This is the accessible text file for GAO report number GAO-03-361R entitled 'Applying Agreed-Upon Procedures: Airport and Airway Trust Fund Excise Taxes' which was released on January 23, 2003. 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. GAO-03-361R: United States General Accounting Office: Washington, DC 20548: January 23, 2003: The Honorable Kenneth M. Mead: Inspector General: Department of Transportation: Subject: Applying Agreed-Upon Procedures: Airport and Airway Trust Fund Excise Taxes: Dear Mr. Mead: We have performed the procedures contained in the enclosure to this 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, 2002, is supported by the underlying records. As agreed with your office, we evaluated fiscal year 2002 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 include (1) detailed tests of transactions that represent the underlying basis of amounts distributed to the AATF, (2) review of the Internal Revenue Service’s (IRS) quarterly AATF certifications, (3) review of the Department of the Treasury Financial Management Service (FMS) adjustments to the AATF for fiscal year 2002, (4) review of certain procedures in the Office of Tax Analysis’ (OTA) process for estimating amounts to be distributed to the AATF for the fourth quarter of fiscal year 2002, (5) comparison of net excise tax distributions to the AATF during fiscal year 2002 and amounts reported in the financial statements prepared by the Bureau of the Public Debt (BPD) for the AATF and the Federal Aviation Administration’s (FAA) draft consolidated financial statements, and (6) review of key reconciliations of IRS records to Treasury records. The enclosure contains the agreed-upon procedures and our findings from performing each of the procedures. We were not engaged to perform, and did not perform, an audit, the objective of which would have been 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 1] We completed the agreed-upon procedures on January 10, 2003. We provided a draft of this report to IRS and Treasury officials, along with its enclosure, for review and comment. They agreed with the results and findings presented in this report. This report is intended solely for the use of the Office of Inspector General of the Department of Transportation and should not be used by those who have not agreed to the procedures and have not taken responsibility for the sufficiency of the procedures for their purposes. However, this 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 home page at [hyperlink, http://www.gao.gov]. If you have any questions, please call me at (202) 512-3406. Sincerely yours, Signed by: Steven J. Sebastian: Director: Financial Management and Assurance: Enclosure: [End of correspondence] Enclosure: Airport and Airway Trust Fund Excise Tax Procedures and Results: I. Detailed tests of transactions that represent the underlying basis of amounts distributed to the AATF in fiscal year 2002: A. Nonrepresentative selection of tax returns from the quarter ended September 30, 2001. [Footnote 2] 1. For the quarter ending September 30, 2001, 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 [Footnote 3]amount from IRS’s master file. [Footnote 4] Description of findings and results: We selected the 31 largest excise tax returns from the quarter ended September 30, 2001, for testing. [Footnote 5] 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 these 31 returns was approximately $8.1 billion, or 64 percent of the total excise tax liability amount ($12.6 billion [Footnote 6]) for all excise tax types for the quarter ended September 30, 2001. Of these 31 returns, 6 contained primarily AATF-related taxes and 25 contained primarily HTF taxes. 2. For each of the 6 returns related primarily to the AATF, we performed the following procedures, which resulted in our testing approximately $1.2 billion in prorated collections [Footnote 7] affecting fiscal year 2002 distributions to the AATF: (a) Trace the liability amount for abstracts [Footnote 8] 26, 27, and 28 from the tax return to IRS’s master file. Description of findings and results: The liability amount for abstracts 26, 27, and 28 on the tax return agreed with IRS’s master file for all 6 of the returns. (b) Check the mathematical accuracy of the taxpayer’s calculations on the tax return for the selected abstracts. Description of findings and results: The taxpayer’s calculations on all 6 returns were mathematically correct. (c) Recompute the prorated collection amount for the selected abstracts based on information from the master file and compare this amount to the amount from the Collection Certification System audit file. [Footnote 9] Description of findings and results: The recomputed prorated collection amounts for the three selected abstracts agreed with amounts in IRS’s Collection Certification System audit file for all 6 of the returns. B. Dollar unit sample (DUS) of transactions from the quarters ended December 31, 2001, and March 31, 2002. 1. Sampling: (a) Obtain excise tax assessments and collection data from IRS’s master file for the first 6 months of fiscal year 2002. Determine if excise tax collections per master file agree with IRS’s general ledger. Reconcile total excise tax collections from the master file to total excise tax collections from the Collection Certification System audit files to determine if they materially [Footnote 10] agree. Description of findings and results: Excise tax collections for the first 6 months of fiscal year 2002 per the master file materially agreed with IRS’s general ledger and with total excise tax collections from the Collection Certification System. (b) Select a random attribute sample of 78 excise tax assessments from IRS’s master file. [Footnote 11] Compare assessment and receipt information for each sample item from the master file to the assessment and receipt information in the Collection Certification System to determine if assessments and receipts from the master file are contained in the Collection Certification System. Description of findings and results: For each sample item, assessments and receipts from the master file were contained in the Collection Certification System. (c) To determine if the Collection Certification System properly summarized the prorated collections, total the prorated collections for selected abstracts [Footnote 12] from the audit files and compare these amounts to amounts in the Reports of Excise Tax Collection. [Footnote 13] Description of findings and results: The Collection Certification System properly summarized the prorated collections for all of the selected abstracts related to the AATF and the HTF. Prorated collections for the above-mentioned trust funds from the audit files agreed with the corresponding amounts in the Reports of Excise Tax Collection. (d) Separate the total population of prorated collections from the audit files into the following distinct populations: (1) AATF, (2) HTF, and (3) other excise tax abstracts. Use DUS to select a sample of prorated excise tax collections from the AATF population. Description of findings and results: Use of DUS with a confidence level of 80 percent, a test materiality of $91 million, and an expected aggregate error amount of $27.3 million resulted in a sample of 62 [Footnote 14] prorated collections for the first 6 months of fiscal year 2002. (e) Select samples of prorated excise tax collections from the two non- AATF populations. Description of findings and results: Use of DUS with a confidence level of 80 percent, a test materiality of $315 million, and an expected aggregate error amount of $94.5 million resulted in a sample of 94 [Footnote 15] prorated collections for the first 6 months of fiscal year 2002 for the HTF. 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 was selected for testing. [Footnote 16] 2. Detailed tests of transactions: (a) For each prorated excise tax collection sampled from the AATF population: * Check to see that the assessment amount on the tax return, for the sampled abstract, agrees with the amount recorded in IRS’s master file. Description of findings and results: The assessment amounts on the tax returns agreed with the amounts recorded in IRS’s master file for all of the sampled abstracts. * Check the mathematical accuracy of the taxpayers’ calculations on the tax returns for the related abstract. Description of findings and results: The taxpayers’ calculations on the tax returns for the related abstracts were mathematically correct for all of the sampled abstracts. * Recompute the prorated collection amount based on information from the master file and compare this amount to the sample items selected from the Collection Certification System audit file. [Footnote 17] Description of findings and results: The recomputed prorated collection based on information from the master file agreed with the amounts for all of the sampled items. (b) Perform detailed testing on the two samples of prorated collections from the non-AATF populations to determine if they contain any AATF excise tax collections. Description of findings and results: The two samples of prorated collections from the non-AATF populations did not contain any AATF excise tax collections. (c) Evaluate the results of conducting steps (a) and (b). Description of findings and results: As noted in the results from steps (a) and (b), we found no errors. II. Review of IRS’s quarterly AATF certifications: A. Receipt certifications. Perform the following steps on IRS’s AATF receipt certifications for the quarters ended September 30, 2001; December 31, 2001; March 31, 2002; and June 30, 2002: [Footnote 18] 1. Inspect the certification letters for authorizing signatures. Description of findings and results The certification letters for all four quarters had authorizing signatures. 2. Determine if evidence exists that the supervisor or another analyst checked the certification letters and supporting worksheets. Description of findings and results: There was evidence that another analyst and a supervisor checked the certification letters and supporting worksheets for all four quarters. 3. Recalculate the totals on the certification letters to determine if they are mathematically correct. Description of findings and results: The totals on the certification letters for all four quarters were mathematically correct. 4. Trace the certified amounts for tax on transportation of persons by air (abstract 26), tax on use of international air facilities (abstract 27), tax on transportation of property by air (abstract 28), and tax on aviation fuel for commercial use (abstract 77) [Footnote 19] from the certification letters back to the Reports of Excise Tax Collection. [Footnote 20] Description of findings and results: The certified amounts for tax on transportation of persons by air (abstract 26), tax on use of international air facilities (abstract 27), tax on transportation of property by air (abstract 28), and tax on aviation fuel for commercial use (abstract 77) per the certification letters agreed with the related Report of Excise Tax Collection for all four quarters. However, IRS omitted $146 million in excise tax collections from its normal receipt certification for the quarter ended March 31, 2002, because of processing delays. Specifically, IRS did not record information from two large excise tax returns into its master file in time for inclusion in the Report of Excise Tax Collection. As a result, IRS performed a supplemental certification in order to timely certify the additional $146 million to the AATF. We (1) recalculated the total on the supplemental certification letter and (2) traced the certified amounts for tax on transportation of persons by air (abstract 26), tax on use of international air facilities (abstract 27), tax on transportation of property by air (abstract 28), and tax on aviation fuel for commercial use (abstract 77) from the supplemental certification letters back to the two supporting tax returns. We did not identify any discrepancies. 5. Review the Reports of Excise Tax Collection used in the certification to determine if they contain significant [Footnote 21] collections from prior quarters. Description of findings and results: The Reports of Excise Tax Collection supporting IRS’s certifications to the AATF did not contain significant prior quarter collections for the quarters ended September 30, 2001; March 31, 2002; and June 30, 2002. The Reports of Excise Tax Collection supporting IRS’s certification to the AATF for the quarter ended December 31, 2001, contained approximately $432 million in AATF excise tax collections related to the quarter ended September 30, 2001. IRS attributed this to the compressed time frame for processing of excise tax returns for that quarter. Congress passed the Air Transportation Safety and System Stabilization Act (Public Law 107-42) in response to the events of September 11, 2001. Section 301 gave the Secretary of the Treasury the option of giving airlines an extension until January 15, 2002, to make their excise tax deposits and to submit their excise tax returns for the quarter ended September 30, 2001. When the Secretary of the Treasury exercised this option, it reduced the time IRS normally has for processing these returns from approximately 4 months to 6 weeks. 6. Review the distribution rates used by IRS to determine whether the distribution rates for tax on transportation of persons by air (abstract 26), tax on use of international air facilities (abstract 27), tax on transportation of property by air (abstract 28), and tax on aviation fuel for commercial use (abstract 77) agree with the applicable laws. Description of findings and results: We saw no evidence that the distribution rates used by IRS for tax on transportation of persons by air (abstract 26), tax on use of international air facilities (abstract 27), tax on transportation of property by air (abstract 28), and tax on aviation fuel for commercial use (abstract 77) did not agree with the applicable laws in effect during the four quarters. B. Refund/credit reclassification: [Footnote 22] Perform the following steps on IRS’s AATF refund/credit certifications for the quarters ended December 31, 2001; March 31, 2002; June 30, 2002; and September 30, 2002: [Footnote 23] 1. Inspect the certification letters for authorizing signatures. Description of findings and results The certification letters for all four quarters had authorizing signatures. 2. Determine if evidence exists that the certification letters and accompanying schedules [Footnote 24] were checked by the supervisor or another analyst. Description of findings and results: There was evidence that another analyst and a supervisor checked the certification letters and accompanying schedules for all four quarters. 3. Recalculate the totals on the certification letters and accompanying schedules to determine if they are mathematically correct. Description of findings and results: The totals on the certification letters and accompanying schedules were mathematically correct for all four quarters. 4. Trace the refund and credit amount for aviation gas and aviation O/T gas [Footnote 25] from the schedules accompanying the certification letters to other summary refund/credit schedules. These other refund/credit summary schedules summarize refund and credit data obtained from service center campuses’ records. Description of findings and results: The refund and credit amounts for aviation gas and aviation O/T gas on the schedules accompanying the certification letters agreed with the amounts on the summary schedules for the quarters ended December 31, 2001; March 31, 2002; and June 30, 2002. On IRS’s refund and credit certification for the quarter ended September 30, 2002, the IRS analyst entered data from the summary schedules into the wrong sections of a schedule accompanying the certification letter. As a result, IRS reported $12.3 million in AATF refunds as credits and $2.2 million in AATF credits as refunds. There was no impact on distributions to the AATF because BPD deducts the total amount of refunds and credits in calculating distributions to the trust fund. III. Review of FMS adjustments: Perform the following steps on FMS adjustments to AATF excise tax distributions for the quarters ended September 30, 2001; December 31, 2001; March 31, 2002; and June 30, 2002. A. Compare the FMS adjustments made to the AATF for fiscal year 2002 with original OTA estimates and IRS-certified amounts to see if they agree with the supporting schedules. [Footnote 26] Description of findings and results: For the FMS adjustments made to the AATF, the original OTA estimates and IRS-certified amounts agreed with the supporting schedule for all four quarters. B. Recompute the difference between the OTA estimates and final IRS- certified amounts to see if the amounts agree with the differences computed by FMS. Description of findings and results: The independently recalculated differences between the OTA estimates and the final IRS-certified amounts for the AATF agreed with the differences computed by FMS for all four quarters. These amounts were: [Footnote 27] * for the quarter ended September 30, 2001, $187,040,000; * for the quarter ended December 31, 2001, $8,832,000; * for the quarter ended March 31, 2002, ($381,091,000); and; * for the quarter ended June 30, 2002, ($105,188,000). IV. Procedures performed on excise tax distributions to the AATF for the quarter ended September 30, 2002 A. Determine if OTA’s process for identifying and incorporating into its trust fund estimates [Footnote 28] the effect of new legislation on excise tax receipts was in place during fiscal year 2002. Description of findings and results: OTA’s process for identifying and incorporating into its trust fund estimates the effect of new legislation on excise tax receipts was in place during fiscal year 2002. OTA prepares a tax rate table [Footnote 29] to capture information relating to legislation that affects tax rates, tax basis, accounts, and deposit rules in effect during the tax period. B. Determine if there is evidence of review of the transfer forms and supporting schedules. Description of findings and results: There was evidence that another OTA economist reviewed the transfer forms and supporting schedules for the semimonthly transfers affecting distributions to the AATF for the quarter ended September 30, 2002. C. Recalculate the totals on the transfer letters to determine if they are mathematically correct. Description of findings and results: The totals on the transfer forms affecting distributions to the AATF for the quarter ended September 30, 2002, were mathematically correct. D. Trace the transfer amounts for tax on transportation of persons by air (abstract 26), tax on use of international air facilities (abstract 27), tax on transportation of property by air (abstract 28), and tax aviation fuel for commercial use (abstract 77) [Footnote 30] from the transfer letter, through the supporting schedules and back to the related source documents. [Footnote 31] Description of findings and results: The transfer amounts for tax on transportation of persons by air (abstract 26), tax on use of international air facilities (abstract 27), tax on transportation of property by air (abstract 28), and tax aviation fuel for commercial use (abstract 77) from the transfer forms affecting distributions to the AATF for the quarter ended September 30, 2002, agreed with the supporting schedules and source documents. V. Other procedures: A. Compare total fiscal year 2002 excise taxes distributed to the AATF with (1) drafts of FAA fiscal year 2002 consolidated financial statements and (2) BPD fiscal year 2002 financial statements for the AATF to determine if they agree. Description of findings and results: Fiscal year 2002 excise taxes of $8.85 billion distributed to the AATF agreed with the amount reported on the draft FAA consolidated financial statements but did not agree with the amount on the BPD fiscal year 2002 financial statements for the AATF. The BPD fiscal year 2002 financial statements for the AATF reported excise tax distributions to the AATF of $8.95 billion. The difference is due to the $105 million downward FMS adjustment for the quarter ended June 30, 2002, which FMS recorded in December 2002. This was after the November 1, 2002, issue date of BPD’s financial statements for the AATF. B. Procedures performed as part of fiscal year 2002 IRS financial statement audit: 1. From IRS’s master files for the first 8 months of fiscal year 2002, use DUS to select statistical samples of (1) total tax revenue receipts and (2) refunds. For each sample item, test that the collection or refund amount, tax period, and tax class [Footnote 32] from source documentation agree with the information recorded in IRS’s master files. Description of findings and results: Detailed testing of 153 revenue receipts and 50 refund sample transactions showed that the collection or refund amount, tax period, and tax class from source documents agreed with the information recorded in IRS’s master files. 2. Review selected service center campuses’ monthly Treasury SF-224 reconciliations to determine if IRS-reported revenue receipts were properly classified and reconciled to Treasury FMS records. For refunds, review selected IRS service center campuses’ monthly Treasury SF-224 reconciliations to determine if IRS-reported total refunds (all tax classes) were materially [Footnote 33] reconciled to Treasury FMS records. [Footnote 34] Description of findings and results: Tax revenue receipts reported by selected IRS service center campuses through the monthly Treasury SF-224 reconciliation process were properly classified and materially agreed with Treasury FMS records. Total refunds reported by the selected IRS service center campuses through the monthly Treasury SF-224 reconciliation process materially agreed with Treasury FMS records. 3. Perform procedures to determine whether tax revenue receipt balances by tax class, including excise tax, per IRS’s general ledger materially agree with IRS master files and Treasury records. For refunds, perform a comparison of total refund balances between the master file, the general ledger, and Treasury records. Also, compare excise tax refunds per the master file to the general ledger. Description of findings and results: Tax receipt balances for all tax classes, including excise taxes, per IRS’s general ledger, materially agreed with IRS’s master files and with Treasury records. Refund balances per IRS’s general ledger materially agreed with the master file and with Treasury records. [End of enclosure] Footnotes: [1] In our report on the results of our audit of IRS’s fiscal year 2002 financial statements, we noted a material weakness in IRS’s financial reporting process (Financial Audit: IRS’s Fiscal Year 2002 and 2001 Financial Statements, GAO-03-243, November 15, 2002). A component of this process includes IRS’s ability to allocate excise tax collections to the appropriate trust funds at the time deposits are made. This condition affects the adequacy of the distributions of federal excise tax revenue to recipient trust funds and is a continuation of an issue that we have reported on in prior years. [2] Since certifications are not completed until 6 months after the end of the quarter, the certification and corresponding FMS adjustment for the quarter ended September 30, 2001, were completed in March 2002 and thus affected fiscal year 2002 distributions to the AATF. [3] Although the certifications are based on amounts collected, we used the tax liability amounts to identify the taxpayers paying the largest amounts of excise taxes. Our review shows that these taxpayers generally pay their excise taxes in full each quarter. [4] The master file is a detailed database containing taxpayer information. [5] Per our agreement with the Department of Transportation Office of Inspector General, we selected one additional AATF-related return in order to test a minimum of six AATF returns. [6] Per IRS, this was the total excise tax liability amount, from its master file, for the quarter ended September 30, 2001. [7] IRS certifies to trust funds the amount of excise taxes collected. Because there are occasions in which taxpayers have 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 taxpayer reports that it owes $4 million for gasoline tax, $2 million for diesel fuel tax, and $1 million for gasohol 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 gasohol tax. [8] 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-ticket tax (abstract 26), (2) tax on use of international air facilities (abstract 27), and (3) tax on transportation of property by air (abstract 28). If the return was related to the HTF, we selected (1) tax on 10 percent gasohol (abstract 59), (2) diesel fuel tax (abstract 60), and (3) 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 make up over 90 percent of the total amount certified to the AATF and over 87 percent of the total amount certified to the HTF. [9] The Collection Certification System produces what IRS refers to as “audit files.” These audit files contain the individual prorated collections, by abstract and taxpayer identification number, that make up the certified total amounts for each abstract. [10] For the purpose of this reconciliation, material is defined as 1 percent of the total Form 720-related excise tax collections, related to the quarters ended December 31, 2001, and March 31, 2002. For fiscal year 2002, the materiality amount was $210 million for the two quarters combined. [11] 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. [12] The selected abstracts include the following: (1) tax on transportation of persons by air (abstract 26), (2) tax on use of international air facilities (abstract 27), (3) tax on transportation of property by air (abstract 28), (4) tax on aviation fuel for commercial use (abstract 77), (5) tax on 10 percent gasohol (abstract 59), (6) diesel fuel tax (abstract 60), and (7) gasoline tax (abstract 62). The tax amounts for the four AATF-related abstracts make up over 96 percent of the total amount certified to the AATF and the tax amounts for the three HTF-related abstracts make up over 87 percent of the total amounts certified to the HTF. [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 111 items. DUS selects dollars versus specific transaction items by dividing the population by dollar intervals. The dollar interval for the AATF was $34 million. Accordingly, any item with a dollar value matching or exceeding the sampling interval would be selected, whereas items less than the sampling interval might not be selected. For example, an item of $68 million would cover two dollar-intervals, but represent one sample item. Due to large dollar items covering more than one interval, the 62 unique sampled transactions selected represent 111 dollar-intervals. [15] The planned sample size using DUS was 136 items. As explained in footnote 14, DUS selects dollars versus specific transaction items by dividing the population by dollar intervals. The dollar interval for the HTF was $116 million. Due to large dollar items covering more than one interval, the 94 unique sampled transactions selected represent 136 dollar-intervals. [16] For this sample, if no errors are found in testing the 45 items, we would be 90 percent confident that the error rate in the population would not exceed 5 percent. [17] The purpose of this test is to determine whether the Collection Certification System prorates correctly. This test is not intended to determine whether amounts provided to the system are correct. [18] Since certifications are not completed until 6 months after the end of the quarter, the certification and corresponding FMS adjustment for the quarter ended September 30, 2002, will not be completed in time to affect the recorded fiscal year 2002 distributions to the AATF. [19] The certified amounts for tax on transportation of persons by air (abstract 26), tax on use of international air facilities (abstract 27), tax on transportation of property by air (abstract 28), and tax on aviation fuel for commercial use (abstract 77) make up over 96 percent of the total amount certified to the AATF. [20] 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 recorded in IRS’s master file during the processing interval covered by the report. The second of the two reports used may contain collections related to previous quarters not classified by abstract until the current quarter because the related return was not recorded on the master file until the current quarter. [21] For this test, “significant” is defined as $20 million. This represents approximately 1 percent of the total amount certified to the AATF for a quarter. [22] IRS performs a quarterly reclassification of excise tax refunds and credits originally entered into its master file as personal or corporate refund/credit. IRS refers to these reclassifications as “refund/credit certifications.” These amounts do not represent the total excise tax refund/credit activity to the trust funds. Other routine excise tax refunds and credits (e.g., overpayments), which are claimed on taxpayers’ Form 720 excise tax returns, are included in IRS’s excise tax receipt certification to trust funds. [23] In order to meet certain reporting deadlines, IRS-certified refunds and credits for the fourth quarter of fiscal year 2002 as of September 6, 2002. [24] IRS attaches a separate schedule to the AATF refund/credit certification letter that includes the detailed excise tax amounts that support the total amount shown on the letter. IRS compiles the amounts on these schedules from service center campus systems and its Interim Revenue Accounting Control System. IRS has 10 service center campuses that process tax returns and tax receipts. [25] Aviation gas and aviation O/T gas are the only two excise taxes on the AATF refund/credit certification. [26] An FMS accountant compiles this schedule, called the Subsidiary Quarterly Account of Estimates and Actual Related Excise Taxes Appropriated to the AATF. It computes the difference between IRS- certified amounts and the OTA estimate for excise taxes, individually and in total, that relate to the AATF. The schedule, along with OTA transfer forms and IRS certifications, supports the FMS adjustment. [27] 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. [28] OTA makes semimonthly estimates of excise tax collections for transfer to trust funds. [29] OTA communicates this information to interested parties at Treasury, the Federal Highway Administration, the Federal Transit Administration, and the Department of Transportation. IRS uses the tax and distribution rates from this table in its subsequent certification of collections to trust funds. [30] The transfer amounts for tax on transportation of persons by air (abstract 26), tax on use of international air facilities (abstract 27), tax on transportation of property by air (abstract 28), and tax aviation fuel for commercial use (abstract 77) made up over 96 percent of the total amount transferred to the AATF during the fourth quarter of fiscal year 2002. [31] 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. [32] IRS assigns a tax class number to specific types of taxes. Excise taxes are tax class 4. 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