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entitled 'Applying Agreed-Upon Procedures: Airport and Airway Trust 
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November 3, 2006: 

The Honorable Todd J. Zinser:
Acting Inspector General:
Department of Transportation: 

Subject:Applying Agreed-Upon Procedures: Airport and Airway Trust Fund 
Excise Taxes: 

Dear Mr. Zinser: 

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 Airport and Airway Trust Fund (AATF) for the 
fiscal year ended September 30, 2006, is supported by the underlying 
records. As agreed with your office, we evaluated fiscal year 2006 
activity affecting distributions to the 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 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) detailed tests of 
transactions that represent the underlying basis of amounts distributed 
to the AATF, (2) Internal Revenue Service's (IRS) quarterly AATF 
certifications, (3) Department of the Treasury's Financial Management 
Service adjustments to the AATF during fiscal year 2006, (4) IRS's 
precertification[Footnote 1] of receipts for each quarter completed in 
fiscal year 2006, (5) certain procedures of the Department of the 
Treasury's Office of Tax Analysis' (OTA) process for estimating amounts 
to be distributed to the AATF for the fourth quarter of fiscal year 
2006, and other procedures related to (6) the net amount of fiscal year 
2006 excise taxes distributed to the AATF, (7) transactions that 
represent total IRS tax revenue receipts and refunds, and (8) key 
reconciliations of IRS records to Department of the 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 the expression of an opinion on the 
amount of net excise taxes distributed to the 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 2] We completed the agreed-upon procedures on 
October 25, 2006. 

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's review of the report only covered the procedures related 
to the estimation process for the quarter ended September 30, 2006. OTA 
agreed with the results and findings presented in this report relating 
to procedures performed on the estimation process for the quarter ended 
September 30, 2006. 

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. Copies are available to others upon request. This 
report is also 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, 

Signed by: 

Steven J. Sebastian: 
Director: 
Financial Management and Assurance: 

Enclosure: 

Enclosure I: Airport and Airway Trust Fund Excise Tax Procedures and 
Results: 

Procedures on detailed transactions that represent the underlying basis 
of amounts distributed to the Airport and Airway Trust Fund (AATF) in 
fiscal year 2006: 

A. Nonstatistical selection of tax returns from the quarters ended June 
30, 2005, and September 30, 2005[Footnote 3]: 

1. For the quarters ending June 30, 2005, and September 30, 2005, 
select the 30 largest excise tax returns containing excise taxes 
related primarily to the AATF and the Highway Trust Fund (HTF) on the 
basis of total tax liability amount[Footnote 4] from the Internal 
Revenue Service's (IRS) master file.[Footnote 5] 

Description of findings and results: 

We selected the 30 largest excise tax returns related primarily to the 
AATF and the HTF from each of the two quarters for testing. The 
selection was based on the total tax liability amount 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, 2005, was approximately $9.7 billion, or 65 
percent of the total excise tax liability amount of $15 billion for all 
excise tax types for the quarter. Of these 30 returns, 9 contained 
primarily AATF-related taxes and 21 contained primarily HTF taxes. 

The total tax liability amount related to the 30 returns from the 
quarter ended September 30, 2005, was approximately $9.8 billion, or 65 
percent of the total excise tax liability amount of $15 billion for all 
excise tax types for the quarter. Of these 30 returns, 9 contained 
primarily AATF-related taxes and 21 contained primarily HTF taxes. 

2. For each of the 18 returns related primarily to the AATF from the 
quarters ended June 30, 2005, and September 30, 2005, we performed the 
following procedures, which encompassed approximately $3.7 billion in 
prorated collections[Footnote 6] affecting fiscal year 2006 
distributions to the 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 the master file for all 18 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 18 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 8] 

Description of findings and results: 

The independently calculated prorated collection amounts for the three 
selected abstracts agreed with amounts in IRS's Collection 
Certification System for all 18 returns. 

B. Dollar unit sample (DUS) of transactions from the quarters ended 
December 31, 2005, and March 31, 2006: 

1. Sampling: 

(a) Obtain excise tax collection data from the master file for the 
first two quarters of fiscal year 2006. Compare excise tax collection 
data from the master file with data from IRS's general ledger to 
determine if they materially agree.[Footnote 9] 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 2006 
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 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 77 of the 78 sample items, assessments and receipts from the master 
file were contained in the Collection Certification System. For one 
sample item, the tax liability associated with the tax return was 
abated[Footnote 11], however, the assessment amount of $18,000 for 
abstract 71 was not abated and, therefore, was incorrectly included in 
the Collection Certification System. 

(c) Sum the prorated collections for selected abstracts[Footnote 12] 
from the audit files and compare these amounts to amounts in the Report 
of Excise Tax Collection[Footnote 13] 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) AATF, (2) HTF, 
and (3) other excise tax abstracts. Use DUS to select a sample of 
prorated excise tax collections from the AATF population using a 
confidence level of 80 percent, a test materiality of $103 million, and 
an expected aggregate error amount of $31 million. 

Description of findings and results: 

Use of DUS with a confidence level of 80 percent, a test materiality of 
$103 million, and an expected aggregate error amount of $31 million 
resulted in a sample of 66[Footnote 14] prorated collections for the 
AATF for the first two quarters of fiscal year 2006. 

(e) Select samples of prorated excise tax collections from the two non-
AATF populations. Use DUS to select a sample of prorated excise tax 
collections from the HTF population using a confidence level of 80 
percent, a test materiality of $379 million, and an expected aggregate 
error amount of $114 million. Select a random attribute sample of 45 
items from the population of prorated tax collections related to all 
excise taxes other than the AATF and the HTF. 

Description of findings and results: 

Use of DUS with a confidence level of 80 percent, a test materiality of 
$379 million, and an expected aggregate error amount of $114 million 
resulted in a sample of 94[Footnote 11] prorated collections for the 
HTF for the first two quarters of fiscal year 2006. 

A random attribute sample of 45 items was selected from the population 
of prorated tax collections related to all excise taxes other than the 
AATF and the HTF.[Footnote 16] 

2. Detailed transactions: 

(a) For each prorated excise tax collection sampled from the AATF 
population: 

* Compare the assessment amount on the tax return for the sampled 
abstract with the amount recorded in IRS's master file. 

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 were mathematically correct on the tax 
return 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.[Footnote 17] 

Description of findings and results: 

The independently calculated prorated collection, based on information 
from the master file, agreed with the amounts for all of the sampled 
items selected from the Collection Certification System audit files. 

(b) Inspect the tax returns and master file information for 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 2006, the net most likely error 
is $0 with an upper error limit of $62 million at the 80-percent 
confidence level. 

II. Procedures on IRS's quarterly AATF receipt certifications: 

Perform the following procedures on IRS's AATF receipt certification 
for the quarters ended September 30, 2005, December 31, 2005, and March 
31, 2006: 

A. Inspect the certification letters for authorizing signatures. 

Description of findings and results: 

The certification letters for all three 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 three 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 three quarters were 
mathematically correct. 

D. Trace the certified amounts for tax on transportation of persons by 
air (abstract 26), tax on the use of international air travel 
facilities (abstract 27), tax on transportation of property by air 
(abstract 28), and tax on kerosene for use in commercial aviation 
(abstract 77)[Footnote 18] from the certification letters back to the 
Report of Excise Tax Collection[Footnote 19] and the Treasury 90 
Report.[Footnote 20] 

Description of findings and results: 

The certified amounts for tax on transportation of persons by air 
(abstract 26), tax on the use of international air travel facilities 
(abstract 27), tax on transportation of property by air (abstract 28), 
and tax on kerosene for use in commercial aviation (abstract 77) from 
the certification letters agreed with the related Report of Excise Tax 
Collection and the Treasury 90 Report for all three quarters. 

E. Compare the distribution rates used by IRS for tax on transportation 
of persons by air (abstract 26), tax on the use of international air 
travel facilities (abstract 27), tax on transportation of property by 
air (abstract 28), and tax on kerosene for use in commercial aviation 
(abstract 77) with the applicable laws. 

Description of findings and results: 

The distribution rates used by IRS for tax on transportation of persons 
by air (abstract 26), tax on the use of international air travel 
facilities (abstract 27), tax on transportation of property by air 
(abstract 28), and kerosene for use in commercial aviation (abstract 
77) agreed with the applicable laws in effect during all three 
quarters. 

F. Inspect the Report of Excise Tax Collection used in the 
certification to determine if it contains significant[Footnote 21] 
collections from prior quarters. 

Description of findings and results: 

The Report of Excise Tax Collection used in the certification for all 
three quarters did not contain significant collections from prior 
quarters. 

III. Procedures on Financial Management Service adjustments: 

Perform the following procedures on Financial Management Service (FMS) 
adjustments to the AATF excise tax distributions for the quarters ended 
June 30, 2005, September 30, 2005, December 31, 2005, and March 31, 
2006: 

A. Compare the FMS adjustments made to the AATF with original Office of 
Tax Analysis (OTA) estimates and IRS-certified amounts, and with the 
supporting schedules.[Footnote 22] 

Description of findings and results: 

The FMS adjustments made to the AATF agreed with the original OTA 
estimates and IRS-certified amounts, and with the supporting schedules, 
for all four quarters. 

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 
the IRS-certified amounts for the AATF agreed with the differences 
computed by FMS for all four quarters. These amounts were[Footnote 23] 

* $118,835,000 for the quarter ended June 30, 2005; 

* $195,817,000 for the quarter ended September 30, 2005; 

* ($229,109,000) for the quarter ended December 31, 2005; and: 

* ($263,237,000) for the quarter ended March 31, 2006. 

IV. Procedures on IRS's AATF precertification for the quarters ended: 

September 30, 2005, December 31, 2005, March 31, 2006, and June 30, 
2006[Footnote 24] 

A. Compare the precertified amount to the actual amount certified to 
the AATF for the quarters ended September 30, 2005, December 31, 2005, 
and March 31, 2006. If there is a significant variance,[Footnote 25] 
request from the IRS data on any large returns omitted from the 
precertification. 

Description of findings and results: 

There were no significant variances between the precertified amounts 
and the actual certified amounts for all three quarters. 

B. Perform the following procedures on IRS's AATF precertification for 
the quarter ended June 30, 2006: 

1. Inspect the precertification letter 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 
precertification letter and supporting worksheets. 

2. Calculate the total on the precertification letter to determine if 
it is mathematically correct. 

Description of findings and results: 

The total on the precertification letter was mathematically correct. 

3. Trace the amounts for tax on transportation of persons by air 
(abstract 26), tax on the use of international air travel facilities 
(abstract 27), tax on transportation of property by air (abstract 28), 
and tax on kerosene for use in commercial aviation (abstract 
77)[Footnote 26] from the precertification letter back to the Report of 
Excise Tax Collection and the Treasury 90 Report. 

Description of findings and results: 

The amounts for tax on transportation of persons by air (abstract 26), 
tax on the use of international air travel facilities (abstract 27), 
tax on transportation of property by air (abstract 28), and tax on 
kerosene for use in commercial aviation (abstract 77) from the 
precertification letter agreed with the related Report of Excise Tax 
Collection and the Treasury 90 Report. 

4. Compare the distribution rates used by IRS for tax on transportation 
of persons by air (abstract 26), tax on the use of international air 
travel facilities (abstract 27), tax on transportation of property by 
air (abstract 28), and tax on kerosene for use in commercial aviation 
(abstract 77) with the applicable laws. 

Description of findings and results: 

The distribution rates used by IRS for tax on transportation of persons 
by air (abstract 26), tax on the use of international air travel 
facilities (abstract 27), tax on transportation of property by air 
(abstract 28), and tax on kerosene for use in commercial aviation 
(abstract 77) agreed with the applicable laws in effect during the 
quarter. 

5. Inspect the Report of Excise Tax Collection used in the 
precertification to determine if it contains significant[Footnote 27] 
collections from prior quarters. 

Description of findings and results: 

The Report of Excise Tax Collection supporting the precertification did 
not contain significant collections from prior quarters. 

6. Inspect the Collection Certification System information to determine 
whether IRS omitted any significant[Footnote 28] returns from the 
precertification. If so, report (1) the average amount of AATF-related 
excise taxes from these taxpayers' returns that were included in IRS's 
certification from the four previous quarters and (2) the amount of 
AATF-related excise taxes from these taxpayers' returns that were 
included in IRS's certification for the quarter ended June 30, 2005. 

Description of findings and results: 

Our procedures did not identify any missing significant returns from 
the precertification. 

V. Procedures performed on excise tax distributions to the AATF for the 
quarter ended September 30, 2006: 

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 29] was in place during the quarter ended September 
30, 2006. 

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, 2006. OTA prepares a tax 
rate table[Footnote 30] 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 AATF for the quarter ended September 30, 2006. 

C. Calculate the totals on the transfer forms to determine if they are 
mathematically correct. 

Description of findings and results: 

The totals on the transfer forms affecting distributions to the AATF 
for the quarter ended September 30, 2006, were mathematically correct. 

D. Trace the transfer amounts for tax on transportation of persons by 
air (abstract 26), tax on the use of international air travel 
facilities (abstract 27), tax on transportation of property by air 
(abstract 28), and tax on kerosene for use in commercial aviation 
(abstract 77)[Footnote 31] from the transfer forms through the 
supporting schedules and back to the related source documents.[Footnote 
32] 

Description of findings and results: 

The transfer amounts for tax on transportation of persons by air 
(abstract 26), tax on the use of international air travel facilities 
(abstract 27), tax on transportation of property by air (abstract 28), 
and tax on kerosene for use in commercial aviation (abstract 77) from 
the transfer forms agreed with the supporting schedules and source 
documents for the semimonthly transfers affecting distributions to the 
AATF for the quarter ended September 30, 2006. 

VI. Other procedures: 

A. Using IRS's quarterly certifications, OTA's estimated distributions, 
and any adjustments, report excise taxes distributed to the AATF in 
fiscal year 2006. 

Description of findings and results: 

Based on a compilation of IRS's quarterly certifications, OTA's 
estimated distributions, and adjustments, the net amount of excise 
taxes distributed to the AATF in fiscal year 2006 was $10,202,200,000. 

Procedures performed as part of the fiscal year 2006 IRS financial 
statement audit: 

1. From IRS's master files for the first 8 months of fiscal year 2006, 
use DUS to select statistical samples of (1) total tax revenue receipts 
and (2) refunds. For each sample item, compare the collection or refund 
amount, tax period, and tax class[Footnote 33] from source 
documentation with those recorded in IRS's master files. 

Description of findings and results: 

The receipt or refund amount, tax period, and tax class from source 
documents for 156 revenue receipts and 53 refund sample transactions 
were consistent with amounts recorded in IRS's master files. 

2. Obtain selected IRS service center campuses' monthly Department of 
the Treasury (Treasury) FMS 224 reconciliations[Footnote 34] and 
determine whether IRS-reported revenue receipts and refunds were 
materially reconciled[Footnote 35] to Treasury FMS records. 

Description of findings and results: 

Tax revenue receipts and refunds reported by selected IRS service 
center campuses through the monthly Treasury FMS 224 reconciliation 
process materially reconcile to Treasury FMS records. 

3. Compare tax revenue receipt balances by tax class, including excise 
taxes, and total refund balances recorded in IRS's general ledger with 
the master files and Treasury records to determine if they agree in all 
material respects. 

Description of findings and results: 

Tax receipt balances for all tax classes, including excise taxes, and 
total refund balances per IRS's general ledger materially agreed with 
IRS's master files and Treasury records. 

(196091):  

FOOTNOTES 

[1] To accommodate the Department of Transportation's accelerated 
reporting date for fiscal year 2006, IRS performed precertifications of 
excise tax collections. The data are for information purposes only, and 
the precertification does not constitute an official certification. 

[2] In our report on the results of our audit of IRS's fiscal year 2005 
financial statements, we noted a material weakness in IRS's financial 
reporting process (GAO, Financial Audit: IRS's Fiscal Years 2005 and 
2004 Financial Statements, GAO-06-137, [Washington D.C.: Nov. 10, 
2005]). A component of this weakness includes IRS's inability 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 
and is a continuation of an issue that we have reported on in prior 
years. 

[3] Since certifications are not completed until 6 months after the end 
of the quarter, the certification and corresponding adjustment by the 
Department of the Treasury's (Treasury) Financial Management Service 
for the quarters ended June 30, 2005, and September 30, 2005, were 
completed in December 2005 and March 2006, respectively, and thus 
affected distributions to the AATF during fiscal year 2006. 

[4] 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. Our review shows that these taxpayers 
generally pay their excise taxes in full each quarter. 

[5] The master file is a detailed database containing taxpayer 
information. 

[6] 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. 

[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 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). If the return was related to the HTF, we 
selected (1) diesel fuel tax (abstract 60) and (2) gasoline tax 
(abstract 62). 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 90 percent of the total amount 
certified to the AATF and over 83 percent of the total amount certified 
to the HTF for the quarters ended June 30, 2005, and September 30, 
2005. 

[8] The Collection Certification System produces what IRS refers to as 
audit files. These audit files contain 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. 

[9] 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, 2005, and March 31, 2006. For fiscal year 2006, the 
materiality amount was $236 million for the two quarters combined. 

[10] 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. 

[11] Abatements are reductions in the amount of taxes owed and can 
occur for a variety of reasons, such as to correct errors made by IRS 
or taxpayers or to provide relief from interest and penalties. 26 
U.S.C.  6404. 

[12] The selected abstracts are (1) tax on transportation of persons by 
air (abstract 26), (2) tax on the use of international air travel 
facilities (abstract 27), (3) tax on transportation of property by air 
(abstract 28), (4) tax on kerosene for use in commercial aviation 
(abstract 77), (5) diesel fuel tax (abstract 60), and (6) gasoline tax 
(abstract 62). The tax amounts for the four AATF-related abstracts made 
up over 99 percent of the total amount certified to the AATF and the 
tax amounts for the two HTF-related abstracts made up over 86 percent 
of the total amount certified to the HTF for the quarters ended 
December 31, 2005, and March 31, 2006. 

[13] The Report of Excise Tax Collection contains prorated collections, 
classified by abstracts, that serve as the basis for IRS's quarterly 
trust fund certifications. 

[14] The planned sample size using DUS was 136 items. DUS selects 
dollars instead of specific transaction items by dividing the 
population by dollar intervals. The dollar interval for the AATF was 
$37 million. Accordingly, any item with a dollar value equal to or 
exceeding the sampling interval would be selected, whereas items with 
dollar values below the sampling interval might not be selected. For 
example, an item of $74 million would cover 2 dollar intervals, but 
represent one sample item. Due to large-dollar items covering more than 
one interval, the 66 unique sampled transactions selected represent 136 
dollar intervals. 

[15] The planned sample size using DUS was 145 items. As explained in 
footnote 14, DUS selects dollars instead of specific transaction items 
by dividing the population by dollar intervals. The dollar interval for 
the HTF was $137 million. Because large-dollar items cover more than 
one interval, the 94 unique sampled transactions represent 145 dollar 
intervals. 

[16] For this sample, if no errors are found in the 45 items, we would 
be 90 percent confident that the error rate in the population would not 
exceed 5 percent. 

[17] 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. 

[18] The certified amounts for tax on transportation of persons by air 
(abstract 26), tax on the use of international air travel facilities 
(abstract 27), tax on transportation of property by air (abstract 28), 
and tax on kerosene for use in commercial aviation (abstract 77) made 
up over 87 percent of the total amount certified to AATF for the 
quarters ended September 30, 2005, December 31, 2005, and March 31, 
2006. 

[19] 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 second of 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 interval covered 
by this report. 

[20] 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. 

[21] For this procedure, "significant" is defined as $45 million, which 
represents approximately 2 percent of the total amount certified to the 
AATF for the quarters ended September 30, 2005, December 31, 2005, and 
March 31, 2006. 

[22] An FMS accountant compiles this schedule, called the "Subsidiary 
Quarterly Account of Estimates and Actual Related Excise Taxes 
Appropriated to Airport and Airway Trust Fund." This schedule computes 
the difference between IRS-certified amounts and the OTA estimate for 
excise taxes, individually and in total, that relate to AATF. The 
schedule, along with OTA transfer forms and IRS certifications, 
supports the FMS adjustment. 

[23] 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. 

[24] In order to accommodate the Department of Transportation's 
November 15 reporting date for fiscal year 2006, IRS performed 
precertifications of excise tax receipts. The data in the 
precertification are for information purposes only and do not represent 
an official certification for use in adjusting the excise tax 
distributions to the AATF. 

[25] Significant is defined as 5 percent of the actual certified amount 
for the quarter. 

[26] The certified amounts for tax on transportation of persons by air 
(abstract 26), tax on the use of international air travel facilities 
(abstract 27), tax on transportation of property by air (abstract 28), 
and tax on kerosene for use in commercial aviation (abstract 77) made 
up over 99 percent of the precertified amount to the AATF for the 
quarter ended June 30, 2006. 

[27] For this procedure, "significant" is defined as $45 million. This 
represents approximately 2 percent of the precertified total to the 
AATF. 

[28] For this procedure, "significant" is defined as tax returns with a 
total quarterly excise tax liability equal to or greater than $10 
million during each of the prior four quarters. Tax returns related 
specifically to the AATF with liabilities equal to or greater than $10 
million have, in the aggregate, historically accounted for over 85 
percent of distributions certified to AATF. 

[29] OTA makes semimonthly estimates of excise tax collections for 
transfer to trust funds. There are five semimonthly estimates for the 
quarter ended September 30, 2006, which affect fiscal year 2006 
distributions to the AATF. 

[30] OTA communicates this information to interested parties at 
Treasury and the Department of Transportation. IRS used the tax and 
distribution rates from this table in its subsequent certification of 
collections to trust funds. 

[31] The transfer amounts for tax on transportation of persons by air 
(abstract 26), tax on the use of international air travel facilities 
(abstract 27), tax on transportation of property by air (abstract 28), 
and tax on kerosene for use in commercial aviation (abstract 77) made 
up over 87 percent of the total amount transferred to AATF for the 
fourth quarter of fiscal year 2006. 

[32] 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 tables. 

[33] IRS assigns a tax class number to specific types of taxes. Excise 
taxes are tax class 4. 

[34] At the end of each month, each IRS campus provides Treasury its 
FMS 224 (Statement of Transactions) generated from IRS's general 
ledger, reporting receipts and refunds journalized during the month. 
Treasury reconciles the amounts on the FMS 224 with its records and 
provides IRS a Statement of Differences for any differences identified. 

[35] For the purpose of this procedure and procedure VI.B.3, we define 
"material" as $23 billion. This represents 1 percent of the estimated 
gross tax revenue receipts to be collected by IRS in fiscal year 2006. 

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