Applying Agreed-Upon Procedures: Highway Trust Fund Excise Taxes
(02-NOV-07, GAO-08-202R).
We 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.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-08-202R
ACCNO: A77910
TITLE: Applying Agreed-Upon Procedures: Highway Trust Fund
Excise Taxes
DATE: 11/02/2007
SUBJECT: Auditing standards
Excise taxes
Financial statement audits
Fund audits
Interstate highways
Performance measures
Primary highways
Public roads or highways
Reporting requirements
State highways
Taxes
Trust funds
Transportation costs
Policies and procedures
Highway Trust Fund
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GAO-08-202R
* [1]enclosure.pdf
* [2]Procedures on IRS's quarterly HTF receipt certifications
* [3]However, the FMS adjustments for the quarter ended September
* [4]Other procedures
* [5]PDF6-Ordering Information-Young-10-25-07.pdf
* [6]GAO's Mission
* [7]Obtaining Copies of GAO Reports and Testimony
* [8]Order by Mail or Phone
* [9]To Report Fraud, Waste, and Abuse in Federal Programs
* [10]Congressional Relations
* [11]Public Affairs
United States Government Accountability Office
Washington, DC 20548
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
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,
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 ^[12]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 ^[13]2 from the Internal Revenue
Service's (IRS) master file. ^[14]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.
^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.
^2Although 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.
^3The master file is a detailed database containing taxpayer information.
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^4 affecting fiscal year 2007 distributions to the
HTF:
(a) Trace the liability amount for abstracts ^[15]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 ^[16]6 for
agreement.
^4IRS 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.
^5The 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.
^6The 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
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. ^[17]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. ^[18]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.
to the trust funds are calculated by subtracting credits from prorated
collections and then multiplying the difference by the applicable trust
fund distribution rates.
^7For 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.
^8For 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.
(c) Sum the prorated collections for selected abstracts ^[19]9 from the
audit files and compare these amounts to amounts in the Report of Excise
Tax Collection ^[20]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 ^[21]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. ^[22]12
^9The 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.
^10The Report of Excise Tax Collection contains prorated collections,
classified by abstracts, which serve as the basis for IRS's quarterly
trust fund certifications.
^11The 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.
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 ^[23]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:
o 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.
o 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.
^12For 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.
^13The 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.
o 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. ^[24]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:
^14The 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.
A. Inspect the certification letters ^[25]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) ^[26]16 from the certification letters back to
the Report of Excise Tax Collection ^[27]17 and the Treasury 90 Report
^[28]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.
^15IRS prepares two certification letters for the HTF each quarter: one for
the Highway Account and the other for the Mass Transit Account.
^16The 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.
^17IRS 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.
^18The 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.
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. ^[29]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 ^[30]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. ^[31]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.
^19IRS 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.
^20For 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.
^21These taxes, which go to the HTF, are reported on Form 2290 and are not
included in the Collection Certification System.
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 ^[32]22 and to the Office of Tax Analysis (OTA)
transfer forms ^[33]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. ^[34]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.
^22An 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.
^23The transfer forms denote the amounts estimated by OTA for transferring
excise taxes to the trust funds.
^24On 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.
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 ^[35]25
o $185,212,000 for the quarter ended June 30, 2006;
o $842,023,000 for the quarter ended September 30, 2006;
o $618,554,000 for the quarter ended December 31, 2006;
o ($193,764,000) for the quarter ended March 31, 2007; and
o ($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
o $10,356,000 for the quarter ended June 30, 2006;
o $98,286,000 for the quarter ended September 30, 2006;
o $84,839,000 for the quarter ended December 31, 2006;
o ($18,202,000) for the quarter ended March 31, 2007; and
o $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
^[36]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.
^25A 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.
^26OTA 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.
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 ^[37]27 from the transfer
forms through the supporting schedules and back to the related source
documents ^[38]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. ^[39]29
^27The 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.
^28The 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.
^29Section 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.
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 ^[40]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.
^30IRS assigns a tax class number to specific types of taxes. Excise taxes
are tax class 4.
(196154)
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