Applying Agreed-Upon Procedures
Highway Trust Fund Excise Taxes Gao ID: GAO-08-202R November 2, 2007We have performed the procedures contained in the enclosure to this report, which we agreed to perform and with which the Department of Trasnportation (DOT) concurred, solely to assist your office in ascertaining whether the net excise tax revenue distributed to the Highway Trust Fund (HTF) for the fiscal year ended September 30, 2007, is supported by the underlying records. As agreed with your office, we evaluated fiscal year 2007 activity affecting distributions to the HTF. 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 for 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 were related to (1) transactions that represent the underlying basis of amounts distributed to the HTF, (2) the Internal Revenue Service's (IRS) quarterly HTF receipt certifications, (3) the Department of the Treasury's Financial Management Service adjustments to the HTF during fiscal year 2007, (4) the Department of the Treasury's Office of Tax Analysis's (OTA) process for estimating excise tax amounts to be distributed to the HTF for the fourth quarter of fiscal year 2007, and other procedures related to (5) adjustments to the HTF for tax on kerosene used in aviation, (6) the net amount of fiscal year 2007 excise taxes distributed to the HTF, and (7) transactions that represent total IRS tax revenue receipts and refunds.
We were not engaged to perform, and did not perform, an audit, the objective of which would have been the expression of an opinion on the amount of net excise taxes distributed to the HTF. 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. We completed the agreed-upon procedures on October 24, 2007.
GAO-08-202R, Applying Agreed-Upon Procedures: Highway Trust Fund Excise Taxes
This is the accessible text file for GAO report number GAO-08-202R
entitled 'Applying Agreed-Upon Procedures: Highway Trust Fund Excise
Taxes' which was released on November 2, 2007.
This text file was formatted by the U.S. Government Accountability
Office (GAO) to be accessible to users with visual impairments, as part
of a longer term project to improve GAO products' accessibility. Every
attempt has been made to maintain the structural and data integrity of
the original printed product. Accessibility features, such as text
descriptions of tables, consecutively numbered footnotes placed at the
end of the file, and the text of agency comment letters, are provided
but may not exactly duplicate the presentation or format of the printed
version. The portable document format (PDF) file is an exact electronic
replica of the printed version. We welcome your feedback. Please E-mail
your comments regarding the contents or accessibility features of this
document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
November 2, 2007:
The Honorable Calvin L. Scovel III:
Inspector General:
Department of Transportation:
Subject: Applying Agreed-Upon Procedures: Highway Trust Fund Excise
Taxes:
Dear Mr. Scovel:
We have performed the procedures contained in the enclosure to this
report, 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 Highway Trust Fund (HTF) for the fiscal year
ended September 30, 2007, is supported by the underlying records. As
agreed with your office, we evaluated fiscal year 2007 activity
affecting distributions to the HTF.
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 for 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 were related to (1) transactions that
represent the underlying basis of amounts distributed to the HTF, (2)
the Internal Revenue Service's (IRS) quarterly HTF receipt
certifications, (3) the Department of the Treasury's Financial
Management Service adjustments to the HTF during fiscal year 2007, (4)
the Department of the Treasury's Office of Tax Analysis's (OTA) process
for estimating excise tax amounts to be distributed to the HTF for the
fourth quarter of fiscal year 2007, and other procedures related to (5)
adjustments to the HTF for tax on kerosene used in aviation, (6) the
net amount of fiscal year 2007 excise taxes distributed to the HTF, and
(7) transactions that represent total IRS tax revenue receipts and
refunds. 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 the expression of an opinion on the
amount of net excise taxes distributed to the HTF. 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. We completed the agreed-upon procedures on October 24,
2007.
We provided a draft of this report to IRS and OTA officials for review
and comment. IRS agreed with the results and findings presented in this
report. OTA agreed with the results and findings presented in this
report relating to its responsibilities, that is, the procedures
performed in the estimation process for the quarter ended September 30,
2007.
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 purpose.
However, this report is a matter of public record, and its distribution
is not limited. This report is available at no charge on GAO's Web site
at [hyperlink, http://www.gao.gov]. If you have any questions, please
call me at (202) 512-3406. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this report.
Sincerely yours,
Signed by:
Steven J. Sebastian:
Director:
Financial Management and Assurance:
Enclosure:
Highway Trust Fund Excise Tax Procedures and Results:
I. Procedures on transactions that represent the underlying basis of
amounts distributed to the Highway Trust Fund (HTF) in fiscal year
2007:
A. Nonstatistical selection of tax returns from the quarters ended June
30, 2006, and September 30, 2006[Footnote 1].
1. For each of the quarters ending June 30, 2006, and September 30,
2006, select the 30 largest excise tax returns containing excise taxes
related primarily to the HTF and the Airport and Airway Trust Fund
(AATF) on the basis of total tax liability amount[Footnote 2] from the
Internal Revenue Service's (IRS) master file.[Footnote 3]
Description of findings and results:
We selected the 30 largest excise tax returns related primarily to HTF
and AATF from each of the two quarters for testing. The selection was
based on the total tax liability amount and type of taxes owed for each
return from IRS's master file.
The total tax liability amount related to the 30 returns from the
quarter ended June 30, 2006, was approximately $9.9 billion or 65
percent of the total tax liability amount of $15.3 billion for all
excise tax returns for the quarter. Of these 30 returns, 21 contained
primarily HTF-related taxes and 9 contained primarily AATF taxes.
The total tax liability amount related to the 30 returns from the
quarter ended September 30, 2006, was approximately $9.9 billion or 70
percent of the total tax liability amount of $14.2 billion for all
excise tax returns for the quarter. Of these 30 returns, 21 contained
primarily HTF-related taxes and 9 contained primarily AATF taxes.
2. For each of the 42 returns related primarily to the HTF from the
quarters ended June 30, 2006, and September 30, 2006, we performed the
following procedures, which encompassed approximately $14.9 billion in
prorated collections[Footnote 4] affecting fiscal year 2007
distributions to the HTF:
(a) Trace the liability amount for abstracts[Footnote 5] 60 and 62 from
the tax return to IRS's master file for agreement.
Description of findings and results:
The liability amount for abstracts 60 and 62 on the tax return agreed
with the master file for all 42 returns.
(b) Inspect the taxpayers' calculations on the tax return for the
selected abstracts to determine whether they are mathematically
correct.
Description of findings and results:
The taxpayers' calculations on all 42 returns were mathematically
correct.
(c) Calculate 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
files[Footnote 6] for agreement.
Description of findings and results:
The independently calculated prorated collection amounts for the
selected abstracts agreed with amounts in IRS's Collection
Certification System audit files for all 42 returns.
B. Attribute and Monetary unit samples (MUS) from the quarters ended:
December 31, 2006, and March 31, 2007:
1. Sampling:
(a) Obtain excise tax collection data from the master file for the
first two quarters of fiscal year 2007. Compare excise tax collection
data from the master file with data from IRS's general ledger to
determine if they materially agree.[Footnote 7] Compare total excise
tax collections from the master file with total excise tax collections
from the Collection Certification System audit files to determine if
they materially agree.
Description of findings and results:
Excise tax collections for the first two quarters of fiscal year 2007
from 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
the master file.[Footnote 8] 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
assessment and receipt information from the master file are contained
in the Collection Certification System.
Description of findings and results:
For all 78 sample items, assessment and receipt information from the
master file were contained in the Collection Certification System.
(c) Sum the prorated collections for selected abstracts[Footnote 9]
from the audit files and compare these amounts to amounts in the Report
of Excise Tax Collection[Footnote 10] to determine if the Collection
Certification System properly summarized the prorated collections.
Description of findings and results:
The Collection Certification System properly summarized the prorated
collections for all of the selected abstracts. Prorated collections
from the audit files for the selected abstracts agreed with the
corresponding amounts in the Report of Excise Tax Collection.
(d) Separate the total population of prorated collections from the
audit files into the following distinct populations: (1) HTF, (2) AATF,
and (3) other excise tax abstracts. Use MUS to select a sample of
prorated excise tax collections from the HTF population using a
confidence level of 80 percent, a test materiality of $388 million, and
an expected aggregate error amount of $116 million.
Description of findings and results:
Use of MUS with a confidence level of 80 percent, a test materiality of
$388 million, and an expected aggregate error amount of $116 million
resulted in a sample of 95[Footnote 11] prorated collections for the
HTF for the first two quarters of fiscal year 2007.
(e) Select samples of prorated excise tax collections from the two non-
HTF populations. Use MUS to select a sample of prorated excise tax
collections from the AATF population using a confidence level of 80
percent, a test materiality of $102 million, and an expected aggregate
error amount of $31 million. Select a random attribute sample of 45
items from the population of prorated tax collections related to all
excise taxes other than the HTF and the AATF.[Footnote 12]
Description of findings and results:
Use of MUS with a confidence level of 80 percent, a test materiality of
$102 million, and an expected aggregate error amount of $31 million
resulted in a sample of 70[Footnote 13] prorated collections for the
AATF for the first two quarters of fiscal year 2007.
A random attribute sample of 45 items was selected from the population
of prorated tax collections related to all excise taxes other than the
HTF and the AATF.
2. Procedures on transactions:
(a) For each prorated excise tax collection sampled from the HTF
population:
* Compare the assessment amount on the tax return for the sampled
abstract with the amount recorded in IRS's master file for agreement.
Description of findings and results:
The assessment amount on the tax return agreed with the amount recorded
in the master file for all of the sampled items.
* Inspect the taxpayers' calculations on the tax returns for the
related abstract to determine whether they are mathematically correct.
Description of findings and results:
The taxpayers' calculations on the tax returns were mathematically
correct for all of the sampled items.
* Calculate 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 files for
agreement.[Footnote 14]
Description of findings and results:
The independently calculated prorated collection, based on information
from the master file, agreed with the amounts for 93 of the 95 sampled
items selected from the Collection Certification System audit files.
On one tax return that included two sample items, IRS denied a tax
credit on the tax return but gave the taxpayer the credit in the
system. As a result, the prorated collection amounts for the two sample
items were overstated by a total of $26,924.
(b) Inspect the tax returns and master file information for the two
samples of prorated collections from the non-HTF populations to
determine if they contain any HTF excise tax collections.
Description of findings and results:
The two samples of prorated collections from the non-HTF populations
did not contain any HTF 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 2007, the net most likely error
is $26,924 with an upper error limit of $225 million at the 80-percent
confidence level.
II. Procedures on IRS's quarterly HTF receipt certifications:
Perform the following procedures on IRS's HTF receipt certifications
for the quarters ended September 30, 2006, December 31, 2006, March 31,
2007, and June 30, 2007:
A. Inspect the certification letters[Footnote 15] for authorizing
signatures.
Description of findings and results:
The certification letters for all four quarters had authorizing
signatures.
B. Inspect the certification letters and supporting worksheets to
determine if evidence exists that they were reviewed by the supervisor
or another analyst.
Description of findings and results:
There was evidence that the supervisor or another analyst reviewed the
certification letters and supporting worksheets for all four quarters.
C. Calculate 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 four quarters were
mathematically correct.
D. Trace the certified amounts for diesel fuel tax (abstract 60) and
gasoline tax (abstract 62)[Footnote 16] from the certification letters
back to the Report of Excise Tax Collection[Footnote 17] and the
Treasury 90 Report[Footnote 18] for agreement.
Description of findings and results:
The certified amounts for diesel fuel tax (abstract 60) and gasoline
tax (abstract 62) from the certification letters agreed with the
related Report of Excise Tax Collection and the Treasury 90 Report for
all four quarters. However, for the quarter ended December 31, 2006,
the certified amounts for kerosene tax (abstract 35) from the
certification letters were not deducted for related credits from the
Treasury 90 Report. This resulted in a $153 million overstatement of
the total amount certified to the HTF for the quarter ended December
31, 2006. After we brought this to the attention of IRS officials, IRS
corrected the error in subsequent adjustments to the certifications for
the quarter ended December 31, 2006. Since the adjustments were made
prior to the end of the fiscal year, the error did not have an effect
on fiscal year 2007 distributions to the HTF.
E. Compare the distribution rates used by IRS for diesel fuel tax
(abstract 60) and gasoline tax (abstract 62) for agreement with the
applicable laws.[Footnote 19]
Description of findings and results:
The distribution rates used by IRS for diesel fuel tax (abstract 60)
and gasoline tax (abstract 62) agreed with the applicable laws in
effect during all four quarters.
F. Inspect the Report of Excise Tax Collection used in the
certification to determine if it contains significant[Footnote 20]
collections from prior quarters.
Description of findings and results:
The Report of Excise Tax Collection used in the certification for all
four quarters did not contain significant collections from prior
quarters.
G. Trace heavy vehicle use tax amounts from the Highway Account
certification letters to the master file.[Footnote 21]
Description of findings and results:
The heavy vehicle use tax amounts from the Highway Account
certification letters agreed with the master file for all four
quarters.
III. Procedures on Financial Management Service adjustments:
Perform the following procedures on Financial Management Service (FMS)
adjustments to HTF excise tax distributions for the quarters ended June
30, 2006, September 30, 2006, December 31, 2006, March 31, 2007, and
June 30, 2007:
A. Compare the adjustment amounts from the FMS journal vouchers to the
supporting schedules[Footnote 22] and to the Office of Tax Analysis
(OTA) transfer forms[Footnote 23] and IRS certification letters for
agreement.
Description of findings and results:
The adjustment amounts from the FMS journal vouchers agreed with the
supporting schedules, OTA transfer forms, and IRS certification letters
for all five quarters.
However, the FMS adjustments for the quarter ended September 30, 2006,
which were made in February 2007, included a negative adjustment of
approximately $375 million to transfer estimated amounts of excise
taxes collected on kerosene used in aviation from the HTF to the
AATF.[Footnote 24] This transfer had already been made by FMS in
January 2007. As a result, FMS erroneously duplicated the transfer out
of the HTF. Consequently, the HTF received $375 million less in excise
tax distributions than what it should have received for the quarter
ended September 30, 2006. After we brought this to the attention of an
FMS official, FMS corrected the erroneous adjustment in March 2007 by
transferring back $375 million from the AATF to the HTF for the quarter
ended September 30, 2006.
B. Calculate the differences between the OTA estimates and IRS
certified amounts to determine if the amounts agree with the
differences computed by FMS.
Description of findings and results:
The independently calculated differences between the OTA estimates and
IRS certified amounts for the Highway Account agreed with the
differences computed by FMS for all five quarters. These amounts
were[Footnote 25]:
* $185,212,000 for the quarter ended June 30, 2006;
* $842,023,000 for the quarter ended September 30, 2006;
* $618,554,000 for the quarter ended December 31, 2006;
* ($193,764,000) for the quarter ended March 31, 2007; and:
* ($138,729,000) for the quarter ended June 30, 2007.
The independently calculated differences between the OTA estimates and
IRS certified amounts for the Mass Transit Account agreed with the
differences computed by FMS for all five quarters. These amounts were:
* $10,356,000 for the quarter ended June 30, 2006;
* $98,286,000 for the quarter ended September 30, 2006;
* $84,839,000 for the quarter ended December 31, 2006;
* ($18,202,000) for the quarter ended March 31, 2007; and:
* $35,512,000 for the quarter ended June 30, 2007.
IV. Procedures on excise tax distributions to the HTF for the quarter
ended September 30, 2007:
A. Determine if OTA's process for identifying and incorporating the
effect of new legislation on excise tax receipts into its trust fund
estimates[Footnote 26] was in place during the quarter ended September
30, 2007.
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 the quarter ended September 30, 2007. OTA prepares a tax
rate table to capture information relating to legislation that affects
tax rates, tax basis, accounts, and deposit rules in effect during the
quarter.
B. Inspect the transfer forms and supporting schedules to determine if
there is evidence of review.
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 the HTF for the quarter ended September 30, 2007.
C. Calculate the totals on the transfer forms affecting distributions
to the HTF to determine if they are mathematically correct.
Description of findings and results:
The totals on the transfer forms affecting distributions to the HTF for
the quarter ended September 30, 2007, were mathematically correct.
D. Trace the transfer amounts for diesel fuel tax (abstract 60),
gasoline tax (abstract 62), and heavy vehicle use tax[Footnote 27] from
the transfer forms through the supporting schedules and back to the
related source documents[Footnote 28] for agreement.
Description of findings and results:
The transfer amounts for diesel fuel tax (abstract 60), gasoline tax
(abstract 62), and heavy vehicle use tax from the transfer forms agreed
with the supporting schedules and source documents for the quarter
ended September 30, 2007.
V. Other procedures:
A. Determine if the adjustments to the HTF for tax on kerosene used in
aviation were made during fiscal year 2007 and calculate the adjustment
amounts based on the Treasury 90 Report to determine if they are
mathematically correct.[Footnote 29]
Description of findings and results:
The adjustments to the HTF for tax on kerosene used in aviation were
made during fiscal year 2007 and were mathematically correct.
B. Using IRS's quarterly certifications, OTA's estimated distributions,
and any adjustments, compile and report excise taxes distributed to the
HTF in fiscal year 2007.
Description of findings and results:
Based on a compilation of IRS's quarterly certifications, OTA's
estimations, and adjustments, the net amount of excise taxes
distributed to the HTF in fiscal year 2007 was $40,082,021,440.
C. Procedures performed as part of the fiscal year 2007 IRS financial
statement audit:
From IRS's master files for the first 8 months of fiscal year 2007, use
MUS to select statistical samples of (1) total tax revenue receipts and
(2) refunds.
For each sample item, compare the receipt or refund amount, tax period,
and tax class[Footnote 30] from source documentation with those
recorded in IRS's master files for consistency.
Description of findings and results:
The receipt or refund amount, tax period, and tax class from source
documents for 165 of the 167 revenue receipts and 57 of the 57 refund
sample transactions were consistent with those recorded in IRS's master
files.
For two revenue receipt sample items, the IRS did not properly classify
the receipts in the appropriate tax class. These two sample items were
not related to excise taxes.
[End of enclosure]
Footnotes:
[1] The Internal Revenue Service (IRS) certifications and corresponding
adjustments by the Department of the Treasury's Financial Management
Service for the quarters ended June 30, 2006, and September 30, 2006,
were completed in December 2006 and January 2007, respectively, and
thus affected distributions to the HTF during fiscal year 2007.
[2] 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. These taxpayers generally pay their excise
taxes in full each quarter.
[3] The master file is a detailed database containing taxpayer
information.
[4] IRS certifies to trust funds the amount of excise taxes collected.
Because taxpayers have sometimes not fully paid their tax liability,
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 as owed on the tax return. For
example, if a corporation reports that it owes $4 million for gasoline
tax, $2 million for diesel fuel tax, and $1 million for kerosene tax on
its Form 720, Quarterly Federal Excise Tax Return, but has paid IRS
only $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
kerosene tax.
[5] 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 Form 720, Quarterly Federal Excise Tax Return, and are
used by the taxpayer to report excise tax assessments. If the return
was related to the HTF, we selected (1) diesel fuel tax (abstract 60),
and (2) gasoline tax (abstract 62). If the return was related to the
AATF, we selected (1) tax on transportation of persons by air (abstract
26), (2) tax on the use of international air travel facilities
(abstract 27), and (3) tax on transportation of property by air
(abstract 28). 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 made up over 81 percent of the total amount
certified to the HTF and over 97 percent of the total amount certified
to the AATF for the quarters ended June 30, 2006, and September 30,
2006.
[6] 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. The
certified amounts to the trust funds are calculated by subtracting
credits from prorated collections and then multiplying the difference
by the applicable trust fund distribution rates.
[7] For the purpose of this procedure, "material" is defined as 1
percent of the Form 720-related excise tax collections for the quarters
ended December 31, 2006, and March 31, 2007. For fiscal year 2007, the
materiality amount was $226 million for the two quarters combined.
[8] For this sample, if one or no errors were found in testing the 78
items, we would be 90 percent confident that the error rate in the
population would not exceed 5 percent.
[9] The selected abstracts are (1) diesel fuel tax (abstract 60), (2)
gasoline tax (abstract 62), (3) tax on transportation of persons by air
(abstract 26), (4) tax on the use of international air travel
facilities (abstract 27), (5) tax on transportation of property by air
(abstract 28), and (6) tax on kerosene for use in commercial aviation
(abstract 77). The tax amounts for the two HTF-related abstracts made
up over 88 percent of the total amount certified to the HTF and the tax
amounts for the four AATF-related abstracts made up over 97 percent of
the total amount certified to the AATF for the quarters ended December
31, 2006, and March 31, 2007.
[10] The Report of Excise Tax Collection contains prorated collections,
classified by abstracts, which serve as the basis for IRS's quarterly
trust fund certifications.
[11] The planned sample size using MUS was 142 items. MUS selects
dollars instead of specific transaction items by dividing the
population by dollar intervals. The dollar interval for HTF was $141
million. Accordingly, any item with a dollar value matching or
exceeding the interval would be selected, whereas items less than the
interval might not be selected. For example, an item of $282 million
would cover 2 dollar intervals, but represent 1 sample item. Because
large-dollar items cover more than 1 interval, the 95 unique sample
transactions selected represented 142 dollar intervals.
[12] For this sample, if no errors were found in testing the 45 items,
we would be 90 percent confident that the error rate in the population
would not exceed 5 percent.
[13] The planned sample size using MUS was 144 items. As explained in
footnote 11, MUS selects dollars instead of specific transaction items
by dividing the population by dollar intervals. The dollar interval for
the AATF was $37 million. Because large-dollar items cover more than 1
interval, the 70 unique sampled transactions represent 144 dollar
intervals.
[14] The purpose of this procedure is to determine whether the
Collection Certification System prorates correctly. This procedure is
not intended to determine whether amounts provided to the system are
correct.
[15] IRS prepares two certification letters for the HTF each quarter:
one for the Highway Account and the other for the Mass Transit Account.
[16] The certified amounts for diesel fuel tax (abstract 60) and
gasoline tax (abstract 62), along with the heavy vehicle use tax
(traced separately), made up over 89 percent of the total amount
certified to the HTF for the quarters ended September 30, 2006,
December 31, 2006, March 31, 2007, and June 30, 2007.
[17] IRS uses data from two of these reports, covering sequential
processing intervals, for each quarterly certification. Collections are
classified by abstract on the report when the related Form 720 tax
return has been posted to IRS's master file during the processing
interval covered by the report. The two reports used may contain
collections related to prior quarters that IRS certifies as part of the
current quarter's collections because the related return was not posted
to the master file until the processing intervals covered by these
reports.
[18] The Treasury 90 Report summarizes excise tax credit information
and is produced quarterly by IRS submission processing campus systems.
IRS has eight submission processing campuses that receive and process
tax returns and payments.
[19] IRS calculates certified collections to the Highway Account and
the Mass Transit Account using the prorated collection amounts, credit
amounts, tax rates, and distribution rates applicable to each account.
[20] For this procedure, "significant" is defined as $175 million,
which represents approximately 2 percent of the total amount certified
to the HTF for each quarter of fiscal year 2007.
[21] These taxes, which go to the HTF, are reported on Form 2290 and
are not included in the Collection Certification System.
[22] An FMS accountant compiles this schedule, called the "Subsidiary
Quarterly Account of Estimates and Actual Related Excise Taxes
Appropriated to Highway Trust Fund." This schedule computes the
difference between the OTA estimates and IRS certified amounts that
relate to the Highway Account. A similar schedule is prepared for the
Mass Transit Account. The schedules, along with the OTA estimations and
IRS certifications, support the FMS adjustment.
[23] The transfer forms denote the amounts estimated by OTA for
transferring excise taxes to the trust funds.
[24] On January 5, 2007, the OTA issued guidance that the fiscal year
2006 HTF and AATF amounts did not accurately account for the provisions
of Public Law 109-59 (2005), which requires monthly transfers of
amounts equivalent to estimates of the taxes collected on kerosene used
in aviation from the HTF to the AATF. The guidance provided estimates
of the amounts that would be necessary to adjust the HTF and AATF.
[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] OTA makes semimonthly estimates of excise tax collections for
transfer to trust funds. There are five semimonthly estimates for the
quarter ended September 30, 2007, which affect fiscal year 2007
distributions to the HTF.
[27] The transfer amounts for diesel fuel tax (abstract 60), gasoline
tax (abstract 62), and heavy vehicle use tax made up over 90 percent of
the total amount transferred to the HTF for the fourth quarter of
fiscal year 2007.
[28] The source documents include the IRS report of excise taxes used
to derive the percentages applied to reported receipts, the Daily
Treasury Statement, the Monthly Treasury Statement, and the excise tax
rate table.
[29] Section 11161 of P.L. 109-59 (2005), "Treatment of Kerosene for
Use in Aviation," taxes all kerosene taxpayers at the standard kerosene
rate, unless the taxpayer had removed the kerosene from a refinery or
terminal directly into an aircraft's fuel tank and thus qualified for
the lower aviation kerosene tax rate. Amounts received under the
standard kerosene tax are initially deposited in the HTF. If a taxpayer
subsequently used the kerosene in aviation, the taxpayer is eligible
for the lower tax rate associated with aviation kerosene and can
request a refund. Section 11161 requires that the amount of kerosene
tax collected from that taxpayer, net of refunds, be transferred from
the HTF to AATF.
[30] IRS assigns a tax class number to specific types of taxes. Excise
taxes are tax class 4.
[End of section]
GAO's Mission:
The Government Accountability Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting
its constitutional responsibilities and to help improve the performance
and accountability of the federal government for the American people.
GAO examines the use of public funds; evaluates federal programs and
policies; and provides analyses, recommendations, and other assistance
to help Congress make informed oversight, policy, and funding
decisions. GAO's commitment to good government is reflected in its core
values of accountability, integrity, and reliability.
Obtaining Copies of GAO Reports and Testimony:
The fastest and easiest way to obtain copies of GAO documents at no
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each
weekday, GAO posts newly released reports, testimony, and
correspondence on its Web site. To have GAO e-mail you a list of newly
posted products every afternoon, go to [hyperlink, http://www.gao.gov]
and select "Subscribe to Updates."
Order by Mail or Phone:
The first copy of each printed report is free. Additional copies are $2
each. A check or money order should be made out to the Superintendent
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or
more copies mailed to a single address are discounted 25 percent.
Orders should be sent to:
U.S. Government Accountability Office:
441 G Street NW, Room LM:
Washington, D.C. 20548:
To order by Phone:
Voice: (202) 512-6000:
TDD: (202) 512-2537:
Fax: (202) 512-6061:
To Report Fraud, Waste, and Abuse in Federal Programs:
Contact:
Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]:
E-mail: fraudnet@gao.gov:
Automated answering system: (800) 424-5454 or (202) 512-7470:
Congressional Relations:
Gloria Jarmon, Managing Director, JarmonG@gao.gov:
(202) 512-4400:
U.S. Government Accountability Office:
441 G Street NW, Room 7125:
Washington, D.C. 20548:
Public Affairs:
Chuck Young, Managing Director, youngc1@gao.gov:
(202) 512-4800:
U.S. Government Accountability Office:
441 G Street NW, Room 7149:
Washington, D.C. 20548:
