedules for the semimonthly transfers affecting
distributions to AATF for the quarter ended September 30, 2001.
C. Recalculate the totals on the transfer letters to determine if they
are mathematically correct.
Description of findings and results:
The totals on the transfer forms affecting distributions to AATF for
the quarter ended September 30, 2001, were mathematically correct.
D. Trace the transfer amounts for tax on transportation of persons by
air (abstract 26), tax on use of international air facilities
(abstract 27), tax on transportation of property by air (abstract 28),
and tax aviation fuel for commercial use (abstract 77)[Footnote 28]
from the transfer letter, through the supporting schedules and back to
the related source documents.[Footnote 29]
Description of findings and results:
The transfer amounts for tax on transportation of persons by air
(abstract 26), tax on use of international air facilities (abstract
27), tax on transportation of property by air (abstract 28), and tax
aviation fuel for commercial use (abstract 77), from the transfer
forms affecting distributions to AATF for the quarter ended September
30, 2001, agreed with the supporting schedules and source documents.
[Footnote 30]
V. Other procedures:
A. Compare total fiscal year 2001 excise taxes distributed to AATF
with drafts of (1) BPD's fiscal year 2001 financial statements for
AATF and (2) Federal Aviation Administration fiscal year 2001
consolidated financial statements to determine if they agree.
Description of findings and results:
Fiscal year 2001 excise taxes of $9.1 billion distributed to the AATF
agreed with amounts reported on (1) draft BPD fiscal year 2001
financial statements for AATF and (2) draft FAA fiscal year 2001
consolidated financial statements.
B. Procedures performed as part of fiscal year 2001 IRS financial
statement audit:
1. From IRS's master files for the first 9 months of fiscal year 2001,
use DUS to select statistical samples of (1) total tax revenue
receipts and (2) refunds. For each sample item, test that the
collection or refund amount, tax period, and tax class[Footnote 31]
from source documentation agrees with amounts recorded in IRS's master
files.
Description of findings and results:
Detailed testing of 188 revenue receipts and 19 refund sample
transactions showed that the collection or refund amount, tax period,
and tax class from source documents agreed with amounts recorded in
IRS's master files.
2. Review selected service center campuses' monthly Treasury SF-224
reconciliations to determine if IRS-reported revenue receipts were
properly classified and reconciled to Treasury FMS records.
For refunds, review selected IRS service center campuses' monthly
Treasury SF-224 reconciliations to determine if IRS-reported total
refunds (all tax classes) were materially[Footnote 32] reconciled to
Treasury FMS records.[Footnote 33]
Description of findings and results:
Tax revenue receipts reported by selected IRS service center campuses
through the monthly Treasury SF-224 reconciliation process were
properly classified and materially agreed with Treasury FMS records.
Total refunds reported by the selected IRS service center campuses
through the monthly Treasury SF-224 reconciliation process materially
agreed with Treasury FMS records.
3. Perform a proof of cash for fiscal year 2001 to determine whether
revenue receipt balances by tax class, including excise tax, per IRS's
general ledger materially agree with IRS master files and Treasury
records. For refunds, perform a comparison of total refund balances
between the master file, the general ledger, and Treasury records.
Also, compare excise tax refunds per the master file to the general
ledger.
Description of findings and results:
Fiscal year-end tax receipt balances for all tax classes, including
excise taxes, per IRS's general ledger materially agreed with IRS's
master files and with Treasury records.
Fiscal year-end refund balances per IRS's general ledger materially
agreed with the master file and with Treasury records.
[End of section]
Footnotes:
[1] In our reports on the results of our audit of IRS's fiscal year
2000 financial statements, we noted a reportable condition related to
IRS's ability to allocate excise tax collections to the appropriate
trust funds at the time deposits are made. This condition affects the
adequacy of the distributions of federal excise tax revenue to
recipient trust funds. (See U.S. General Accounting Office, Financial
Audit: IRS' Fiscal Year 2000 Financial Statements, [hyperlink,
http://www.gao.gov/products/GAO-01-394] [Washington, D.C., Mar. 1,
2001] and U.S. General Accounting Office, Internal Revenue Service:
Progress Made, but Further Actions Needed to Improve Financial
Management, [hyperlink, http://www.gao.gov/products/GAO-02-35]
[Washington, D.C., Oct. 19, 2001]). This condition continued to exist
during fiscal year 2001. Our report on the results of our audit of
IRS's fiscal year 2001 financial statements will be issued shortly.
[2] Since certifications are not completed until 6 months after the
end of the quarter, the certification and corresponding FMS adjustment
for the quarter ended September 30, 2000, was completed in March 2001
and thus affected fiscal year 2001 distributions to AATF.
[3] Although the certifications are based on amounts collected, we
used the tax liability amounts to identify the taxpayers paying the
largest amounts of excise taxes. Based on our experience, these
taxpayers generally pay their excise taxes in full each quarter.
[4] The master file is a detailed database containing taxpayer
information.
[5] IRS told us that this was the total excise tax liability amount,
from its master file, for the quarter ended September 30, 2000.
[6] IRS certifies to trust funds the amount of actual excise taxes
collected. Because there are occasions in which taxpayers have not
paid their full tax liability at the time of IRS's certification, IRS
must allocate the amount of payments actually received among the
different excise taxes reported on the taxpayer's return. IRS's
Collection Certification System prorates a taxpayer's payments
proportionately among all taxes reported on the tax return. For
example, if a taxpayer reports that they owe $4 million for gasoline
tax, $2 million for diesel fuel tax, and $1 million for gasohol tax on
their Form 720 Quarterly Federal Excise Tax Return, but has only paid
IRS $3.5 million at the time IRS performs its certification, the
program prorates the $3.5 million in the following manner: $2 million
to gasoline tax, $1 million to diesel fuel tax, and $500,000 to
gasohol tax.
[7] The abstract numbers identify the tax type (e.g., gasoline and
ticket tax) and are used as the basis for determining the distribution
of the excise taxes to the various trust funds. Abstract numbers are
preprinted on the Form 720 Quarterly Federal Excise Tax Return and are
used by the taxpayer to report excise tax assessments. If the return
was related to AATF, we selected (1) tax on transportation of persons
by air-ticket tax (abstract 26), (2) tax on use of international air
facilities (abstract 27), and (3) tax on transportation of property by
air (abstract 28). If the return was related to HTF, we selected (1)
tax on 10 percent gasohol (abstract 59), (2) diesel fuel tax (abstract
60), and (3) gasoline tax (abstract 62). If the return was related to
neither of these trust funds, we selected all abstracts on the return
in which the taxpayer has reported a liability. The tax amounts
related to the selected abstracts for each trust fund are the largest
tax amounts reported on the taxpayer's excise tax return and make up
over 90 percent of the total amount certified to AATF and over 86
percent of the total amount certified to HTF.
[8] The Collection Certification System produces what IRS refers to as
"audit files." These audit files contain the individual prorated
collections, by abstract and taxpayer identification number, that make
up the certified total amounts for each abstract.
[9] For the purpose of this reconciliation, material is defined as
$205 million. This represents one percent of the total Form 720-
related excise tax collections, related to the quarters ended December
31, 2000, and March 31, 2001.
[10] For this sample, if one error or none was found in testing the 78
items, we would be 90 percent confident that the error rate in the
population would not exceed 5 percent.
[11] The selected abstracts include the following: (1) tax on
transportation of persons by air (abstract 26), (2) tax on use of
international air facilities (abstract 27), (3) tax on transportation
of property by air (abstract 28), (4) tax on aviation fuel for
commercial use (abstract 77), (5) tax on 10 percent gasohol (abstract
59), (6) diesel fuel tax (abstract 60), and (7) gasoline tax (abstract
62). The tax amounts for the four AATF-related abstracts make up over
96 percent of the total amount certified to AATF and the three HTF-
related abstracts make up over 86 percent of the total amounts
certified to HTF.
[12] The Report of Excise Tax Collection contains classified prorated
collections that serve as the basis for IRS's quarterly trust fund
certifications.
[13] The planned sample size using DUS was 135 items. DUS selects
dollars versus specific transaction items by dividing the population
by dollar intervals. The dollar interval for AATF was $36 million.
Accordingly, any item with a dollar value matching or exceeding the
sampling interval would be selected, whereas items less than the
sampling interval might not be selected. For example, an item of $72
million would cover 2 dollar intervals but represent 1 sample item.
Because the large dollar items cover more than 1 interval, the 69
unique sampled transactions selected represent 135 dollar intervals.
[14] The planned sample size using DUS was 129 items. DUS selects
dollars versus specific transaction items by dividing the population
by dollar intervals. The dollar interval for HTF was $129 million.
Accordingly, any item with a dollar value matching or exceeding the
sampling interval would be selected, whereas items less than the
sampling interval might not be selected. For example, an item of $260
million would cover 2 dollar intervals but represent 1 sample item.
Because the large dollar items cover more than 1 interval, the 100
unique sampled transactions selected represent 129 dollar intervals.
[15] For this sample, if no errors are found in testing the 45 items,
we would be 90 percent confident that the error rate in the population
would not exceed 5 percent.
[16] The purpose of this test is to determine whether the Collection
Certification System prorates correctly. This test is not intended to
determine whether amounts provided to the system are correct.
[17] Since certifications are not completed until 6 months after the
end of the quarter, the certification and corresponding FMS adjustment
for the quarter ended September 30, 2001, will not be completed in
time to affect the recorded fiscal year 2001 distributions to AATF.
[18] The certified amounts for tax on transportation of persons by air
(abstract 26), tax on use of international air facilities (abstract
27), tax on transportation of property by air (abstract 28), and tax
on aviation fuel for commercial use (abstract 77) make up over 96
percent of the total amount certified to AATF.
[19] IRS uses data from two of these reports, covering sequential
processing intervals, for each quarterly certification. Collections
are classified on the report when the related Form 720 tax return has
been recorded on IRS's master file during the processing interval
covered by the report. The second of the two reports used may contain
collections related to previous quarters not classified until the
current quarter because the related return was not recorded on the
master file until the current quarter.
[20] For this test, "significant" is defined as $20 million. This
represents approximately 1 percent of the total amount certified to
AATF for a quarter.
[21] IRS performs a quarterly reclassification of excise tax refunds
and credits originally entered into its master file as personal or
corporate refund/credit. IRS refers to these reclassifications as
"refund/credit certifications." These amounts do not represent the
total excise tax refund/credit activity to the trust funds. Other
routine excise tax refunds and credits (e.g., overpayments), which are
claimed on taxpayers' Form 720 excise tax returns, are included in
IRS's excise tax receipt certification to trust funds.
[22] IRS attaches a separate schedule to the AATF refund/credit
certification letter that includes the detailed excise tax amounts
that support the total amount shown on the letter. IRS compiles the
amounts on these schedules from service center campus systems and its
Interim Revenue Accounting Control System. IRS has 10 service center
campuses that process tax returns and tax receipts.
[23] Aviation Gas and Aviation 0/T gas are the only two excise taxes
on the AATF refund/credit certification.
[24] An FMS accountant compiles this schedule, called the Subsidiary
Quarterly Account of Estimates and Actual Related Excise Taxes
Appropriated to the Airport and Airway Trust Fund. It computes the
difference between IRS certified amounts and the OTA estimate for
excise taxes, individually and in total, that relate to the Airport
and Airway Trust Fund. The schedule, along with OTA transfer forms and
IRS certifications, support the FMS adjustment.
[25] A positive amount indicates that the FMS adjustment increased
excise taxes distributed to the trust fund. A negative amount, shown
in parentheses, indicates that the FMS adjustment decreased excise
taxes distributed to the trust fund.
[26] Under its new estimation process, OTA makes semimonthly estimates
of excise tax collections for transfer to trust funds.
[27] 0TA communicates this information to interested parties at
Treasury, the Federal Highway Administration, the Federal Transit
Administration, and the Department of Transportation. IRS uses the tax
and distributions rates from this table in its subsequent
certification of collections to trust funds.
[28] The transfer amounts for tax on transportation of persons by air
(abstract 26), tax on use of international air facilities (abstract
27), tax on transportation of property by air (abstract 28), and tax
aviation fuel for commercial use (abstract 77), typically made up over
97 percent of the total amount transferred to AATF during the fourth
quarter of fiscal year 2001.
[29] The source documents include the IRS report of excise taxes used
to derive the percentages applied to reported receipts, the Daily
Treasury Statement, Monthly Treasury Statement, and the excise tax
rate table.
[30] As noted in step IV.A, OTA took into consideration the effect of
Section 301 of P.L. 107-42. As a result, OTA's estimated excise tax
collections to AATF for the period September 16 through September 30,
2001, was only $88.5 million, compared to over $400 million in each of
the other semimonthly periods affecting fourth quarter distributions
to AATF.
[31] IRS assigns a tax class number to specific types of taxes. Excise
taxes are tax class 4.
[32] For the purpose of this procedure and procedure V.B.3, we define
material as $22 billion. This represents 1 percent of the estimated
total tax revenue receipts to be collected by IRS for fiscal year 2001.
[33] IRS maintains records of refund balances by tax class in its
master file and reports this information monthly to Treasury on the SF-
224. Treasury provides IRS with a Statement of Differences (TFS-6652),
which reports differences between total refunds reported by IRS on the
SF-224 and the total refunds per Treasury records.
