This is the accessible text file for GAO report number GAO-10-92R 
entitled 'Applying Agreed-Upon Procedures: Fiscal Year 2009 Airport and 
Airway Trust Fund Excise Taxes' which was released on November 5, 2009. 

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-10-92R: 

United States Government Accountability Office: 
Washington, DC 20548: 

November 5, 2009: 

The Honorable Calvin L. Scovel III: 
Inspector General:
Department of Transportation: 

Subject: Applying Agreed-Upon Procedures: Fiscal Year 2009 Airport and 
Airway Trust Fund Excise Taxes: 

Dear Mr. Scovel: 

We have performed the procedures described in the enclosure to this 
letter, which we agreed to perform and with which you concurred, solely 
to assist your office in ascertaining whether the net excise tax 
revenue distributed to the Airport and Airway Trust Fund (AATF) for the 
fiscal year ended September 30, 2009, is supported by the underlying 
records. As agreed with your office, we evaluated fiscal year 2009 
activity affecting excise tax distributions to the AATF. 

We conducted the engagement in accordance with U.S. generally accepted 
government auditing standards, which incorporate certain financial 
audit and attestation standards established by the American Institute 
of Certified Public Accountants. 

You are responsible for the adequacy of these agreed-upon procedures to 
meet your objectives, 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 from the 
general fund to the AATF during fiscal year 2009, (2) the Internal 
Revenue Service's (IRS) quarterly AATF receipt certifications during 
fiscal year 2009, (3) the Department of the Treasury's Financial 
Management Service adjustments to AATF excise tax distributions during 
fiscal year 2009, (4) the Department of the Treasury's Office of Tax 
Analysis's (OTA) process for estimating excise tax amounts to be 
distributed to the AATF for the fourth quarter of fiscal year 2009, (5) 
adjustments to the AATF for tax on kerosene used in aviation during 
fiscal year 2009, and (6) the amount of net excise taxes distributed to 
the AATF during fiscal year 2009. The enclosure provides more detail on 
the agreed-upon procedures and our results. 

We were not engaged to perform, and did not perform, an examination, 
the objective of which would have been to express an opinion on the 
amount of net excise taxes distributed to the AATF during fiscal year 
2009. Accordingly, we do not express such an opinion. Had we performed 
additional procedures, other matters might have come to our attention 
that we would have reported to you. We completed the agreed-upon 
procedures on October 28, 2009. 

We provided a draft of this letter, along with the enclosure, to IRS 
and OTA officials for review and comment. IRS agreed with the results 
and findings presented in the enclosure. OTA agreed with the results 
and findings presented in the enclosure relating to its 
responsibilities, that is, the procedures performed in the estimation 
process for the quarter ended September 30, 2009. 

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 or have not taken 
responsibility for the sufficiency of the procedures for their 
purposes. However, the report is a matter of public record, and its 
distribution is not limited. The report is available at no charge on 
the GAO Web site at [hyperlink, http://www.gao.gov]. 

If you have any questions concerning this report, please contact me at 
(202) 512-3406 or sebastians@gao.gov. 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: 

[End of section] 

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

I. Procedures on Transactions That Represent the Underlying Basis of 
Amounts Distributed to the Airport and Airway Trust Fund (AATF) in 
Fiscal Year 2009: 

A. Nonstatistical selection of tax returns from the quarters ending 
June 30, 2008,[Footnote 1] and September 30, 2008[Footnote 2] 

1. For each of the quarters ending June 30, 2008, and September 30, 
2008, 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 3] from the Internal 
Revenue Service's (IRS) master file.[Footnote 4] 

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 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, 2008, was approximately $9.5 billion or 69 
percent of the total recorded tax liability amount of $13.7 billion for 
all excise tax returns for the quarter. Of these 30 returns, 10 
contained primarily AATF-related tax liabilities and 20 contained 
primarily HTF-related tax liabilities. 

The total tax liability amount related to the 30 returns from the 
quarter ended September 30, 2008, was approximately $9.2 billion or 69 
percent of the total recorded tax liability amount of $13.4 billion for 
all excise tax returns for the quarter. Of these 30 returns, 10 
contained primarily AATF-related tax liabilities and 20 contained 
primarily HTF-related tax liabilities. 

2. For each of the 20 returns related primarily to the AATF from the 
quarters ended June 30, 2008, and September 30, 2008, perform the 
following procedures:[Footnote 5] 

(a) Compare the assessment amounts for abstracts[Footnote 6] 26, 27, 
and 28 from the tax return to IRS's master file for agreement. 

Description of Findings and Results: 

The assessment amount for abstracts 26, 27, and 28 on the tax return 
agreed with the master file for all 20 returns. 

(b) Calculate the assessment amounts on the tax return for the selected 
abstracts to determine whether they are mathematically correct. 

Description of Findings and Results: 

The taxpayers' calculations for the selected abstracts were 
mathematically correct on all 20 returns. 

(c) Calculate the prorated collection amount for the selected abstracts 
based on information from the master file and compare this amount to 
the amount in the Collection Certification System audit files[Footnote 
7] for agreement. 

Description of Findings and Results: 

The independently calculated prorated collection amounts for the 
selected abstracts agreed with amounts in IRS's Collection 
Certification System audit files for 19 of the 20 returns. 

For the other return, IRS recorded less credits than indicated by the 
taxpayer on its Form 720 tax return for the quarter ended June 30, 
2008. As a result of this error, the prorated collection amounts for 
abstracts 26, 27, and 28 were misstated. This, in turn, caused the AATF 
to receive $36,269 more in excise tax distributions than it should have 
for the quarter ended June 30, 2008. 

IRS identified and corrected this error in November 2008, after the cut-
off date for its excise tax certification to the AATF for the quarter 
ended June 30, 2008. As a result, the correction of the error was 
reflected in IRS's excise tax certification to the AATF for the 
subsequent quarter ended September 30, 2008. Because IRS's excise tax 
certification to the AATF for the quarter ended June 30, 2008, affected 
fiscal year 2008 distributions to the AATF but its certification for 
the quarter ended September 30, 2008, affected fiscal year 2009 
distributions to the AATF, the error caused the AATF to receive $36,269 
in fiscal year 2008 that it should have received for fiscal year 2009. 
[Footnote 8] 

B. Statistical selection of attribute and monetary unit samples (MUS) 
from the quarters ended December 31, 2008, and March 31, 2009: 

1. Sampling and other procedures: 

(a) Compare excise tax collections from the master file with excise tax 
collections from the Collection Certification System audit files for 
the first two quarters of fiscal year 2009 to determine if they 
materially agree.[Footnote 9] 

Description of Findings and Results: 

Excise tax collections from the master file materially agreed with the 
Collection Certification System for the first two quarters of fiscal 
year 2009. 

(b) Compare excise tax collections from the master file with excise tax 
collections from IRS's general ledger for the first 9 months of fiscal 
year 2009 to determine if they materially agree.[Footnote 10] 

Description of Findings and Results: 

The amount of excise tax collections from the master file was 1.63 
percent less than the amount of excise tax collections recorded in the 
general ledger for the first 9 months of fiscal year 2009, which 
exceeded the 1 percent materiality defined for this procedure. 

(c) Select a random attribute sample of 78 excise tax returns from the 
master file.[Footnote 11] Compare assessment and receipt information 
for each return from the master file to the Collection Certification 
System. 

Description of Findings and Results: 

For all 78 returns, assessment and receipt information from the master 
file agreed with the information in the Collection Certification 
System. 

(d) 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. 

(e) 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 MUS to select a sample of 
prorated excise tax collections from the AATF population using a 
confidence level of 80 percent, a tolerable misstatement of $118 
million, and an expected aggregate error amount of $35 million. 
[Footnote 14] 

Description of Findings and Results: 

Use of MUS with a confidence level of 80 percent, a tolerable 
misstatement of $118 million, and an expected aggregate error amount of 
$35 million resulted in a sample of 61[Footnote 15] prorated 
collections for the AATF for the first two quarters of fiscal year 
2009. 

(f) Select samples of prorated excise tax collections from the two non-
AATF populations. Use MUS to select a sample of prorated excise tax 
collections from the HTF population using a confidence level of 80 
percent, a tolerable misstatement of $364 million, and an expected 
aggregate error amount of $109 million.[Footnote 16] 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.[Footnote 17] 

Description of Findings and Results: 

Use of MUS with a confidence level of 80 percent, a tolerable 
misstatement of $364 million, and an expected aggregate error amount of 
$109 million resulted in a sample of 90[Footnote 18] prorated 
collections for the HTF for the first two quarters of fiscal year 2009. 

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. 

2. Procedures on transactions: 

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

* Compare the assessment amount for the sampled item from the tax 
return to IRS's master file for agreement. 

Description of Findings and Results: 

The assessment amount on the tax return agreed with the master file for 
each of the 61 sampled items. 

* Calculate the assessment amount on the tax return for the sampled 
item to determine whether the amount is mathematically correct. 

Description of Findings and Results: 

The assessment amount on the tax return was mathematically correct for 
each of the 61 sampled items. 

* Calculate the prorated collection amount for the sampled item based 
on information from the master file and compare this amount to the 
amount in the Collection Certification System audit files for 
agreement. 

Description of Findings and Results: 

The independently calculated prorated collection amount agreed with the 
amount in the Collection Certification System audit files for each of 
the 61 sampled items. 

(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 two quarters of fiscal year 2009, the net most likely 
error was $0 with an upper error limit of $70.9 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 certifications 
for the quarters ended September 30, 2008; December 31, 2008; March 31, 
2009; and June 30, 2009: 

A. Inspect the certification letters 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 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 19] from the certification letters back to the 
Report of Excise Tax Collection[Footnote 20] and the Treasury 90 Report 
[Footnote 21] for agreement. 

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 four 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) for agreement 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 all four 
quarters. 

F. Inspect the Report of Excise Tax Collection used in the 
certification to determine if it contains significant[Footnote 22] 
collections from prior quarters. 

Description of Findings and Results: 

The Report of Excise Tax Collection used in the certification for the 
quarters ended September 30, 2008; March 31, 2009; and June 30, 2009, 
did not contain significant collections from prior quarters. 

For the quarter ended December 31, 2008, the Report of Excise Tax 
Collection used in the certification contained approximately $77 
million from prior quarters. Due to a taxpayer error, one large-dollar 
excise tax return containing primarily AATF-related excise taxes was 
omitted from IRS's excise tax certifications to the AATF for the 
quarter ended September 30, 2008. Although IRS identified the 
taxpayer's error and eventually posted the return to the taxpayer's 
master file account module,[Footnote 23] this was not done in time for 
the return information to be included in IRS's excise tax certification 
to the AATF for the quarter ended September 30, 2008. Since IRS's 
excise tax certification to the AATF for the quarters ended September 
30, 2008, and December 31, 2008, are both used in determining fiscal 
year 2009 excise tax distributions to the AATF, this had no effect on 
the dollar amount of excise tax distributions to the AATF for fiscal 
year 2009. 

III. Procedures on Financial Management Service Adjustments: 

Perform the following procedures on Financial Management Service (FMS) 
adjustments to AATF excise tax distributions for the quarters ended: 

September 30, 2008; December 31, 2008; March 31, 2009; and June 30, 
2009: 

A. Calculate the FMS adjustment amounts based on the Office of Tax 
Analysis (OTA) transfer forms[Footnote 24] and IRS certification 
letters to determine if they are mathematically correct. 

Description of Findings and Results: 

The FMS adjustment amounts for all four quarters were mathematically 
correct. These amounts were[Footnote 25]: 

* ($9,858,000) for the quarter ended September 30, 2008; 

* ($53,803,000) for the quarter ended December 31, 2008; 

* ($282,501,000) for the quarter ended March 31, 2009; and: 

* ($951,478,000) for the quarter ended June 30, 2009. 

IV. Procedures on Excise Tax Distributions to the AATF for the Quarter 
Ended September 30, 2009: 

A. Determine if OTA's process for identifying and incorporating the 
effect of new legislation on excise tax receipts into its trust fund 
estimates[Footnote 26] was in place during the quarter ended September 
30, 2009. 

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, 2009. OTA prepares a tax 
rate table to capture information relating to legislation that affects 
tax rates, tax basis, accounts, and deposit rules in effect during the 
quarter. 

B. Inspect the transfer forms and supporting schedules to determine if 
there is evidence of review. 

Description of Findings and Results: 

There was evidence that another OTA economist reviewed the transfer 
forms and supporting schedules affecting distributions from the general 
fund to the AATF for the quarter ended September 30, 2009. 

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, 2009, 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 27] from the transfer forms back to the related 
source documents[Footnote 28] for agreement. 

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 related source documents for the 
quarter ended September 30, 2009. 

V. Other Procedures: 

A. Determine if adjustments to the AATF for tax on kerosene used in 
aviation were made during fiscal year 2009 and calculate the adjustment 
amounts to determine if they were mathematically correct.[Footnote 29] 

Description of Findings and Results: 

Adjustments to the AATF for tax on kerosene used in aviation were made 
during fiscal year 2009 and were mathematically correct. These amounts 
were[Footnote 30]: 

* $57,415,000 for the quarter ended September 30, 2008; 

* $46,055,000 for the quarter ended December 31, 2008; 

* $41,139,000 for the quarter ended March 31, 2009; 

* $38,549,000 for the quarter ended June 30, 2009; and: 

* $51,890,000 for the quarter ended September 30, 2009. 

B. Using IRS's quarterly certifications, OTA's estimated distributions, 
and any adjustments, compile and report the amount of net excise taxes 
distributed to the AATF in fiscal year 2009. 

Description of Findings and Results: 

Based on a compilation of IRS's quarterly certifications, OTA's 
estimations, and adjustments, the amount of net excise taxes 
distributed to the AATF in fiscal year 2009 was $10,569,246,000. 

[End of section] 

Footnotes: 

[1] In October 2008, the Internal Revenue Service (IRS) completed its 
certification of excise tax distributions to the AATF for the quarter 
ended June 30, 2008, and the Department of the Treasury's Financial 
Management Service (FMS) recorded the corresponding adjustment to 
transfer funds between the general fund and the trust fund. 
Administrators of the Federal Aviation Administration (FAA) recorded 
the adjustment amount on FAA's financial statements, which include AATF 
data, for fiscal year 2008. 

[2] The IRS certification of excise tax distributions and corresponding 
FMS adjustment for the quarter ended September 30, 2008, were completed 
in February 2009 and thus affected distributions to the AATF during 
fiscal year 2009. 

[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. These taxpayers generally pay their excise 
taxes in full each quarter. 

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

[5] These procedures encompassed approximately $4.5 billion in prorated 
collections affecting distributions to the AATF. 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 taxpayers' returns. 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 Collection Certification 
System 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. 

[6] 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 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 94 percent of the total amount certified to the AATF and over 84 
percent of the total amount certified to the HTF for the quarters ended 
June 30, 2008, and September 30, 2008. 

[7] The Collection Certification System produces what IRS refers to as 
audit files. These audit files contain the individual prorated 
collections by abstract and taxpayer identification number. The 
certified amounts to the trust funds are calculated by subtracting 
credits from prorated collections and then multiplying the difference 
by the applicable trust fund distribution rates. 

[8] Each fiscal year, excise tax distributions to the AATF are affected 
by quarterly excise tax certifications prepared by IRS. However, due to 
the timing of the certifications, the certifications affecting 
distributions do not correspond exactly to the quarters of the fiscal 
year. For example, IRS's certifications for the quarters ended 
September 30, 2007; December 31, 2007; March 31, 2008; and June 30, 
2008, affected fiscal year 2008 excise tax distributions to AATF, while 
IRS's certification for the quarters ended September 30, 2008; December 
31, 2008; March 31, 2009; and June 30, 2009, affected fiscal year 2009 
excise tax distributions to the AATF. 

[9] For the purpose of this procedure, "material" is defined as 1 
percent of the excise tax collections for the quarters ended December 
31, 2008, and March 31, 2009. 

[10] This is a reconciliation of all excise tax collections that posted 
to the master file and general ledger during the first 9 months of 
fiscal year 2009 and is not limited to the first two quarters. For the 
purpose of this procedure, "material" is defined as 1 percent of the 
excise tax collections for the first 9 months of fiscal year 2009. 

[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 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 98 percent of the total amount certified to the AATF, and the 
tax amounts for the two HTF-related abstracts made up over 91 percent 
of the total amount certified to the HTF for the quarters ended 
December 31, 2008, and March 31, 2009. 

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

[14] The $118 million tolerable misstatement represents approximately 1 
percent of the net excise tax revenue distributed to the AATF in fiscal 
year 2008. The expected aggregate error amount of $35 million 
represents approximately 30 percent of the tolerable misstatement 
amount. 

[15] The planned sample size using MUS was 116 items. MUS selects 
dollars versus specific transaction items by dividing the population of 
prorated excise tax collections by dollar intervals. The dollar 
interval for AATF was $43 million. Accordingly, any item with a dollar 
value equal to or exceeding the interval would be selected, whereas 
items less than the interval might not be selected. For example, an 
item of $86 million would cover two dollar intervals, but represent one 
sample item. Because large-dollar items cover more than one interval, 
the 61 unique sampled transactions selected represented 116 dollar 
intervals. 

[16] The $364 million tolerable misstatement represents approximately 1 
percent of the net excise tax revenue distributed to the HTF in fiscal 
year 2008. The expected aggregate error amount of $109 million 
represents approximately 30 percent of the tolerable misstatement 
amount. 

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

[18] The planned sample size using MUS was 135 items. As explained in 
footnote 15, MUS selects dollars instead of specific transaction items 
by dividing the population of prorated excise tax collections by dollar 
intervals. The dollar interval for HTF was $133 million. Because large- 
dollar items cover more than one interval, the 90 unique sampled 
transactions selected represented 135 dollar intervals. 

[19] 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 97 percent of the total amount certified to the AATF for the 
quarters ended September 30, 2008; December 31, 2008; March 31, 2009; 
and June 30, 2009. 

[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 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. 

[21] The Treasury 90 Report summarizes excise tax credit information 
and is produced quarterly by IRS service center campus systems. IRS has 
seven service center campuses that receive and process tax returns and 
payments. 

[22] For this procedure, "significant" is defined as $55 million. This 
represents approximately 2 percent of the total amount certified to the 
AATF for each of the quarters ended September 30, 2008; December 31, 
2008; March 31, 2009; and June 30, 2009. 

[23] A taxpayer may have multiple accounts and account modules within 
IRS's master files. Each unique account is identified by a taxpayer 
identification number (i.e., social security number or an employer 
identification number). Each account contains unique modules identified 
by the specific tax period (e.g., year, quarter) and tax type (e.g., 
excise tax, individual tax, payroll tax, etc.). 

[24] The transfer forms denote the amounts estimated by OTA for 
transferring excise taxes to the trust funds. 

[25] A positive amount indicates that the FMS adjustment increased 
excise taxes distributed to the trust fund. A negative amount, shown in 
parentheses, indicates that the FMS adjustment decreased excise taxes 
distributed to the trust fund. 

[26] OTA makes semimonthly estimates of excise tax collections for 
transfer to trust funds. There are five semimonthly estimates for the 
quarter ended September 30, 2009, which affect fiscal year 2009 
distributions to the AATF. 

[27] The OTA estimated 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 97 percent of the total amount transferred 
to the AATF for the fourth quarter of fiscal year 2009. 

[28] The source documents include the IRS report of excise taxes used 
to derive the percentages applied to reported receipts, the Daily 
Treasury Statement, the Monthly Treasury Statement, and the excise tax 
rate table. 

[29] Section 11161 of Pub. L. No. 109-59 (Aug. 10, 2005), Treatment of 
Kerosene for Use in Aviation, taxes all kerosene taxpayers at the 
standard kerosene rate, unless a 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. The amount of this refund is transferred from the 
HTF to the general fund. The amount of the kerosene tax collected from 
the taxpayer, net of refunds, is transferred from the HTF to the AATF. 

[30] The adjustments for the quarters ended September 30, 2008; 
December 31, 2008; March 31, 2009; and June 30, 2009, were included in 
the IRS receipt certifications, and the adjustment for the quarter 
ended September 30, 2009, was included in the OTA estimates. The 
adjustment amounts represent excise taxes transferred to the AATF from 
the HTF. 

[End of section] 

GAO's Mission: 

The Government Accountability Office, the audit, evaluation and 
investigative arm of Congress, exists to support Congress in meeting 
its constitutional responsibilities and to help improve the performance 
and accountability of the federal government for the American people. 
GAO examines the use of public funds; evaluates federal programs and 
policies; and provides analyses, recommendations, and other assistance 
to help Congress make informed oversight, policy, and funding 
decisions. GAO's commitment to good government is reflected in its core 
values of accountability, integrity, and reliability. 

Obtaining Copies of GAO Reports and Testimony: 

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each 
weekday, GAO posts newly released reports, testimony, and 
correspondence on its Web site. To have GAO e-mail you a list of newly 
posted products every afternoon, go to [hyperlink, http://www.gao.gov] 
and select "E-mail Updates." 

Order by Phone: 

The price of each GAO publication reflects GAO’s actual cost of
production and distribution and depends on the number of pages in the
publication and whether the publication is printed in color or black and
white. Pricing and ordering information is posted on GAO’s Web site, 
[hyperlink, http://www.gao.gov/ordering.htm]. 

Place orders by calling (202) 512-6000, toll free (866) 801-7077, or
TDD (202) 512-2537. 

Orders may be paid for using American Express, Discover Card,
MasterCard, Visa, check, or money order. Call for additional 
information. 

To Report Fraud, Waste, and Abuse in Federal Programs: 

Contact: 

Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]: 
E-mail: fraudnet@gao.gov: 
Automated answering system: (800) 424-5454 or (202) 512-7470: 

Congressional Relations: 

Ralph Dawn, Managing Director, dawnr@gao.gov: 
(202) 512-4400: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7125: 
Washington, D.C. 20548: 

Public Affairs: 

Chuck Young, Managing Director, youngc1@gao.gov: 
(202) 512-4800: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7149: 
Washington, D.C. 20548: